502 bad gateway 502 bad gateway nginx 502 bad gateway 502 bad gateway nginx publication review publication review – “releasing brownfields” page 90 the australian journal of construction economics & building publication review “releasing brownfields” author paul syms professor of urban land use in the centre for the built environment, sheffield hallam university, united kingdom this publication, produced by the rics foundation, considers the redevelopment of „brownfield‟ sites. these are considered to occur when land has been previously used, and has not been returned to a pristine state. accordingly, the land must first be upgraded to a suitable standard before redevelopment can occur. the prior usage may have left the land with partially demolished structures or with some form of contamination. the publication has emerged as a result of a two year study conducted by professor syms in the uk, and is a response to a political initiative intended to address the question of the physical regeneration of ageing cities. whilst much of this study is specific to the uk, and treats the encountered problems within that cultural perspective, there is much that may be useful to the australian practitioner. twenty case examples would be of use and interest to any who would be involved with such a problem and chapters on risk assessment, environmental concerns, the local community‟s concerns, transport and valuing brownfield land will strike a chord with developers and local authorities. a considerable amount of information concerning the problem of brownfield development in the uk has been gathered together, and a survey of 230 practitioners has produced a useful database, even although the statistical analysis used in the research is somewhat questionable at times (e.g. rank ordering based on 3 decimal precision from a five point answer scale, and no confidence bounds). the publication was produced in april 2001, and is 80 pages long. a.p.jeary dsc., phd, faib, fistructe, fciob, miee, maibs brewer, g (2011) book review, australasian journal of construction economics and building, 11 (1) 61 61 book review responsible corporate strategy in construction and engineering. doing the right thing? by martin loosemore and florence phua, published by spon press: isbn 978-0-41545910-5. aud 69.95.gbp 35.00, 192 pages. it is often said that the practice of management in the architectural, engineering, and construction (aec) sector is highly derivative, that attempts to distinguish it as a separate and distinct area of professional practice are erroneous, and that the best prescription for its low productivity is to imitate best practice from the manufacturing industry – egan can't be wrong, can he? loosemore and phua are both respected writers on the issues facing the industry and its members. they have conceived this timely book from the standpoint that slavish and unquestioning imitation of mainstream corporate social responsibility (csr) strategy formulation and implementation is likely to result in poor quality decision-making and disappointing outcomes. using a wide range of authoritative sources the authors first introduce the concept of csr with all its attendant facets, make a compelling case for its centrality to corporate strategic planning, explain the consequences that this inevitably imposes on the governance of a firm or corporation, and then outline the ethical consequences this has for them both internally and externally. it is probably inaccurate to characterise the authors’ presentation of their case as left versus right, green versus un-green, or idealistic versus cynical, but a sense is gained of an ongoing dialogue between competing polar extremes throughout the first four chapters, which remind adherents or enthusiasts of a particular camp of their social and business obligations to the opposing viewpoint. in many respects this is both refreshing and liberating, allowing readers of a particular persuasion to "come out of the closet", clad in the armour of a sound business case. arguably the most important feature of this book is that the first four chapters are followed by a fifth, containing nine case studies of aec organisations. predictably they include major design and engineering consultancies, developers and contractors, but usefully they also include smaller firms from lower tiers within the construction industry supply chain. each of the cases is presented in a highly structured format, reflecting the way in which each was conducted. however it is not always clear whether the case being reported reflects a single interview with a key stakeholder in the organisation, or whether it is in fact a digest of multiple interviews. it would also have been useful to provide clearer visual separation between each case, for instance starting each one on a new page. nevertheless these are minor quibbles and the authors draw the book to a useful conclusion making cogent generalisations from the case studies about the challenge of designing and implementing csr for a range of different types of organisation. as with any well researched and well written addition to the aec library the authors are to be commended for their efforts, if for no other reason than to give lie to the notion that the field is indeed derivative. in this case the commendation goes much further as the book deserves a place on the sentient practitioner’s bookshelf. graham brewer associate professor university of newcastle stevens, m (2012) book review, australasian journal of construction economics and building, 12 (3) 103 103 book review construction item pricing for more profit and less risk david cattell, uct press, 2012, 150 pages includes cd rom, isbn 9781919895697. price usd 34.95, zar 265.00 david cattell has written the next evolution in construction pricing approaches and strategies. he builds upon previous research breakthroughs in this area while acknowledging those whose work is foundational. cattell’s exhaustive research has made this book an important one for researchers and practitioners to study. in my reading, it clarified some grey areas concerning theory and practice. i am sure it will do the same for others. construction pricing is the first opportunity for construction firms to improve a project’s financial outcome. improved profit and cash flow calculate to a greater return on investment. the idea of improving a project’s cash flow through line item pricing generates controversy. however, contractors still practice it and have an interest in improved approaches. the business of construction contracting is a risk filled venture. cattell recognizes this in his work. he captures the basic premise that faces all construction organizations, “maximising profit while minimising risk.” it is well explained and structured in the pricing model he proposes. i believe this book is a foundational text for those serious about knowing more effective approaches to line item pricing in the construction industry. investment banks are challenged with the same problem. they rely on three sources of input to their decision making process. firstly, “perfect information”, that is, corroborated facts and data. secondly, mathematical models which reflect all those factors and their relative effect on the business situation. thirdly, computer software that calculates the model. in essence, a commercial decision-making system quantifies risk and prices it accordingly. cattell’s model achieves the same for contractors. cattell included a welcome extension. his book furnishes the source code for the program he wrote for implementing his model. his equation includes critical items such as timing, schedule confidence, rate of escalation, expected variations of counts and client’s potential rejection of pricing. the software provides a test of the new model. as a final exhibit in the cd-rom included with the book, it lists optimal pricing for each of 503 items featured in the book’s case study. for the industry practitioner or academic, this is an evolutionary work that should be studied. it is a building block for anyone’s knowledge of construction pricing. it is an improvement over previous works and has to be considered by the next evolutionary person. overall in today’s competitive environment, a detailed computer-pricing model that is reflective of real world factors can quickly start a fact-based discussion the quicker that factbased discussion starts the better the quality of the “art” of final decision-making. this is what cattell offers in his mathematical model and computer language. i believe it affords a competitive edge in producing less risk and more reward for contractors than previous approaches. matt stevens senior lecturer in construction the faculty of architecture, building and planning the university of melbourne microsoft word ajceb vol.2 no.2 27.11.02a.doc the australian journal of construction economics and building vol.2 no.2 i editorial the publication of this second issue for 2002 completes our commission as editors of the journal for now. once again we were faced with the daunting prospect of selecting from a substantial number of papers submitted (21 in total) and we hope that the papers that we have chosen, in consultation with our referees, will be both interesting useful. as was the case with the previous issue, we have been fortunate in having a panel of eminent people from various countries to referee the papers in addition to the many staff of the faculty of design architecture and building at uts who assisted in the refereeing process. in reviewing the contributions and selecting papers for publication we were faced with some fundamental questions, not the least of which was the question of exactly what criteria we would use in assessing papers. it may seem simple: separate the “good” papers from the “bad” papers (the “wheat” from the “chaff”) and print the former. there are, however, some other concerns that need to addressed before we even get to the point of thinking about what constitutes a “good” or “bad” paper. the most important of these is related to the nature of the journal itself: it is a refereed journal but one that serves two professional bodies, the aib and the aiqs, and therefore we should give consideration to presenting papers that will be of interest to their members, and not only to academics. on the other hand, as both bodies have their own professional journals, in which practitioner papers and articles regularly appear, we have generally steered away from papers that we feel fall into that category. in assessing papers for publication we have always looked for those that have a clear objective and that then investigate or pursue that objective in a clear and logical manner. in keeping with our aim of publishing papers that will be of some interest to all our readers we have also looked for clarity in the writing and reporting of research outcomes. it is unfortunate that often what is good research (in our opinion and that of our referees) is devalued because the reporting of it is unclear or just simply difficult to read. the end result is a paper with content that makes it worthy of publication but an outcome that is, overall, too muddy for anyone but a dedicated editor, or perhaps another researcher, to plough through. it could be argued that writing papers for refereed journals is all about content and not about style, i.e., that it is the research and the conclusions drawn from the research that are important. further it may be argued that it is not the purpose of serious research to produce light reading matter, however, construction is a practical business and if the people in the professions that serve the industry are to benefit from research then surely the research outcomes need to be communicated to those may make use of them—otherwise what purpose does the research serve apart from looking good on academic resumes? this is not to say that we have rejected more than half of the papers submitted because we thought they were poorly written—several were very well written but were basically literature reviews that will eventually form part of a thesis for the authors’ postgraduate degrees. others did not clearly follow their stated objectives; a few were just not original enough or rigorous enough to displace papers that did report original research well. in any case we have tried to be fair and consistent, or at least fairly consistent. our thanks must again go the editorial board plus the uts referees who willingly donated their time and expertise, the contributors who accepted our decisions and suggestions with good grace, and sally beech, who has done her usual professional job of putting the issue into printable format. producing the 2002 issues of the journal has been a challenging but edifying job, and we wish our colleagues at rmit every success with volume 3. rick best goran runeson december 2002 book review constructing futures: industry leaders and futures thinking in construction paul chan and rachel cooper, wiley-blackwell 2011, 224 pages, isbn: 9781405157971 (hardback), gbp 69.99, aud 140.00 “the fact that i wear red trousers, it‟s not a political or artistic take.” thus says george ferguson, riba ex-president, one of the fifteen influential people in uk construction who have been interviewed by chan and cooper. fourteen men and one woman, sandi rhys jones. they talk freely about construction, and what they say has been gathered under the headings of two main chapters: „sustainability‟ and „connecting stakeholders‟, mixed with the views of the authors. after a while, the reader discovers that the true focus of this book is the social dimension. this is preceded by a review of ten studies of the future of construction, published over the last two decades. analytical future studies relying on formalized methods of forecasting received a blow by the 1973 oil crisis and its consequences for the stability of the world economy. thus extrapolating the present lost much of its attraction. when john major replaced margaret thatcher in 1990, there was soon a revival of industrial and innovation policies together with a wave of future or foresight studies, which were or are more like industry consensus exercises than unbiased, scientific analyses of trends. the semiscientific delphi method, based on independent and anonymous expert guesses, merged with old-style commissions of the great and the good to create the foresight style of cosy discussion of industry problems. chan and cooper have looked at three such uk construction foresight reports, three us future studies, one swedish (clearly uk inspired) vision and finally the australian construction 2020 exercise. as with foresight studies for other industries, if you have read one of them, you have read all. so here they are, the drivers for change, extracted and sorted by our authors: ageing population, climate change, individualism, lifestyle expectations, political change, rise of china/india (does anybody remember the threat from the big japanese contractors in the 1980s?), technology and communication, as well as the 9/11 latecomer, terrorist threat. what can be done to deal with what the authors see as current problems in the industry? central government, with all its limitations, does appear as an important force for change. however, the reader who wishes to pursue the role of government will have to remain dependent on change in the construction industry, the 2006 book by david adamson and tony pollington, who chronicled and analysed the uk construction industry reform movement. it is surprising that this analysis has not been mentioned by chan and cooper, who otherwise have many useful references to literature hidden in their endnotes. given that the fifteen interviewees are all from the uk construction industry, not few of the problems raised in the book are peculiar to british society and can be difficult for a foreign readership to recognize. nevertheless, since the latham and egan reports were read avidly by 1990s policy makers in many countries, the present round of interviews is valuable. finally, three themes are identified: emergence, boundaries and contradictions; readers may perhaps wonder whether any type of „industry change‟ can do without these three. the word „emergent‟ often occurs. the future is described as elusive, nebulous, fluid, full of ambiguities and paradoxes. as if the present situation is crystal clear to us. australasian journal of construction economics and building bröchner, j (2011) book review, australasian journal of construction economics and building, 11 (4) 114-115 115 while the authors disclaim scientific intentions, it is still heavy reading, and there are symptoms of an overexpanded vocabulary, which could have done with some editorial care to protect both the authors and the readers from curious uses of unusual words. however, chan and cooper have written a book that contains many interesting thoughts. jan bröchner chalmers university of technology göteborg, sweden cme book review book review managing construction logistics gary sullivan; stephen barthorpe and stephen robbins publishers : wiley-blackwell 2010, 304 pages, isbn 978-1-4051-5124-5 (paperback), gbp 49.99, eur 60.00, aud 99.95, nzd 115.00. i suspect that i am not alone when first picking up a new book in starting at the last page and quickly flicking to the front cover in the hope of somehow obtaining a subliminal impression of the contents. i must say that my first impression of this publication, subliminal or otherwise, was not particularly encouraging. this was mainly due to the photographs which appear towards the end of the book which, in several instances, are unlikely to be of interest to a general reader, in particular group photographs of award winners. however my concerns as to whether the intellectual content of the book would be up to the mark were immediately assuaged on the reading the introduction by gary sullivan which strikes a nice balance between humour and insightfulness. readers can look forward to being entertained as well as being informed. in fact, i read some parts of this publication with almost a guilty pleasure worrying as to whether the serious and worthy topic of managing construction logistics should be so enjoyable. the foreword to the book makes a very strong case as to why the management of construction logistics is important and laments the fact that to-date this topic has been largely neglected by the construction industry. most authors of management texts make the case that they are filling a gap in current knowledge. the proof is, as they say, in the pudding. in this instance the case is well made that there are compelling reasons as to why the construction industry should recognise the benefits which accrue in adopting a professional approach to logistics. much as i enjoyed the opening chapter which gives a historical perspective it may perhaps have been advisable for the authors to present the case for the adoption of logistics as a discipline more forcibly in the opening chapter although the case is made, to some extent by stephen barthorpe in the preface. however this is a minor quibble on my part and the line of argument for the adoption of construction logistics permeates the text. the text is essentially practical in nature containing a good deal of sensible advice which will be of interest to construction industry professionals. the conceptual models in chapter 2 provide a useful framework for the following chapters. each chapter is extensively referenced, a feature which will no doubt appeal to an academic readership. section 2, which is essentially the backbone of the book, contains 9 chapters as follows:  an introduction to practical logistics  mobilisation and resourcing the team  materials delivery and handling  transport and communications  managing critical risks  security  coordinating infrastructure and services  waste management and good house each of these topics is dealt with in a very readable even-handed manner. although the text tends to rely on the use of aphorisms to make a point, i never found this style to be wearing or irritating. indeed, the advice given always appears to be sensible and based on personal australasian journal of construction economics and building mcgeorge, d (2010) book review, australasian journal of construction economics and building, 10 (4) 73-74 74 experience. although each of the chapters can be read on a stand-alone basis, it is clearly a case of the whole being greater than the sum of the parts. section 3 contains a chapter on the future of construction logistics followed by a chapter containing a number of case studies. i found the concept of consolidated centres (cc) as described in chapter 11 to be of particular interest and despite the fact the example cited is ‘anglo centric’ (as indeed are all the case studies) i believe that cc will be of interest to an international readership. the conclusion to the book, ‘the argument for change’ is rather tucked away after the case studies and because of its brevity may be missed by the less diligent reader. this would be regrettable as it is an elegant counterpoint to the introduction and ends on a suitably ringing call to arms to the construction professional. my one criticism and this may very well be a symptomatic of my personal bias, is that there is no mention, as far as i can determine, of the role of design in construction logistics. just as it is now advocated that facilities managers should have early involvement in the design process. one would have thought that early consideration of construction logistics in the design process was also essential. perhaps this point is so self-evident that it somehow passed under the authors’ radar or perhaps this aspect may be taken on board in the next edition? i can commend this book to both industry professionals, to academics and to students in the field of construction management. i would recommend that potential readers not follow my example but rather follow the advice of the king in alice in wonderland and begin at the beginning and go on till you come to the end: then stop. denny mcgeorge sydney april 2010 2 viewpoint the demise of the journal ranking: a victory for common sense goran runeson (university of technology, sydney australia) in a ministerial statement to the senate economics legislation committee: improvements to excellence in research for australia (era), the minister for innovation, industry, science and research, senator kim carr, in a brilliant example of creative writing, has pronounced the 2010 era an outstanding success, with a small exception, the quality ranking of journals. the arc has advised the minister that consultations had revealed that there is a “widespread preference for limited change”: the “refinement of the journal quality indicator” by the removal of the “prescriptive a*, a, b and c ranks”; something no doubt made less painful as “the rankings were inherited from the discontinued research quality framework (rqf) process of the previous government” and therefore not really needed. one of the reasons for the change of mind was that “there is clear and consistent evidence that the rankings were being deployed inappropriately within some quarters of the sector, in ways that could produce harmful outcomes, and based on a poor understanding of the actual role of the rankings. one common example was the setting of targets for publication in a and a* journals by institutional research managers.” there were obviously a lot of naughty people who should have understood that actually using the ranking in the most obvious way was a „no-no‟, and that leaves the question: what was the aim of the ranking if this was inappropriate. there were problems other than the “inappropriate” use of the rankings. the rankings themselves were carried out in secrecy and with very limited resources and support, given the magnitude of the job – some 55 000 journals ranked by less than 200 people. when things went wrong, and there were more than 7000 submissions to arc during the consultation period indicating that they did, frequently, there was, as ross thomas, editor of the journal of educational administration, points out, no process by which the mistakes could be corrected. “numerous attempts to have era's palpably incorrect ranking reconsidered were rejected and met with a standard, platitudinous response: there were many academies and individuals involved in the ranking process; arc personnel were satisfied with the procedures followed and, submissions would be noted for when next era embarked on the exercise. many were advised that era had defensible evidence (presumably) justifying its treatment of the journal. the reply to a freedom of information request to view this defensible evidence was farcical blank pages and others with a few heavily censored (and irrelevant) paragraphs.” in the case of construction management, among several other irregularities, including a distorted perception of open access journals by at least one senior member of the ranking committee who arbitrarily decided and enforced that no open access journal would be given an a ranking despite the fact that there were numerous examples of a* and a rankings of such journals in other disciplines. this was an ultimate triumph of form over content and obviously, it is a reasonable conclusion that ajceb suffered from this misconception. the discontinuation of the ranking, has now partially corrected the situation. the problem that does remain, though, for journals such as ajceb is: how long will it take to undo the damage done by the ranking and how long will it take until the actual quality of the journal takes precedence over the now defunct ranking. there is no doubt that the ranking did distort the submission of papers and while the journal has been exceptionally well supported australasian journal of construction economics and building runeson, g (2011) ‘the demise of the journal ranking: a victory for common sense’, australasian journal of construction economics and building, 11 (2) 99-100 100 in australia, there has been a – hopefully temporary – change in the supply of papers from some areas where the rankings have been used “inappropriately”. the consequences are discussed rather light-heartedly by joseph gora, in a scene from the beleaguered arc bunker just before the capitulation: the actors are disguised as the minister, senator carr and the arc ceo professor shiel arc general sheil: but there's more, field marshal. we may be accused of war crimes. field marshal carr: you what?! like what, for christ's sake? arc general sheil: the accusations are out there, sir: a massive waste of time and money, sullying the reputation of countless journals, closure of others, screwing up university recruitment and promotion processes, influencing the entire culture of scholarship and publications, undermining australian journals, changing rankings without any reasons being given, excessive secrecy over the ranking process . . . that sort of thing. maybe, it isn‟t all that light-hearted if you think of the consequences but you can enjoy the whole story in http://www.theaustralian.com.au/higher-education/opinion-analysis/inside-theera-bunker/story-e6frgcko-1226071198170 the minister‟s statement is available at: http://minister.innovation.gov.au/carr/mediareleases/pages/improvementstoexcellenceinrese archforaustralia.aspx and professor ross thomas can be found at: http://www.theaustralian.com.au/higher-education/rankings-gone-but-what-about-thestench/story-e6frgcjx-1226071074342au/higher-education/rankings-gone-but-what-aboutthe-stench/story-e6frgcjx-1226071074342 http://www.theaustralian.com.au/higher-education/opinion-analysis/inside-the-era-bunker/story-e6frgcko-1226071198170 http://www.theaustralian.com.au/higher-education/opinion-analysis/inside-the-era-bunker/story-e6frgcko-1226071198170 http://minister.innovation.gov.au/carr/mediareleases/pages/improvementstoexcellenceinresearchforaustralia.aspx http://minister.innovation.gov.au/carr/mediareleases/pages/improvementstoexcellenceinresearchforaustralia.aspx http://www.theaustralian.com.au/higher-education/rankings-gone-but-what-about-the-stench/story-e6frgcjx-1226071074342au/higher-education/rankings-gone-but-what-about-the-stench/story-e6frgcjx-1226071074342 http://www.theaustralian.com.au/higher-education/rankings-gone-but-what-about-the-stench/story-e6frgcjx-1226071074342au/higher-education/rankings-gone-but-what-about-the-stench/story-e6frgcjx-1226071074342 http://www.theaustralian.com.au/higher-education/rankings-gone-but-what-about-the-stench/story-e6frgcjx-1226071074342au/higher-education/rankings-gone-but-what-about-the-stench/story-e6frgcjx-1226071074342 book review book review construction stakeholder management ezekiel chiniyo and paul olomolaiye (eds), wiley-blackwell: chchester, uk 2010, i-xxiv 1-392 pp, isbn 978-1-4051-8098-6 (hardback) aud 140.00, nzd 160.00 ., £69.99. construction stakeholder management (csm) is an edited book that has twenty-one chapters with introductory and concluding chapters by the editors and a foreword by professor emeritus dave langford. the back cover of the book states that the book ‘captures the best practice in csm using a range of international case studies’ and ‘advocates an alternative to dispute resolution that is proactive, practical and global in its application’. the book is recommended as an essential text for advanced students, lecturers and practitioners in the built environment. the editors of the book are dr. ezekiel chiniyo, lecturer at the university of wolverhampton and professor paul olomalaiye who is also the pro vice-chancellor and executive dean for environment and technology at the university of west england (uwe) in bristol. this review will provide an overview of the topics covered in the book, discuss its strengths and weaknesses and assess the book with respect to the statements made on the back cover of the book. as you would expect of an edited book with contributions from several authors (from around the world) the book deals with a variety of topics covering a historical perspective of stakeholder management; theoretical perspectives; analysis of the types of stakeholders and strategies to deal with them; managerial issues such as leadership, decision making, change management; construction specific issues such as risk management and contracts; dispute resolution practices such as conflict and negotiation management; useful tools like stakeholder circle, diagramming; and case studies from several countries as well as addressing different situations. the strength of the book is its wide coverage of topics and the examples of stakeholder management issues from several countries. there is something valuable in this book for a diverse range of readers. for those who are theoretically inclined there are chapters that deal with theoretical aspects and a chapter that provides an insight into how stakeholding practices have changed over the years. chapter 2 by kenneth amaeshi reviews corporate stakeholding practices, theories of stakeholder behavior and stakeholder salience. it also points to gaps in the literature on construction stakeholder management which are worth pursuing in future research. chapter 3 by frank harris provides a historical perspective of stakeholder management including a listing of reports by government and industry on how to improve construction industry performance. it also provides a good overview of how stakeholder perspectives have changed over the years. chapter 11 by abbas ali elumualim discusses the role of culture and leadership in stakeholder management covering some theoretical aspects of relationships and power and socio-cultural elements in stakeholder management. for the practitioner, the book provides some useful tools that can be directly applied in practice to manage stakeholders better. chapter 7 by lynda bourne and patrick weaver explains the stakeholder circle methodology which is a visualization tool that can help in identifying and classifying stakeholder importance and influence. the tool also assists in rating stakeholders through the project life cycle to manage them better. chapter 8 by ektewan manowong and stephen ogunlana discusses practical tips on strategies and tactics for managing stakeholders with a useful chart for strategic stakeholder management. chapter 6 by mei-yung leung and   118 paul olomolaiye has some good examples on how risk events affects internal and external stakeholders at various phases of the project life cycle as well as some risk management methods that would come in handy for construction managers. there are several case studies presented in the book from several countries. in particular chapter 20 by ezekiel chiniyo presents ten case studies devoted to several aspects of stakeholder management. in addition case studies are provided in several other chapters. examples of stakeholder management from finland, austria and hongkong also contribute to the international favour of the book. two of the chapters are worth mentioning for their novel and interesting insights into stakeholder management. chapter 14 by matthew wood, amlan mukherjee, todd bridges and igor linkov discusses the practical application of mental models to improve decision making in dynamic situations. the authors compare four diagram–based representation techniques and explain how these are used in practice. chapter 16 by michalea schaffhauser-linzetti discusses a case study from austria on how electronic archiving helped to increase the number of stakeholders involved in document submission and archiving in projects, resulting in increased interconnectedness. the authors claim this as a successful example of egovernment solutions to aid stakeholder management. while variety is a strength, it can also be looked upon as a weakness as readers may not find what they want easily. the editors have not provided a summary of what is to come in their introductory chapter. to ease referencing chapters contributing to similar themes could have been clustered together or placed into sections with themes. the editors have covered topics of general interest in early chapters but after chapter 4 the remaining chapters do not seem to have been placed in any logical sequence. for example while chapter 9 covers negotiations, conflict management is featured in chapter 17. chapter 20 could have benefited by standardizing sections of the case studies or the author could have highlighted the features of the various case studies. the introduction and conclusion sections of this chapter do not provide guidance to the case studies incorporated in the chapter. the preface and the book’s back cover mention partnering which is promoted as a new way of working in contractual relationships. a chapter providing some guideline to set up partnering arrangements or examples of partnering that have been successful or otherwise could have been very useful to the readers and met the objective of the book. a chapter on partnering could have easily replaced chapter 19 on change management which does not specifically focus on the implications of change management in stakeholder management. the revaluing construction management (barrett 2007) research and its findings that would of relevance to stakeholder management is missing from the list of reports mentioned in the history chapter. would it be useful to get a copy of the book? certainly readers will find new and useful materials in this book. it is uncertain if the book could be used as a text book but selected chapters could be essential readings in any course on stakeholder management. the editors have to be commended for putting together a number of perspectives across the world to help in managing stakeholders better in construction management. associate professor shankar sankaran school of the built environment, university of technology, sydney ajceb book review book review evaluating sustainable development in the built environment, 2nd edition peter s brandon, patrizia lombardi, wiley-blackwell publishing, 2011, 280 pages, isbn: 978-1-4051-9258-3 (hardcover), aud 125.00 nzd 140.00, usd 96.99, gbp 60.95, euro 79.90 the title of this book being “evaluating sustainable development in the built environment” is ideally suited as the content is directly aligned with the keywords of built environment, development and sustainability. the authors (peter s. brandon and patrizia lombardi) have produced a comprehensive text which addresses one of the major challenges in the built environment, namely how to ensure stakeholders fully understand and implement the rapidly changing area of sustainable development. this second edition has been completely rewritten and updated from the successful first edition, as well as including many new and emerging insights into this field. the book is supported by detailed testimonials from highly regarded academics in different european universities, indicating to the reader this text is worthy of respect before even opening the cover. evaluating sustainable development in the built environment covers 264 pages in approximately a5 page size and is divided into nine chapters. the chapters have been carefully organised into a sequential order which commences with a broad scene setting introduction and then progresses to the complex challenges with sustainable development. at the end of the text is a comprehensive index and is accompanied with a list of relevant websites. the book commences with an informative overview of the two authors and their respective backgrounds, following by a preface by the authors and a single page of acknowledgements. the nine chapters are divided into a smaller number of sub-headings with a reference list and also a bibliography inserted after the last chapter. most chapters also include a summary section which is very helpful to the reader to highlight the pertinent aspects in each chapter. chapter one (setting the context for evaluating sustainable development) introduces the environmental perspective and the varying perceptions about sustainability. the discussion moves to the international policy debate and the impact of sustainability on the built environment, prior to seeking to define what sustainability actually is and discussing management and intervention considerations for sustainable development. chapter two (time and sustainability) examines the complex background to sustainability changing over time and investigates innovation and stability. this chapter investigates the impact of time on sustainable development including the development lifecycle and time in evaluation aspects. there is an extensive review of relevant literature and useful supporting graphs and diagrams are included. following on, chapter three (approaches to evaluation) is concerned with different approaches to addressing sustainability in the built environment. the first part refers to the concept of ‘the natural step’ which precedes a discussion about the concept of community capital. this then moves onto the notion of an ecological footprint and a range of alternative evaluation approaches including reference to accounting frameworks. the summary and conclusions section is comprehensive and neatly encapsulates this chapter’s intent. chapter four (indicators and measures) identifies and examines indicators for measuring progress towards sustainable development. it commences by examining the questions behind why it is critical to evaluate and the differences between traditional and sustainable australasian journal of construction economics and building reed, r (2012) book review, australasian journal of construction economics and building, 12 (1) 93-94 94 development indicators. reference is made to the type of questions required, namely general or specific, and which international indicators are relevant. the chapter concludes with an informative discussion section following by a succinct summary. chapter five (assessment methods) investigates an incredibly delicate area with regards to sustainability in the built environment, namely why assessment is undertaken and what is the optimal approach. a comprehensive table of assessment methods, tools and procedures is included as well as a summary of the main assessment methods, tools and procedures in use. this includes a discussion about environmental impact analysis, strategic environmental assessment, cost-benefit analysis, contingent valuation method, hedonic pricing method and other related approaches. the strengths and weaknesses of each approach are discussed and a summary and conclusion section neatly brings the chapter to a close. chapter six (a proposed framework for evaluating sustainable development) builds on previous five chapters and argues for an optimal framework and the relevant theoretical underpinning that is required. considerable attention is placed on identifying 15 modalities for understanding sustainable development in the built environment accompanied by a discussion about each. also included is a checklist of questions segregated for each modality followed by a section which is aimed at synthesising the results. a summary concludes the chapter. chapter seven (the framework as a structuring tool: case studies) seeks to explain the approach to a multi-modal framework for decision-making by using a series of case studies. each of the four case studies are evaluated in detail and are based on a municipal waste treatment system, a redevelopment of an urban area, a multi-stakeholder urban regeneration project and a strategic plan for a designated city. attention is also placed on the key issues of social reporting and followed by a conclusion and summary section. chapter eight (towards management systems and protocols) begins with a broad discussion about management and the appropriate definition thereof. the argument then moves onto the question of who is a manager and what exactly is the concept of the planning framework. challenges with the management process are examined including possible approaches to management. attention is then placed on ‘the vancouver study’ which examines the concept of a sustainable city in 100 years. the final chapter in the book is chapter nine (education and research) which is designed to examine the largest single challenge facing sustainable development in the built environment, namely how to educate the stakeholders and also undertake meaningful research. the majority of this chapter is written in a general discussion format and focuses on education, which is then accompanied by a section highlighting the importance of having a research agenda. throughout the book there is optimal use of detailed tables, graphs and conceptual diagrams which are referred to frequently throughout the text. each chapter is well written and the authors have successfully produced a book which provides a fluent chapter-by-chapter insight into this changing topic. the book is extremely well organised and set out, which in turn assists the reader to gain an insight into this increasingly important area. the typical reader’s knowledge about sustainability can range from very limited to a relatively expert, since the text is well written and caters for a wide range of stakeholders. in conclusion the text is recommended as direct and informative insight into the otherwise complex area of sustainable development in the built environment. professor richard reed deakin university, australia book review bim handbook: a guide to building information modeling for owners, managers, designers, engineers and contractors 2nd edition c eastman, p teicholtz, r sacks and k liston isbn: 978-0-470-54137-1 (hardcover) 648 pages, 2011, aud $105.00; nzd $120.00, usd 85.00, gbp57.50, eur 68.00 e-book version isbn: 978-1-1180-2169-9 544 pages 2011 aud $84.99 / nzd $99.99, usd 69.99, gbp 47.99, eur 54.99 “extending bim: a review of the bim handbook” the bim handbook (2 nd edition) provides very insightful understandings of the bim concept, the associated approaches and processes, and the major enabling technologies. the book emphasizes more the business and organizational issues of bim implementation than the detailed technical aspects of bim technologies and tools. this makes the book distinct as integrated project delivery and lean construction concepts are discussed together with bim thus addressing the potential business and process-oriented issues in the actual bim implementation. the book is well written, as a good starting reference for beginners and readers from both academia and industry. it gives a holistic picture of the fundamentals for understanding bim. in summary, it is a very good book and i quite enjoyed it. from the technical perspective, as classified by autodesk, bim tools can be applied in four aspects: representation, simulation, collaboration, and realization. the book covers well representation and simulation, as the majority of available bim tools and adoptions as well as the best practice cases fall into these two functional categories. it would have been desirable if it could also have covered the state-of-the-art advances in collaboration and simulation as well. for example, groupware (computer-supported collaborative work) and social network software (sns) can potentially be integrated with existing bim tool to better support bim’s collaborative capabilities. other potential issues are how sns tools such as secondlife (virtual reality-based social tool), facebook, twitter, etc. can be integrated into bim to support better multi-disciplinary synchronous and asynchronous collaboration and communication. it would be interesting to read about the current recognized r&d efforts in this direction. another of the four aspects is “realization”, which means how to bring bim information onsite and bridge the gap from digital to physical world. mobile computing, cloud computing (cloud bim) and augmented reality are promising technologies to enable this happen. examples of recent industrial development include vela, bentley i-model running on ipad/iphone, and so on. there has also been some exploratory lab-based research and development. chapter 8 discusses some future trends, and it would have been particularly inspiring if it could have covered the details of how to bring bim onsite, which is very important if bim is to fulfil its full potentials as originally promised. the integration of bim with other advanced technologies such as augmented reality (ar), virtual reality (vr), mobile computing, radio frequency identification technologies (rfid), gps, etc. is essential if this is to happen, and figure 8-3 gives an example of a component-based simulation of an operating room, allowing the owners and designers to compare different equipment. there is some system that can project the real-scale bim model into the real context space via augmented reality to compare how equipment and furniture fit into the space and determine whether or not the surrounding space is sufficient or not. australasian journal of construction economics and building wang, x (2012) book review, australasian journal of construction economics and building, 12 (3) 101-102 102 the book discusses the processes and business well, although it could have been helpful to have a section concerning the cost-effectiveness or return on investment of adopting bim, as this is always the most important question asked by industry when they first encounter bim. the governments in many countries are moving fast in developing their own national bim standards and strategies. some parts of the standards are similar, as regulators are learning from each other in the development of bim standards, but there are also some distinct differences. it would be interesting to extract the main characteristics of bim standards in representative countries and develop a comparison table as an overview. the bim handbook mainly focuses on the building industry. many assets in oil and gas, mining and infrastructure can also embrace bim and the practitioners in these industries are interested in bim. it would have been very helpful and worthwhile to include some case studies in these specialized sectors into the book. prof xiangyu wang curtin university co-director, australasian joint research centre for bim microsoft word july paper 4.doc the role of the media in south african construction health and safety (h & s) by john smallwood and danie venter the australian journal of construction economics & building page 43 the role of the media in south african construction health and safety (h & s) john smallwood, department of construction management and danie venter, institute for statistical consultation and methodology, university of port elizabeth , south africa introduction mass media are pervasive in modern society and are essential to disseminate information, facilitate expression, and to determine happenings beyond the immediate environment (vivian, 1997). the mass media fall into three categories based on the technology by which they are produced – print, electronic and photographic. the primary print media are books, magazines and newspapers. the primary electronic media are television, major radio and sound recordings, and the web. the one photographic medium is movies (vivian, 1997). a further issue is that of ‘hot’ versus ‘cool’. according to theorist mcluhan, books, magazines and newspapers are ‘hot’ media because they require a high degree of thinking to use. this contention has been reinforced by research, which found that people remember much more from reading a magazine or newspaper, than from watching television or listening to the radio (vivian, 1997). given the scope of the mass media, this paper focuses on the role of the print media in the form of magazines, and then primarily those which are construction, and to a lesser extent, those which are h&s related. to this end a study was initiated in south africa to determine: • the role of the media; • the need for the media to contribute; • the influence and impact of the media, and • perceptions of editors. the status quo in terms of construction h&s accident statistics and the possible cost of accidents (coa) in south africa, amplify the need for the media to contribute to construction h&s. according to statistics provided by the compensation commissioner (cc) (2000), in 1995, the year for which the latest h&s statistics are available, every working day in construction, approximately: 1.03 workers were killed; 4.45 workers were permanently disabled; 39.63 workers were temporarily disabled, and 77.49 workers received medical aid from a medical practitioner. the disabling injury incidence rate (diir) of 2.03 in 1995, means that 2.03 workers per 100 incurred disabling injuries (dis). the construction industry has the fifth highest diir, and the fourth highest permanent diir, out of twenty three industries. the severity rate (sr) which is relative to 1000 hours worked, was 2.77 in 1995. given that the average worker works 2000 hours per year, when the sr is multiplied by two, the modified sr of 5.54 means that 5.54 days were lost per worker in 1995. the total of 236 fatalities in 1995 results in a fatality rate of 59.5/100 000 workers. this fatality rate does not compare favourably with those of selected international countries or states for the year 1992: germany (14.0); japan (19.0); new south wales (11.0); ontario (7.4); sweden (6.0); the netherlands (3.3), and the usa (18.6) (center to project workers’ rights, 1995). inadequate or poor h&s results in injuries and fatalities and disease. although contractors can obtain insurance cover for the cost of injuries, fatalities and disease the role of the media in south african construction health and safety (h & s) by john smallwood and danie venter page 44 the australian journal of construction economics & building in the form of workers’ compensation insurance, the insurance only covers the direct coa, such as medical care, and lost wages in excess of three days. however, the indirect coa cannot be insured against. the indirect coa includes, inter alia: reduced productivity for both the injured worker and the crew; clean-up costs; replacement costs; cost of overtime; administrative costs; costs resulting from delays; costs related to rescheduling, and wages paid while the injured is idle (levitt & samelson, 1993). research conducted by the university of washington (hinze, 1992) determined the indirect costs (excluding claims and material damage costs) to be more than 1.67 times the direct costs. however, for minor injury cases (direct costs less than us$50), the indirect coa was determined to be more than 5 times the direct coa. according to grossman (1991), a study by the construction industry institute safety task force in the usa, concluded that the indirect coa is 20 times the direct coa. according to the business roundtable (1995), research conducted in the usa determined the direct and indirect coa to be approximately 6.5% of the value of completed construction. anderson (1997) cites findings in the uk, which estimate the direct and indirect coa to be 8.5% of the tender price. regardless of the actual percentage, the coa constitutes a substantial percentage of construction costs. importance of the media mass media are a source of information, the heart of the informing function being in messages called news. advertising is also part of the mass media’s information function. mass media also persuades people, usually through editorials and commentaries. however, advertising is the media message designed to persuade people. public relations (pr) also seeks to persuade, but is subtler, as it is not intended to induce immediate action (vivian, 1997). magazines can contain news, editorials, commentaries, advertising, and even advertorial, which effectively combines advertising and pr. magazines there are two categories of magazines, consumer magazines which are generally available on newsracks, and nonnewsrack magazines which are either sponsored magazines or trade magazines/journals. sponsored magazines are primarily directed towards the promotion of an association or society, such as national geographic, and growth in membership. every profession or trade has at least one magazine for keeping related people abreast of developments. similar to consumer magazines, trade magazines rely mostly on advertising for income, whereas sponsored magazines rely on both advertising and self funding (vivian, 1997). magazines as a channel of influence wilde (1994) maintains that society has become more reliant on the mass media as channels for influencing attitudes and behaviour. television, radio, newspapers, periodicals, posters and other message carriers are being used in efforts to distribute knowledge, to educate, to teach skills, to shape attitudes and to propagate or discourage various habits. according to vivian (1997), magazines contribute to the creation of a national culture and promote literacy. magazines are much less expensive than books and are affordable for most people. magazines were the first advertising medium in the usa and contributed to the transformation of the usa from an agricultural and cottage industry to a modern economy. magazines have led other media in terms of innovations in journalism, advertising and circulation through investigative reporting, in-depth personality profiles and photo-journalism. investigative reporting entails, inter alia, explorations of abusive institutions or organisations in society. inthe role of the media in south african construction health and safety (h & s) by john smallwood and danie venter the australian journal of construction economics & building page 45 depth personality profiles usually entail a highly structured ‘question –and-answer’ interview, whereas photojournalism uses visuals to communicate messages (vivian, 1997). according to kotelchuck (1989), a paper authored by cooke and published in the british medical journal in 1924, linked asbestos exposure to disease. subsequent to 1924, while reviewing hundreds and thousands of documents “ in preparation for his book ‘asbestos : medical and legal aspects’, castleman unearthed the cover-up by top us corporations in the asbestos industry and revealed the “smoking gun of corporate irresponsibility” (kotelchuck, 1989). in effect, a corporate policy was established to cover up the hazards of asbestos, which decision shaped and distorted scientific research and public policy relative thereto. selikoff maintains the aforementioned resulted in the needless loss of tens of thousands of lives over several decades, the expected loss of thousands more, as well as profound human suffering (kotelchuck, 1989). the media can also indirectly act as a channel of influence, as if an injury is particularly severe or dramatic, it attracts media attention, which in turn will undoubtably attract the attention of regulatory personnel (hinze, 1997). however, the civil engineering and building contractor (1999) says that even though it has been said that the media has a social obligation to promote h&s in construction, the media can only do so if the industry itself sets out to promote h&s on a much wider basis. the aforementioned clearly indicate the role and potential role of industry magazines, journals and other print media in h&s, particularly with respect to communicating research findings and investigative journalism. criticism of trade magazines vivian (1997) says many trade magazines are recognised for honest, hard-hitting reporting of the industries they cover. however, he maintains that some trade magazines are ‘loaded with puffery exalting their advertisers and industries’ and persist in pandering to their trades, professions and industries rather than approaching their subjects with journalistic truth-seeking and truth-telling. he also cites the american textile reporter’s dismissal of the hazard of textile workers contracting brown lung disease by inhaling cotton dust, as ‘a thing brought up by venal doctors’ at the time when 100 000 us textiles workers were afflicted with brown lung. impact of the media according to wilde (1994) accident reports in the daily press are among the most frequently read material of all newspaper content. however, invariably the reports do not communicate to readers how they themselves can avoid accidents. wilde (1994) further says that numerous studies have demonstrated that well designed mass media messages for h&s can have a considerable influence on the general public’s knowledge, attitudes and observable behaviours. research given the findings of literature, a descriptive survey was conducted among editors of construction industry and h&s magazines/journals, the objectives being to determine: • the level of knowledge and awareness of editors with respect to h&s; • perceptions with respect to h&s performance in the construction industry; • the current and potential contribution and role of the written media, and • perceptions with respect to the potential of various stakeholders to contribute to improving h&s. 18 editors responded to the national postal survey, which represents a response rate of 64.3%. the role of the media in south african construction health and safety (h & s) by john smallwood and danie venter page 46 the australian journal of construction economics & building table 1: categories of magazines represented by respondents category response (%) construction magazine 66.7 ‘in-house’ construction magazine 11.1 health and safety magazine 16.7 construction paper 0.0 construction journal 5.5 total 100.0 ‘construction magazine’ (66.7%) predominated among the categories of publications represented by editors (table1 above). the mean circulation of publications was 5,090, the predominating circulation category being ‘>2,000≤5,000 (50%)’, followed by ‘>5,000≤10,000’ (38.9%). 47% of editors had one qualification, 41.2% had two, and only 5.9% did not have a qualification. only 11.1% of editors had a h&s qualification. 83.3% of editors responded with respect to years spent practising as a reporter, journalist and editor. on average, the editors had practised 1.9 years as reporters, 3.3 years as journalists, and 7.9 years as editors. 94.4% of editors perceived there to be a need to improve construction h&s. table 2 indicates that the number of fatalities (52.9%), followed by conditions on site (observed) (47.1%), predominated among reasons for their perception. the number of fatalities and injuries in the south african construction industry has received frequent coverage in the written media (construction world, 1998) and in reports such as the department of labour’s annual report (department of labour, 1999). table2: reasons for perceived need to improve construction h&s reason response (%) number of fatalities 52.9 number of injuries 35.3 conditions on site (observed) 47.1 reports 35.3 industry comment 11.8 table 3: rating of h&s performance by editors rating response (%) very poor 9.1 poor 63.6 satisfactory 18.2 good 9.1 very good 0.0 the role of the media in south african construction health and safety (h & s) by john smallwood and danie venter the australian journal of construction economics & building page 47 38.9% of editors perceived themselves as capable of rating the h&s performance of the south african construction industry. of the 61.1% that perceived themselves as capable, the greater percentage (63.6%) rated the h&s performance as ‘poor’ (table 3). the rating reflects the status quo in terms of south african performance relative to the performance of selected international countries (smallwood, 2000). editors who had rated the h&s performance as ‘poor’ or ‘very poor’, were than asked to identify which of a number of aspects contributed to the nonsatisfactory performance. lack of management commitment (87.5%) and lack of worker training (87.5%) predominated among ten aspects, followed by lack of worker participation (table 4). the aforementioned have all been previously identified as aspects contributing to the lack of, or, inadequate h&s in south africa (smallwood, 2000). table 4: aspects which have contributed to the ‘poor’ or ‘very poor’ h&s performance aspect response (%) lack of management commitment 87.5 lack of worker training 87.5 lack of worker participation 50.0 industry culture 37.5 lack of industry commitment 37.5 lack of designer consideration 25.0 lack of management education 25.0 non-enforcement of legislation 25.0 lack of client prioritisation 12.5 south african culture 12.5 table 5: publications’ form of h&s coverage form response (%) articles 88.9 news 44.4 letters 27.8 award 27.8 announcement 16.7 columns 16.7 editor’s comment 11.1 88.8% of editors believe that the media can positively influence h&s. 44.4% of editors responded that h&s is ‘very important’, followed by ‘important’ (27.8%) and ‘fairly important’ (22.2%). only 5.6% responded that h&s is ‘not important’. table 5 indicates that articles (88.9%) predominate among the various forms of coverage h&s is afforded by editors. the next highest percentage was relative to news (44.4%). on average, editors devoted 6.2% of their editorial to h&s. although 44.5% of editors responded that they never received complaints regarding the communication of unhealthy and unsafe construction practices in their publications, 36.8% responded that sometimes they did, and 22.2% rarely. the role of the media in south african construction health and safety (h & s) by john smallwood and danie venter page 48 the australian journal of construction economics & building tables 7, 8 and 9 contain findings in the form of a range of responses: always, often, sometimes, rarely, never, no response; not at all, a little, a fait bit, extensively, don’t know, and more, adequate, less, don’t know. given the possible range of responses, an importance index (ii) with a minimum of zero and a maximum of either four, three or two, was computed to enable ranking of the problems. the ii is calculated using the formulae: 4n1 + 3n2 +2n3 + 1n4 + 0n5 or 3n1 + 2n2 +1n3 + 0n4 or 2n1 + 1n2 +0n3 (n1 + n2 +n3 + n4 + n5) (n1 + n2 +n3 + n4) (n1 + n2 +n3) where n1 = always n2 = often n3 = sometimes n4 = rarely n5 = never/no response where n1 = extensively n2 = a fair bit n3 = a little n4 = not at all/ don’t know where n1 = extensively n2 = adequate n3 = less/don’t know table 6 indicates that, based upon an ii with a minimum value of 0.0, and a maximum value of 4.0, editorial is the aspect most frequently reviewed by editors, or their colleagues, to ensure that the general public is not exposed to the portrayal of unhealthy and unsafe practices. editorial is followed by photographs, columns (regular), advertorial and advertisements. given that 2.00 is the midpoint value of the ii, only the review of editorial can be regarded as prevalent. table 6: media aspects reviewed by editors response (%) ii rank media aspect never rarely sometimes often always no response editorial 16.7 16.7 22.2 16.7 22.2 5.5 2.00 1 photographs 38.9 5.5 5.5 22.2 22.2 11.1 1.72 2 columns (regular) 50.0 0.0 6.3 6.3 25.0 12.6 1.31 3 advertorial 33.3 11.1 11.1 16.7 11.1 16.7 1.28 4 advertisements 44.4 5.5 16.7 11.1 11.1 0.0 1.17 5 table 7 indicates that based upon an ii with a minimum value of 0 (not at all) and a maximum value of 3 (extensively), contractors are the stakeholder perceived to be able to contribute most to improving construction h&s, followed by management (construction), and workers (construction). the potential of contractors, management and workers to contribute to improving construction h&s is well documented, the findings reflecting the ‘hierarchy of potential’ in literature (levitt and samelson, 1993; hinze, 1997). industry associations, the department of labour (dol) and unions, achieved rankings of fourth, fifth and sixth the role of the media in south african construction health and safety (h & s) by john smallwood and danie venter the australian journal of construction economics & building page 49 respectively. industry associations can raise and maintain a level of awareness, disseminate information, facilitate research, and organise competitions. the dol can increase the number of inspections, however, the dol is constrained in terms of the number of available inspectors. unions can raise the level of awareness, train members, negotiate the inclusion of h&s in labour agreements and participate in partnering processes (levitt and samelson, 1993; hinze, 1997). insurers, which achieved a ranking of seventh can provide funding for, or employ their own h&s advisors, and promote and sponsor h&s competitions. tertiary institutions, which achieved a ranking of eight, can contribute through the inclusion of h&s in all construction and related curricula (smallwood, 2000). it is notable that editors, journalists and reporters achieved rankings of ninth, tenth and eleventh respectively. overall, it is significant that all iis were above the midpoint value of 1.50, indicating that the potential for all stakeholders to contribute to improving h&s exists. table 7: extent to which construction industry stakeholders can contribute to improving construction h&s extent of contribution (%) ii rank stakeholder not at all a little a fair bit extensively don’t know contractors 0.0 0.0 11.1 88.9 0.0 2.89 1 management (construction) 0.0 5.6 5.6 88.9 0.0 2.83 2 workers (construction) 0.0 22.2 0.0 77.8 0.0 2.56 3 industry associations 0.0 5.6 27.8 61.1 5.6 2.44 4 department of labour 0.0 16.7 27.8 55.6 0.0 2.39 5 unions 0.0 5.6 16.7 66.7 11.1 2.39 6 insurers 0.0 5.9 29.4 52.9 11.8 2.24 7 tertiary institutions 0.0 22.2 38.9 38.9 0.0 2.17 8 editors 0.0 27.8 61.1 11.1 0.0 1.83 9 journalists 5.6 22.2 66.7 5.6 0.0 1.72 10 reporters 5.6 27.8 66.7 0.0 0.0 1.61 11 table 8 indicates the ranking of various interventions, based upon an ii with a minimum value of 0 (less/don’t know), and a maximum value of 2 (more). it is notable that all interventions achieved an ii above the midpoint value of 1.0, indicating that generally the perception exists that more attention relative to the interventions is required. legislation is the only intervention for which the percentage response relative to ‘adequate’, exceeded the percentage response relative to ‘more’, and marginally so. it is significant that management education, worker education and industry promotion achieved rankings of first, second and third respectively, both management and worker education achieving iis of 2.0 (the maximum value). the perceived degree of attention required relative to these interventions correlates with the top four ranked stakeholders in terms of the extent industry stakeholders can contribute to improving construction h&s: contractors; management (construction); workers (construction), and industry associations (table 7). given the objectives of the study, it is notable that magazines (industry) achieved a ranking of fourth, followed by visual media. the role of the media in south african construction health and safety (h & s) by john smallwood and danie venter page 50 the australian journal of construction economics & building table 8: perceived degree of attention required degree of attention (%) intervention less adequate more don’t know ii rank management education 0.0 0.0 100.0 0.0 2.00 1 worker education 0.0 0.0 100.0 0.0 2.00 2 industry promotion 5.9 0.0 94.1 0.0 1.88 3 magazines (industry) – awareness 0.0 17.6 82.4 0.0 1.82 4 visual media – awareness 0.0 11.1 77.8 11.1 1.67 5 inspections by dol 0.0 5.6 77.8 16.7 1.61 6 union prioritisation 5.6 22.2 66.7 5.6 1.56 7 ministerial (govt) prioritisation 0.0 38.9 55.6 5.6 1.50 8 legislation 0.0 50.0 44.4 5.6 1.39 9 newspapers – awareness 0.0 38.9 50.0 11.1 1.39 10 magazines (general) – awareness 0.0 33.3 50.0 16.7 1.33 11 prioritisation by dol 0.0 22.2 50.0 27.8 1.22 12 the editors were presented with a double page a3 size construction magazine advertisement promoting a light delivery vehicle. the advertisement included a four floor reinforced concrete frame building under construction as a backdrop. editors were requested to record any observed unsafe acts, unsafe conditions and poor housekeeping. the observations and the percentage related response is recorded in parentheses. • “site is in a mess.” (27.8%) • “rubble.” (5.6%) • “poor housekeeping.” (27.8%) • “plenty.” (5.6%) • “inadequate safety barriers.” (38.9%) • “shuttering not stacked.” (11.1%) • “unprotected stairs.” (16.7%) • “lack of supervisor discipline.” (5.6%) • “site barbecues – unhygienic, unsafe and poor practice.” (5.6%) • “wasteful aspects.” (5.6%) • “no fencing around building site.” (5.6%) a total of twelve comments in general regarding the role of the media in construction h&s were received. 5.6% of editors had two comments, 55.6% had one comment and 38.9% had no comments. most of the comments have been presented below: • “the media will respond to industry attempts to promote safety on site.” • “legislation and education are needed – media’s role is very minor.” • “merely reporting is not enough. exposing unsafe acts is essential and publicising prosecutions is essential.” • “use media more to get across a simple message.” • “the media needs to: compare the construction industry with others in south africa to see how bad it is; compare with construction industries overseas to see if we do well, or badly, and monitor trends to see if we are improving.” • “it should strive to be more aware and treat safety issues more seriously and allocate more space to these issues.” • “they have an important role to play in communicating fact and creating perceptions.” • “if more editorial is provided by specialists in the field we will publish willingly.” • “the media needs companies to be an open book as far as oh&s is concerned.” • “we can play a very important role in promotion.” • “the media is merely a medium, the onus is on those concerned with the role of the media in south african construction health and safety (h & s) by john smallwood and danie venter the australian journal of construction economics & building page 51 oh&s to utilise this medium to voice their concerns.” conclusions the conclusions are presented relative to the objectives of the study. the role of the media the print media can disseminate information in the form of news, dedicate editorial and, or columns to h&s, publish articles, conduct and publish interviews, undertake investigative reporting and review photographs, advertisements and advertorial, to ensure that unhealthy and unsafe practices are not communicated. currently, the print media afford h&s coverage primarily in the form of articles. however, given that h&s is a ‘second level’ project parameter, vis a vis, cost, quality and schedule, then the average percentage of editorial devoted to h&s, and the other forms of coverage afforded h&s, indicate commitment to h&s by editors of construction magazines and journals. the general comments elicited during the descriptive survey indicate that the print media perceives its role to be important, but not critical. however, the comments indicate that industry initiative with respect to the role of the media is necessary, and may be a prerequisite. the need for the media to contribute the print media in the form of magazines, newspapers and journals has a responsibility as an industry stakeholder to contribute to h&s related endeavours. this responsibility arises from the level of fatalities, injuries and disease in the industry and the cost thereof to the country as a whole. the need for the media to do so, is reinforced by the media’s role and potential to influence the industry and society as a whole. the fourth and fifth placed rankings of magazines (industry) and the visual media respectively in terms of the degree of attention required relative to various interventions in terms of h&s reinforces the need for the media to contribute. the influence and impact of the media the print media can: bring the hazardous nature of materials and / or processes to the attention of industry and society; expose abusive organisations, and engender focus on h&s through the citing of the benefits thereof. the descriptive survey findings indicate that only the review of editorial by editors, or their colleagues, to ensure that unhealthy and unsafe construction practices are not communicated, can be regarded as prevalent. this implies that other aspects such as photographs, columns (regular), advertorial and advertisements can be reviewed more frequently. the print media, represented by editors, journalists and reporters, are perceived to be the stakeholder to have the least potential to contribute to improving construction h&s. perceptions of editors the findings of the descriptive survey indicate that editors are: • aware of the need to improve construction h&s, which need is reinforced by industry statistics; • knowledgeable with respect to the aspects which have contributed to the ‘poor’ h&s performance of the industry, and • aware, to a degree, of what constitutes unsafe acts, unsafe conditions and poor housekeeping, based upon their review of the advertisement during the descriptive survey. recommendations the construction industry, more specifically, industry associations, should make more use of the print media to engender focus on h&s. editors should endeavour to increase the percentage of their editorial devoted to h&s. editors, reporters, journalists and the role of the media in south african construction health and safety (h & s) by john smallwood and danie venter page 52 the australian journal of construction economics & building photographers should review the media aspects pertinent to their occupation, such as: editorial; photographs; columns (regular); advertorial, and advertisements, to ensure that unhealthy and unsafe practices are not communicated. editors, reporters, journalists and photographers should be vigilant, and expose unsafe practices and conditions in the industry. the photograph of workers removing asbestos cement roof sheeting at the casino project in port elizabeth without wearing any personal protective equipment, which accompanied the brief report ‘asbestos ban supported’, is an example of the need to do so (eastern province herald, 2000). references j anderson. the problems with construction. the safety and health practitioner, may, 29 and 30, 1997. centre to protect workers’ rights (cpwr). building a safety culture-report on the second national conference on ergonomics, safety and health in construction. cpwr, washington, d.c. 1995. compensation commissioner. report on the 1995 statistics. www.wcomp.gov.za, 2000 construction world. and now we wait… construction world, august, 3, 1998. department of labour (dol). annual report 1998. pretoria, 1999. eastern province herald. asbestos ban supported. 23 september, 2, 2000. d grossman. construction industry builds a safe work place. safety and health, april, 48-51, 1991. jw hinze. indirect costs are a major portion of job site injury costs. concrete construction, march, 229, 1992. jw hinze. construction safety. prentice hall, new jersey, 1997. d kotelchuck. asbestos: “the funeral dress of kings” – and others. in d rosner & g markowitz. dying for work. indian university press, indianapolis, 1989. re levitt and nm samelson. construction safety management . 2nd edition. john wiley & sons, inc., new york, 1993. jj smallwood. a study of the relationship between occupational health and safety, labour productivity and quality in the south african construction industry. unpublished phd (construction management), thesis, university of port elizabeth, port elizabeth, 2000. the business roundtable. improving construction safety performance report a3. the business roundtable, new york, 1995. the civil engineering and building contractor. saace’s offer to government. the civil engineering and building contractor, april, 8, 9, 11 and 13, 1999. j vivian. the media of mass communication. 4th edition. allyn and bacon, massachusetts, 1997. gsj wilde. target risk. pde publications, toronto, 1994. applications of extensive green-roof systems in contributing to sustainable development in densely populated cities: a hong kong study vivian w. y. tam, (school of engineering, university of western sydney, australia) xiaoling zhang, winnie w. y. lee and l. y. shen, (department of building and real estate, the hong kong polytechnic university, hong kong) abstract developed cities such as hong kong are usually densely populated. since the land is limited, high-rise buildings are constructed. when buildings become higher, air flow is reduced and heat is trapped among high-rise buildings. the air temperature will be greatly increased and air pollution becomes a serious problem. to reduce air temperature caused by the wall-effects, various methods have been developed. one typical method is the use of green roof systems. the application of extensive green roofs on existing buildings has been recommended in hong kong since 2001. the advantage of this practice is that no additional floor area is required and it can also improve urban greenery. although a green roof system has been introduced and adopted in hong kong since 2001, the emphasis is mainly given to the application of intensive green roofs for podium gardens instead of extensive green roofs. this paper investigates the current practice of using extensive green roofs in hong kong. the constraints in applying extensive green roofs are investigated, which leads to studying the solutions for mitigating these constraints and improving the future development of the implementation. keywords: sustainable development, extensive green roof, intensive green roof, benefit, constraint, recommendation, hong kong introduction a green roof system is one of the typical methods for practicing sustainable development principles in the construction sector (gedge and frith 2004). it is considered an effective and important approach especially for those densely populated cities with major impacts on the local climate such as hong kong (urbis limited 2007). green roofs have been used since ancient times and the modern day green roofs evolved in germany during 1950s (jenrick 2005). although the technique of applying green roof systems is well developed in european countries (liu and baskaran 2003), this is not the case for hong kong and many other countries. a green roof system has been greatly encouraged by the hong kong government since 2001. recently, more projects have applied extensive green roofs in hong kong but mainly in governmental buildings and schools such as the new electrical and mechanical services department (emsd) headquarters and the primary school at sze mei street, san po kong. however, no guideline for the use of green roof systems has been introduced in hong kong (urbis limited 2007). therefore, this paper aims to:  identify the differences between intensive green roofs and extensive green roofs;  investigate the experiences of using green roofs in hong kong;  explore the conditions and constraints of using extensive green roofs; and  recommend solutions for reducing the constraints of applying the extensive green roofs. australasian journal of construction economics and building tam, v w y et al. (2011) ‘applications of extensive green-roof systems in contributing to sustainable development in densely populated cities: a hong kong study’, australasian journal of construction economics and building, 11 (1) 1525 16 intensive green roofs vs extensive green roofs a green roof is a vegetated space where a layer of plant grows on top of a roof (urbis limited 2007). green roofs can mainly be classified into two major types: (i) extensive green roofs; and (ii) intensive green roofs. the intensive green roof is a traditional-style roof garden. it consists mainly of large trees and shrubs. they are usually easily accessible to the public and may include some features similar to a park. it needs flat roofs. it is a labour intensive type of green roof requiring regular irrigation, maintenance and care (worden et al. 2004). the extensive green roofs are usually inaccessible to the public but involve several environmental benefits such as mitigating storm water effects and protect building structures. it is heavy and requires structural inspection before construction to determine roof capacity and weight limit (worden et al. 2004). plants usually chosen for extensive green roofs include succulents and moss (cutlip 2006). when compared to extensive green roofs, intensive green roofs add a considerable weight to roofs (cutlip 2006), they are more costly to build (ngan 2004), often require irrigation and maintenance (jenrick 2005), as well as deeper soil (urbis limited 2007). the intensive green roofs have thicker vegetation layers above the roof insulation, which is more suitable for different types and sizes of plants. more space needs to be provided for the plants to develop root systems. it requires a roof that can support its greater structural loads (koppany 2002). the characteristics of the two types of green roofs is summarized in table 1: characteristics extensive green roof intensive green roof weight lower greater capital cost lower higher maintenance minimal higher soil depth 50mm to 150mm 200mm to 2000mm type of plant sedum and grass trees and shrubs irrigation limited regular vegetation layer thinner thicker technical expertise or practical experience requirement minimal higher structural support lower greater table 1 characteristics of extensive and intensive green roofs the initial cost for installing an extensive green roof is about us$8-20/ft 2 (aud 90 220/m 2 ) while installing an intensive green roof is about us$15-25 / ft 2 (aud 165 – 275/m 2 ) (great lakes water institute school of freshwater sciences university of wisconsin milwaukee 2011). this cost estimation includes design and specification, project administration, site review, re-roofing with root-repelling membrane, drainage, filtering, paving, growing medium, plants, installation, and irrigation system. constructing green roofs brings a lot of benefits to the environment, which include: (i) reducing urban island heat effect (jenrick 2005); (ii) improving air quality by converting carbon dioxide into oxygen (grant et al. 2003); (iii) reducing noise (lagstrom 2004); (iv) reducing water runoff speed (rowe et al. 2005); (v) increasing wildlife and biodiversity (gedge and frith 2004); (vi) increasing roof life by reducing thermal stress in the membrane (jenrick 2005); (vii) increasing energy efficiency by reducing the amount of solar heat energy absorbed by the roof below through evapotranspiration by plants (jenrick 2005); (viii) reducing roof maintenance (cutlip 2006); (ix) improving visual amenity (gedge and frith 2004); and (x) improving health by reducing stress and providing cleaner air (gedge and frith 2004). australasian journal of construction economics and building tam, v w y et al. (2011) ‘applications of extensive green-roof systems in contributing to sustainable development in densely populated cities: a hong kong study’, australasian journal of construction economics and building, 11 (1) 1525 17 both green roof systems have the above benefits. however, the extensive green roofs are often less visually pleasing because of fewer types of plants are used (getter and rowe 2006) but have higher cost savings due to less care as compared to intensive green roofs. table 2 summarizes the benefits of the intensive and extensive green roof systems. intensive green roof extensive green roof reduced urban island heat effect   improved air quality   reduced noise absorption   reduced water runoff   improved wildlife and biodiversity   increased roof life   increased energy efficiency   cost savings  (lower)  (higher) maintenance costs  (higher)  (lower) improved visual amenity  (higher)  (lower) improved health   table 2 benefits of intensive and extensive green roof systems although there are many benefits for constructing green roof systems, the extensive green roofs are still not commonly used in hong kong. the major constraints for the use of extensive green roof systems are: (i) lack of knowledge and awareness: the intensive green roofs have widespread used in hong kong but this is not the case with the extensive green roofs. the main reason is lack of knowledge and awareness of extensive green roofs. intensive green roofs are similar to growing plants on the ground, only at a higher level, so it is easier to develop than the extensive green roofs. due to a lack of government use of extensive green roofs in their green roof projects, neither the public nor the private sectors are familiar with the extensive green roof systems (urbis limited 2007). (ii) lack of incentive: since the government lacks knowledge and awareness of extensive green roofs, incentives provided by the government to developers for constructing extensive green roofs is inadequate (urbis limited 2007). (iii) increased design cost: it is necessary to properly design a suitable roof base for the extensive green roofs. design cost may increase with the weight of the extensive green roof systems (urbis limited 2007). (iv) structural loading: roof structural loading is a main factor determining the viability and cost of green roof installation, particularly for extensive green roofs. retrofitting an existing roof may not be feasible if the structural capacity of the roof is inadequate (hui and chan 2008) (urbis limited 2007). (v) technical issues and risks associated with uncertainty: in the construction of the extensive green roofs, some technical issues, such as design, layer between waterproofing layer and plant layer, wind load and structural load, need to be considered. arrangement is required for preparing for future maintenance (urbis limited 2007). the existing applications of green roof projects used in hong kong there are some governmental buildings such as governmental offices, schools and hospitals which have adopted green roof systems in hong kong. according to the legislation council meeting on 15 november 2006 (legislative council 2006), 53 buildings having adopted green roof features, with the details in table 3 and table 4. australasian journal of construction economics and building tam, v w y et al. (2011) ‘applications of extensive green-roof systems in contributing to sustainable development in densely populated cities: a hong kong study’, australasian journal of construction economics and building, 11 (1) 1525 18 type of buildings number of projects school 16 office building 17 hospital 7 community facilities 9 governmental quarters 4 total 53 table 3 various types of completed buildings with green roof features from 2001 to 2006 (legislative council 2006) green roof features number of projects soil layer planting on rooftop surface 45 pot planting 2 soil layer planting on rooftop surface and pot planting 6 total 53 table 4 a breakdown of direct soil planting on rooftop surface and/or pot planting from 2001 to 2006 (legislative council 2006) the main types of completed buildings with green roof features are schools and office buildings. most of the green roof systems use soil layer planting on rooftop surface. however, there is no statistics for the total number of green roofs with extensive green roofs and intensive green roofs in hong kong buildings. table 5 shows some examples of buildings which have applied green roofs in hong kong. type of building green roof project intensive green roof extensive green roof government buildings new police headquarters, wan chai  north point government offices, north point  new emsd headquarters, kowloon city  podium garden, civil engineering and development department headquarters, ho man tin  primary school at sze mei street. san po kong  shun lee department quarter, shun lee  kwai chung ambulance depot, kwai chung  podium garden, tin shui wai area 102, tin shui wai  fanling magistracy building, fanling  science park, building 9, new territories  residential buildings eastern harbour crossing site phase 3, yau tong  commercial buildings international finance centre ii, central  pacific place i and ii, admiralty  the hongkong and shanghai banking corporation limited, central  table 5 examples of hong kong green roof projects (urbis limited 2007) from the above cases, it can be seen that applications of the extensive green roofs are limited in hong kong. furthermore, the original designs of old buildings were not planned for green roofs in the future, and the extra loading may not be possible to accommodate. there are also unauthorized building works on top of the roofs of existing buildings. this will restrict australasian journal of construction economics and building tam, v w y et al. (2011) ‘applications of extensive green-roof systems in contributing to sustainable development in densely populated cities: a hong kong study’, australasian journal of construction economics and building, 11 (1) 1525 19 the potential for construction of green roofs. in addition, some roof areas may be owned by different owners, making it difficult to make arrangement among owners for constructing green roofs. research methodologies to investigate the familiarity of the public of extensive green roofs, and constraints on using extensive green roofs on existing buildings in hong kong, a survey was conducted. 600 questionnaires were sent to university academics, government departments, consultants, contractors and general public. 426 respondents were received with a response rate of about 71%. relative importance index (rii) as used for the data analysis in this paper, is shown in eq. (1). relative importance index (rii) = an w , )10(  rii eq. (1) where w is the sum of individual scores given to each factor by the respondents and ranging from 1 to 5 where ‘1’ is ‘strongly disagree’ and ‘5’ is ‘strongly agree’; a the possible highest score for each factor (i.e. 5 in this case); and n the total number of responses concerning that factor. spearman’s rank correlation test is used to measure the level of agreement among different groups of respondents. the opinion of different groups of respondents is analyzed and compared by mean score. after receiving the questionnaire responses, individual structured interviews are arranged with twenty respondents, selected from different categories and different disciplines of respondents. the interviews are intended for gathering further comments; elaboration and interpretation on the results obtained from the questionnaire. results and discussions the respondents are categorized as government departmental staff (34.1%), contractors (20.3%), consultants (15.9%), academia (19%) and others (10.7%) under five different disciplines, including architecture (14%), surveying (40%), engineering (13%), education (19%) and others (14%). table 6 summarizes the existing and future development of green roof systems. all respondents are not green roof users and majority of the respondents are not involved with any green roof project. the majority of the respondents did not agree that an extensive green roof system is widely used for the existing buildings, in which they argue that one of the main problems is that it is not sufficient promoted by the government. although the green roof systems are not widely adopted, the respondents still agree that the applications of extensive green roof systems are feasible for existing buildings (about 96.6%) and they also support the implementation of extensive green roof systems for the existing buildings (about 96.1%) and the construction of an extensive green roof on the building where they live (about 85%). based on the previous literatures (koppany 2002; grant et al. 2003; liu and baskaran 2003; gedge and frith 2004; lagstrom 2004; ngan 2004; worden et al. 2004; jenrick 2005; rowe et al. 2005; cutlip 2006; getter and rowe 2006; legislative council 2006; urbis limited 2007), benefits from implementing extensive green roof systems are: (i) reduced urban island heat effect; (ii) improved air quality; (iii) improved noise absorption; (iv) reduced water runoff speed; (v) increased wildlife and biodiversity; (vi) prolonged roof life; (vii) improved energy efficiency; (viii) cost saving; (ix) reduced roof maintenance; (x) improved visual amenity; (xi) improved public health; and (xii) increased amenity areas. australasian journal of construction economics and building tam, v w y et al. (2011) ‘applications of extensive green-roof systems in contributing to sustainable development in densely populated cities: a hong kong study’, australasian journal of construction economics and building, 11 (1) 1525 20 percentage green roof user yes 0.0 no 100.0 green roof project involvement yes 3.0 no 97.0 do you agree extensive green roof systems are widely used for the existing buildings? strongly agree 0.0 agree 5.2 neutral 15.5 disagree 43.5 strongly disagree 35.8 do you agree the government has taken sufficient measures to promote the application of extensive green roof systems for the existing buildings? strongly agree 0.0 agree 2.2 neutral 15.1 disagree 51.7 strongly disagree 31.0 do you think the application of extensive green roof systems for the existing buildings is feasible? yes 96.6 no 3.4 do you support the implementation of the extensive green roof systems for the existing buildings? yes 96.1 no 3.9 do you support to construct an extensive green roof of the building where you live in? yes 85.0 no 15.0 table 6: the existing and future development of the extensive green roof systems the survey results in table 7, show that most of the respondents agree that benefits can be gained by implementing extensive green roof systems. improving visual amenity ranks first with the rii of 0.889. green roofs can increase green features in the limited land areas. the interviewees also highlight that green areas can always improve the visual impression of the environment, and the same applies to extensive green roof systems. urban island heat effect and air quality can also be improved due to reflection of direct sunlight and photosynthesis of plants respectively which ranked as the second and third major benefits respectively from the survey results. however, reducing roof maintenance is ranked as the least beneficial, with the rii of 0.572. one of the interviewees argues that he is unsure about the low maintenance for the extensive green roof systems, which may depends on the selection of plants. the maintenance for extensive green roof systems may shift from the roof itself to the plants. the authors are currently conducting a separate study on cost saving from energy in implementing green roof systems. it has a preliminary results showing that there is about 50 per cent energy cost reduction in the initial set-up of the roof. detailed analysis, including life cycle costing and payback period, will be reported in a separate paper in the near future. the different groups of respondents have similar views on the benefits of implementing extensive green roof systems with no significant difference indicated by spearman’s rank correlation analysis. although the implementation of extensive green roof systems for the existing buildings may have benefits, it also has some constraints. fourteen constraints are highlighted in the literature (koppany 2002; grant et al. 2003; liu and baskaran 2003; australasian journal of construction economics and building tam, v w y et al. (2011) ‘applications of extensive green-roof systems in contributing to sustainable development in densely populated cities: a hong kong study’, australasian journal of construction economics and building, 11 (1) 1525 21 gedge and frith 2004; lagstrom 2004; ngan 2004; worden et al. 2004; jenrick 2005; rowe et al. 2005; cutlip 2006; getter and rowe 2006; legislative council 2006; urbis limited 2007): (i) lack of knowledge; (ii) lack of awareness; (iii) lack of incentive from the government to developers; (iv) lack of incentive from the government to owners of existing buildings; (v) lack of promotion by the government; (vi) increase in design cost; (vii) increase in strengthening cost to withstand additional structural loading; (viii) increase in construction cost; (ix) increase in maintenance cost; (x) increase in structural loading; (xi) design difficulties; (xii) difficulties in laying waterproofing payer and plant layer; (xiii) withstand wind load; and (xiv) regular maintenance. benefits strongly disagree disagree neutral agree strongly agree rii ranking reduce urban island heat effect 0.0 0.0 23.1 43.3 33.6 0.838 2 improve air quality 0.0 3.3 21.2 46.6 28.9 0.819 3 improve noise absorption 0.0 16.4 44.8 28.9 9.9 0.678 7 reduce water runoff speed 0.0 20.7 59.9 18.1 1.3 0.612 10 increase wildlife and biodiversity 6.9 23.7 44.8 21.6 3.0 0.592 11 prolong roof life 5.6 16.8 36.7 36.2 4.7 0.648 8 improve energy efficiency 0.9 3.0 28.5 44.8 22.8 0.787 6 cost saving 3.9 27.6 44.3 19.0 5.2 0.600 9 reduce roof maintenance 7.3 32.8 35.8 20.7 3.4 0.572 12 improve visual amenity 0.0 0.9 9.4 43.1 46.6 0.889 1 improve public health 0.0 4.7 16.4 62.1 16.8 0.798 5 increase amenity areas 0.9 3.9 21.1 51.3 22.8 0.798 4 table 7 benefits in implementing extensive green roof systems from the survey results shown in table 8, most of the respondents agree that there are major constraints in the implementation of extensive green roof systems. it is found that lack of promotion from the government and lack of incentives from the government to owners of existing buildings rank as the major constraints with the rii of 0.826 and 0.808 respectively. the interviewees explain that the adoption of innovative facilities needs to be promoted and supported by the government at the early stage of development; otherwise, the industry will adopt a wait-and-see attitude before implementation. when the industry did not have experience of innovative facilities, they consider it risky for the long term. maintenance is a long term process and continuous maintenance cost is normally required. therefore, increased maintenance cost and regular maintenance for the implementation of extensive green roof systems are ranked as the third and fifth major constraints with rii of 0.799 and 0.765 respectively. from the survey results, design for extensive green roof systems is not a major constraint for the implementation, which ranks lowest. the interviewees explained that architectural design is not much different for a green roof building compared to a non-green roof building, particular with an extensive green roof design not using big trees. this can also explain why ability to withstand wind load did not rank as one of the major constraints. australasian journal of construction economics and building tam, v w y et al. (2011) ‘applications of extensive green-roof systems in contributing to sustainable development in densely populated cities: a hong kong study’, australasian journal of construction economics and building, 11 (1) 1525 22 the different groups of respondents, have similar views on the major constraints in the implementation of extensive green roof systems with no significant value from the spearman’s rank correlation analysis. constraints strongly disagree disagree neutral agree strongly agree rii ranking lack of knowledge 0.0 4.3 29.3 44.4 22.0 0.784 6 lack of awareness 0.0 4.3 28.0 45.3 22.4 0.787 4 lack of incentive from the government to developers 0.0 9.9 29.2 40.6 20.3 0.758 9 lack of incentive from the government to building owners for the existing building 0.0 4.3 22.8 45.7 27.2 0.808 2 lack of promotion from the government 0.0 5.2 17.6 44.4 32.8 0.826 1 increase in design cost 1.7 6.0 27.2 51.7 13.4 0.753 10 increase in strengthening cost in withstanding additional structural loading 0.0 7.8 25.8 50.0 16.4 0.765 7 increase in construction cost 0.0 5.2 32.7 45.3 16.8 0.763 8 increase in maintenance cost 0.0 3.0 21.5 56.5 19.0 0.799 3 increase in structural loading 0.9 12.1 28.4 44.8 13.8 0.732 11 design difficulties 3.9 24.6 40.0 26.3 5.2 0.621 14 difficulties in laying waterproofing layer and plant layer 2.2 10.3 29.3 44.8 13.4 0.728 12 withstand wind load 2.2 21.6 34.9 33.2 4.7 0.625 13 regular maintenance 1.3 3.4 18.5 55.2 18.1 0.765 5 table 8: constraints in implementing extensive green roof systems to encourage the implementation of extensive green roofs, nine measures are suggested based on the literatures (koppany 2002; grant et al. 2003; liu and baskaran 2003; gedge and frith 2004; lagstrom 2004; ngan 2004; worden et al. 2004; jenrick 2005; rowe et al. 2005; cutlip 2006; getter and rowe 2006; legislative council 2006; urbis limited 2007): (i) the government provides incentive to developers; (ii) the government provides incentive to owners of existing buildings; (iii) the government offers extra floor area bonus to the developers who construct certain green roof areas; (iv) amount of green area compulsory in open space under property development regulations (v) percentage of prescribed green space compulsory on roofs for property development projects; (vi) green roof construction sets as a statutory requirement under certain conditions such as roof area, building size, use, etc; (vii) setup guidelines for developers / contractors; (viii) building with specified area of impervious surface is required to construct green roofs for reducing storm water pollution and flow rates; and (ix) educate public to enhance the awareness of the importance of green roofs. in table 9, it can be seen that setting up guidelines for developers / contractors to construct green roofs, educate the public to be aware of the importance of green roofs, and the government providing incentives to developers and building owners are the best measures for reducing constraints on the implementation of green roof systems. however, buildings with a specified area of impervious surface required to construct green roofs, percentage of australasian journal of construction economics and building tam, v w y et al. (2011) ‘applications of extensive green-roof systems in contributing to sustainable development in densely populated cities: a hong kong study’, australasian journal of construction economics and building, 11 (1) 1525 23 prescribed green roofs and amount of green area compulsory on roof for property development projects and green roof construction sets as a statutory requirement are not highly ranked as measures to improve the constraints to the implementation, and rank last, seventh, sixth and fifth respectively. it should be noted that voluntary approaches are are preferred to mandatory approaches in improving the implementation of extensive green roof systems. the interviewees also point out that mandatory requirements can force the industry to quickly implement the suggested approaches; however, it can cause a lot of long term problems for the ineffective and inefficient implementation. this may ultimately delay the successfully implement. different groups of respondents have similar views on the major issues in the implementation of extensive green roof systems with no significant differences indicated by spearman’s rank correlation analysis. measures strongly disagree disagree neutral agree strongly agree rii rank the government provides incentive to developers 3.9 9.1 18.5 47.8 20.7 0.760 4 the government provides incentive to owners of existing buildings 3.0 5.6 22.9 47.8 20.7 0.771 3 the government offers extra floor area bonus to developers who construct certain green roof areas 6.5 15.5 20.7 37.9 19.4 0.711 8 amount of green area compulsory in an open space for property development projects 1.3 15.1 20.7 45.7 17.2 0.740 6 percentage of prescribed green space compulsory on roof for property development projects 0.4 17.2 24.7 37.9 19.8 0.734 7 green roof made statutory requirement under certain conditions. 0.9 12.9 26.7 39.2 20.3 0.745 5 setup guidelines for developers /contractors 0.0 2.2 10.7 48.7 38.4 0.864 1 building with specified area of impervious surface required to construct green roofs for reducing storm water 3.0 6.9 53.4 27.6 9.1 0.679 9 educate public to be aware of the importance of green roofs 0.4 2.2 14.6 49.6 33.2 0.843 2 table 9: measures for reducing constraints in implementing extensive green roof systems practical implications based on the survey results and interview discussions, if the aim is to increase the benefits of a wider adoption of extensive green roofs for existing buildings and future development, the following recommendations would be necessary. australasian journal of construction economics and building tam, v w y et al. (2011) ‘applications of extensive green-roof systems in contributing to sustainable development in densely populated cities: a hong kong study’, australasian journal of construction economics and building, 11 (1) 1525 24 subsidization applications of extensive green roof systems to the existing buildings are still at the early stage for the industry. if the government aims to promote the use of extensive green roof systems it may need to counter current uncertainty about their effectiveness and subsidy industry and public for the construction of extensive green roof systems for existing and new buildings and buildings. setup guidelines at present, there is no clear guideline provided to the industry and public on extensive green roof systems. to promote them, there should be definitions of different green roof systems and basic components of green roof systems should be included in the guidelines as well as information on the structures of green roof systems and functions of each component. the guidelines should also include specifications for design, construction and maintenance. technical support the government could benefit from a designated department to monitor applications of extensive green roof systems and provide technical support to industry on effective use of extensive green roof systems. education to promote extensive green roof systems the government could act as a leader in using extensive green roof systems for governmental buildings. site visits, seminars and mass media could also be organized to disseminate knowledge to industry and public. conclusion this paper examined the experience of using green roofs in hong kong. survey and interviews reveled that although extensive green roof systems are not widely adopted, the application of extensive green roof systems is still feasible for the existing buildings. the industry generally also supports the implementation of extensive green roof systems for the existing buildings. it was found that the main benefits can be gained from the implementation of extensive green roofs are improving visual amenity, reducing urban island heat effect and improving air quality. however, lack of promotion from the government and lack of incentives from the government to owners for the existing buildings were found to be the major constraints in the implementation. to improving the implementation of the extensive green roof systems, market rather than mandatory approaches are suggested. recommendations were suggested for improving the existing and future development of the implementation. references cutlip, j. 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(2004) green roofs in urban landscapes, department of environmental horticulture, university of florida, united states chapter 1 modelling seasonality in australian building approvals harry karamujic, (the university of melbourne, australia) abstract the paper examines the impact of seasonal influences on australian housing approvals, represented by the state of victoria building approvals for new houses (banhs). the prime objective of banhs is to provide timely estimates of future residential building work. due to the relevance of the residential property sector to the property sector as whole, banhs are viewed by economic analysts and commentators as a leading indicator of property sector investment and as such the general level of economic activity and employment. the generic objective of the study is to enhance the practice of modelling housing variables. in particular, the study seeks to cast some additional light on modelling the seasonal behaviour of banhs by: (i) establishing the presence, or otherwise, of seasonality in victorian banhs; (ii) if present, ascertaining is it deterministic or stochastic; and (iii) determining out of sample forecasting capabilities of the considered modelling specifications. to do so the study utilises a structural time series model of harvey (1989). the modelling results confirm that the modelling specification allowing for stochastic trend and deterministic seasonality performs best in terms of diagnostic tests and goodness of fit measures. this is corroborated with the analysis of out of sample forecasting capabilities of the considered modelling specifications, which showed that the models with deterministic seasonal specification exhibit superior forecasting capabilities. the paper also demonstrates that if time series are characterized by either stochastic trend or seasonality, the conventional modelling approach (a modelling approach based on the assumption of deterministic trend and deterministic seasonality) is bound to be mis-specified i.e. would not be able to identify statistically significant seasonality in time series. according to the selected modeling specification, factors corresponding to june, april, december and november are found to be significant at five per cent level. keywords: new housing building approvals, univariate structural time series modelling, out of sample forecasting, stochastic and deterministic trend, stochastic and deterministic seasonality introduction building approvals for new houses (banhs) denotes the number of new house building works approved. from july 1990, the statistics include all approved new residential building valued at a$10,000 or more. a new house can be defined as the construction of a detached building that is primarily used for long term residential purposes. according to the australian bureau of statistics (abs) (2009), statistics of building work approved are compiled from “permits issued by local government authorities and other principal certifying authorities, and contracts let or day labour work authorised by commonwealth, state, semi-government and local government authorities”. as with most other countries worldwide, all houses built in australia have to be approved by relevant government departments before building commences. consequently, banhs are used to inform as to how many new buildings are expected to be constructed in the near future. because banhs provide timely estimates of future residential building work, and due to the relevance of the residential property sector to the property sector as whole, banhs are viewed by economic analysts and commentators as a leading indicator of property sector investment and as such the general level of economic activity and employment. australasian journal of construction economics and building karamujic, h (2012) ‘modelling seasonality in australian building approvals’, australasian journal of construction economics and building, 12 (1) 26-36 27 the awareness of the sizeable impact of the property sector on the soundness of financial institutions and the level of economic activity is not a new observation. it is commonly accepted that the boom-bust nature of property prices plays an important role in explaining business cycles (by strengthening the upswing and amplify the downswing). typically, reducing housing prices tend to impose additional pressure on the banking sector. this happens not only because of increases in bad debts for mortgage loans, but also because of the deterioration in the balance sheets of corporate borrowers that rely on property as collateral. not surprisingly, fluctuations in housing activity and the extent to which they interact with the financial sector and the whole economy are very much of interest, among others, to the government, the reserve bank and other financial regulators. the mainstream literature have recognised for a long time that investment in housing and consumer durables lead non-residential business fixed investment over the business cycle (e.g. burns and mitchell 1946). among others, this is corroborated by fisher (2006), who observed that in seven of the ten post-war recessions in the usa, household investment achieved its peak and trough before business investment. ball and wood (1999) conducted comparative structural time series analysis of housing investment in advanced world economies. they looked at the impact of housing investment on the economy and concluded that housing investment fluctuations after 1960s become a destabilizing factor. this finding highlighted the significance of this category of investment and further accentuated the relevance of studies focusing on better understanding housing investment volatility. this study examines the impact of seasonal influences on australian housing approvals, represented by victorian banhs. victoria has been selected as a test case because of its geographical homogeneity and economic relevance. victoria is australia's most urbanized state: nearly 90 per cent of residents living in cities and towns, it is the most densely populated state (22 people on square kilometer), and has a highly centralized population, with almost 75 per cent of victorians living in the state capital and largest city, melbourne. at the same time, the state of victoria is the second largest economy in australia, after new south wales, accounting for almost a quarter of the nation's gross domestic product (gdp). according to the abs (2011), in 2008/2009 victoria contributed 22.6 per cent of the australian gdp. all other australian states are either geographically dispersed (cover a wide geographical region across different time and climatic zones) or economically much less significant. it is important to note that the focus of the study is not on modeling the behaviour of time series in terms of explanatory variables (the conventional modeling approach). the conventional modeling approach assumes that the behaviour of the trend and seasonality can be effectively captured by a conventional regression equation that assumes deterministic trend and seasonality. instead, the aim is to use a univariate structural time series modeling approach (allows modeling both stochastic and deterministic trend and seasonality) and show that conventional assumptions of deterministic trend and seasonality are not always applicable. within this specification all components are stochastic; nevertheless each can turn deterministic as a limiting case. in addition to enhancing the practice of modelling an important housing variable, the objective of this paper to empirically assesses the presence of seasonal variations in victorian housing approvals. specifically, the study seeks to cast some additional light on banhs by: (i) establishing the presence, or otherwise, of seasonality in victorian banhs, (ii) if present, ascertaining if it is deterministic or stochastic, and (iii) determining out of sample forecasting capabilities of the considered modeling specifications. to do so the study utilises the basic structural time series model of harvey (1989). compared to the conventional procedure, harvey’s (1989) structural time series model involves an explicit modelling of seasonality as an unobserved component. empirical evidence of seasonal variations in property related variables is relatively limited. studies come from a range of different perspectives and employ a number of modelling http://en.wikipedia.org/wiki/melbourne http://en.wikipedia.org/wiki/gross_domestic_product australasian journal of construction economics and building karamujic, h (2012) ‘modelling seasonality in australian building approvals’, australasian journal of construction economics and building, 12 (1) 26-36 28 techniques. harris (1989) provided empirical evidence of strong second and third quarter seasonality in the usa house prices. ma and goebel (1991) established the presence of january seasonal effect for securitised mortgage markets, while friday and peterson (1997) and colwell and park (1990) established presence of a january seasonal effect in returns of real estate investment trusts (reits) in the usa. rossini (2000) examined seasonal effects in the housing markets of adelaide, south australia, and, with respect to the volume of detached dwelling transactions, determined the presence of statistically significant ‘summer’ and ‘autumn’ seasonal effects. similarly, costello (2001) examined the impact of seasonal influences on housing market activity in perth, western australia, and found that the volume of transactions and hence demand is greatest during the first quarter of a year and lowest during the last quarter. karamujic (2009) confirmed the presence of both cyclicality and seasonality in australian residential mortgage interest rates in the two major australian banks (national australia bank (nab) and commonwealth australia bank (cba)). all studies, to varying degrees, point to the existence of seasonality. a study of the literature on housing variables uncovered that most studies are focusing on house prices and found no empirical research focusing on seasonal fluctuations in banhs. the rest of the paper is organised as follows. the next section of this paper outlines the methodology used. section 3 elaborates on data specification, modelling test results and interpretation of the modelling results. finally, in section 4, the paper concludes. isolating the seasonal component: methodology modelling a changing seasonal component is relatively easy for quarterly and monthly observations, with the seasonal component normally being combined with a stochastic trend and an irregular term. this is either done explicitly, as in the structural time series modelling approach, or implicitly, as in the integrated moving average (arima) approach. in the latter case, the seasonal component is specified by means of a canonical decomposition as shown by hillmer and tao (1982). the seasonal component can be extracted by a state space smoothing algorithm; see for example, kitagawa and gersch (1984) or harvey (1989). carrying out such model-based seasonal adjustment, using either approach, has considerable attractions because the procedure adapts to the particular characteristics of the series involved. a structural time series framework approach, used in this paper, is in line with that promulgated by harvey (1989). such models can be interpreted as regressions on functions of time in which the parameters are time-varying. this makes them a natural vehicle for handling changing seasonality of a complex form. once a suitable model has been fitted, the seasonal component can be extracted by a smoothing algorithm. following harvey (1989) and harvey, koopman and riani (1997), the basic structural time series model is formulated in terms of a trend, seasonal and irregular components. all are assumed to be stochastic and driven by serially independent gaussian disturbances that are mutually independent. if there are s seasons in the year, the model is  2 t ,0~ ,  nidy tttt  , (1) where the trend, seasonal and irregular are denoted by t  , t  and t  , respectively. the trend is specified as follows:  2 t11 ,0~ ,  nidtttt   , (2)  2 t1 ,0~ ,  nidtt   australasian journal of construction economics and building karamujic, h (2012) ‘modelling seasonality in australian building approvals’, australasian journal of construction economics and building, 12 (1) 26-36 29 where t  is the level and t  is the slope. the disturbances t  and t  are assumed to be mutually independent. setting 0 2  gives a trend that is relatively smooth. the seasonal component is generally constructed in terms of stochastic trigonometric functions at the 2/s seasonal frequencies, although deterministic and dummy-variable formulations are also possible. the fundamental point is that, although the seasonal component is non-stationary, it has the property that the expected value of the sum over the previous s time periods is zero. this ensures that the seasonal effects are not confounded with the trend. it also means that the forecasts of the seasonal component will sum to zero over any one-year period. the statistical treatment of the model is based on the state-space form, with 1s elements in the state vector. estimation, forecasting and signal extraction are carried out by means of the kalman filter and associated algorithms. the trigonometric form of stochastic seasonality used in models of the form (1) where s seasons in the year is   tt s j tjt ,,1 , 2/ 1 ,     , (3) and each tj ,  is generated by                            * , , * 1, 1, * , , cos sin sin cos tj tj tj tj j j j j tj tj           , (4) where sj j  2 is frequency, in radians, for  2,,1 sj  and t  * t  are two mutually uncorrelated white-noise disturbances with zero means and common variance 2  . the basic structural model consisting of the stochastic trend in (2) with trigonometric seasonality is easily put in state-space form by defining the   11 s state vector  ,,,,,, *22 * 11 ttttttt   . the measurement equation is then   tttt y   ' ,0,1 z , (5) where  ,0,1,0,1'  t z . if the kalman filter is initiated with a diffuse prior, as shown by de jong (1991), an estimator of the state with a proper prior is effectively constructed from the first 1s observations. on the other hand, if we choose to fix the seasonal pattern in (1), thus specifying a deterministic seasonal component, t  may be modeled as: 1    s j jtjt z (6) where s is the number of seasons and the dummy variable jt z is one in season j and zero otherwise. in order not to confound trend with seasonality, the coefficients, j  , ,,,1 sj  are constrained to sum to zero. the seasonal pattern may be allowed to change australasian journal of construction economics and building karamujic, h (2012) ‘modelling seasonality in australian building approvals’, australasian journal of construction economics and building, 12 (1) 26-36 30 over time by letting the coefficients evolve as random walks as in harrison and stevens (1976). if t  denotes the effect of season j at time t, then   .,,1 ,0,nid~ , 2 1, sj tjttjjt    (7) although all s seasonal components are continually evolving, only one affects the observations at any particular point in time, that is jtt   when season j is prevailing at time t. the requirement that the seasonal components evolve in such a way that they always sum to zero is enforced by the restriction that the disturbances sum to zero at each point in time. this restriction is implemented by the correlation structure in    iiivar  12 s t  (8) where   sttt  ,, 1  , coupled with initial conditions requiring that the seasonal sum to zero at 0t . it can be seen from the equation above that   .0 t ivar in the basic structural model, t  in (1) is the local linear trend of (2), the irregular component, t  , is assumed to be random, and the disturbances in all three components are taken to be mutually uncorrelated. the signal-noise ratio associated with the seasonal, that is , 22  q determines how rapidly the seasonal changes relative to the irregular. an example of how the basic structural model successfully captures changing seasonality can be found in the study of alcoholic beverages by lenten and moosa (1999). results and discussion the structural time series model represented by (1) is applied to seasonally unadjusted monthly banhs data for victoria. all three considered modelling specifications include trend (composed of the level ( t  ) and slope ( t  )), seasonal ( t  ) and irregular components ( t  ). an irregular component is also known as the standard error, which can be defined as the standard deviation of the sampling distribution of the estimator, calculated as the square root of the one-step ahead prediction error variance. the data has been sourced from the abs. the observed period was from 2000:06 to 2009:05. for consistency, the sample for each variable is standardised to start with the first available june observation and end with the latest available may observation, i.e. t1  is a seasonal factor that relates to the last month in the sample (may), t2  corresponds to april, t3  corresponds to march, and so on. table 1 also reports on the goodness of fit and diagnostics tests. the goodness of fit measures entail the coefficient of determination (r2), a modified coefficient of determination calculated on the basis of the seasonal mean (rs2), akaike’s information criterion (aic), and the schwarz bayesian criterion (bic). on the other hand, diagnostic tests cover serial correlation, normality and heteroscedasticity. they are represented by the durbin-watson statistic (dw), the bowman-shenton (1975) test for normality of the residual (n), the ljungbox (1978) test for serial correlation (q) and a test for heteroscedasticity (h). as shown in table 1, the analysis considers three modelling specifications. two modelling specifications (models one and two) include a stochastic trend, while model three incorporates a deterministic trend. on the other hand, model one incorporates stochastic seasonal component, while models two and three incorporate deterministic (fixed) seasonal australasian journal of construction economics and building karamujic, h (2012) ‘modelling seasonality in australian building approvals’, australasian journal of construction economics and building, 12 (1) 26-36 31 components. in summary, table 1 reports the estimated components of the state vector ( t  , t , 1 11 and t  ), their t-statistics, goodness of fit measures and diagnostics test statistics. with respect to the goodness of fit, all assessed models are well defined. overall, the diagnostic tests are also predominately passed. the only exception is the test for serial correlation (q), for the model two (which is slightly above the statistically acceptable level) and model three (significantly above the statistically acceptable level). the q statistic for model three indicates that the model suffers from serial correlation, implying a mis-specified model. in all cases the slope is insignificant and the level is significant. state variable/test statistic model 1 (stochastic trend and stochastic seasonality) model 2 (stochastic trend and deterministic seasonality) model 3 (deterministic trend and deterministic seasonality) t  2533.30 (17.28) 2533.30 (17.28) 2530.80 (34.04) t  1.17 (0.05) 1.17 (0.05) -0.74 (-0.61) 1  159.39 (3.87) 288.62 (3.53) 244.62 (1.98) 2  242.47 (5.79) 154.24 (1.89) 119.13 (0.96) 3  47.67 (1.39) 266.56 (3.28) 240.09 (1.94) 4  -97.10 (-2.82) 31.38 (0.39) 13.27 (0.11) 5  -113.7 (-3.45) 94.81 (1.17) 84.78 (0.69) 6  89.34 (2.71) 100.83 (1.25) 98.63 (0.80) 7  134.15 (4.13) -390.32 (-4.82) -384.97 (-3.12) 8  63.14 (1.95) -657.19 (-8.12) -644.56 (-5.22) 9  13.54 (0.42) -50.03 (-0.62) -30.38 (-0.25) 10  5.16 (0.16) 20.75 (0.26) 47.13 (0.38) 1 1  -21.80 (-0.96) -78.88 (-0.97) -46.02 (-0.37) t  277.23 274.39 364.48 2 s r 0.30 0.31 -0.21 2 d r 0.58 0.59 0.33 aic 11.55 11.51 12.04 bic 11.94 11.88 12.36 dw 2.09 2.09 0.80 n 3.45 6.37 1.791 q 9.64 15.08 125.71 h 0.37 0.41 0.29 table 1 estimated coefficients of final state vector australasian journal of construction economics and building karamujic, h (2012) ‘modelling seasonality in australian building approvals’, australasian journal of construction economics and building, 12 (1) 26-36 32 as shown in table 1, out of the three assessed modelling specifications, model two has the highest 2 s r and the lowest t  . on the other hand, model three (characterised by deterministic trend and deterministic seasonality) with negative 2 s r implies that the model is badly determined i.e. the model is worse then a seasonal random walk model. overall, all of goodness of fit measures infer that model three is significantly inferior to models one and two, and that model two is somewhat better then model one. figures 1, 2 and 3 provide a visual interpretation of the seasonal elements for each considered modelling specification. the seasonal components evidenced in each of the figures show a constant repetitive pattern over the sample period, providing a visual evidence of the deterministic nature of the seasonal component (fixed seasonal components) in the number of new dwellings approved in victoria. figure 4 shows this even more clearly with individual monthly seasonals represented by horizontal lines, implying an unchanging seasonal effect across the whole sample period. -800 -600 -400 -200 0 200 400 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 out of the eleven seasonal factors relating to the model two, presented in table 1, factors corresponding to june ( 1 ), april ( 3 ), december ( 7 ) and november ( 8 ) are found to be significant at five per cent level (shown as variables with t statistics values above 1.96). the factors corresponding to december ( 7  ) and november ( 8  ) exhibit the season-related reduction in the number of banhs, while the factors corresponding to june ( 1 ) and april ( 3  ) demonstrate season-related increases. -800 -600 -400 -200 0 200 400 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 figure 1 model 1 seasonal component figure 2 model 2 seasonal component australasian journal of construction economics and building karamujic, h (2012) ‘modelling seasonality in australian building approvals’, australasian journal of construction economics and building, 12 (1) 26-36 33 -700 -600 -500 -400 -300 -200 -100 0 100 200 300 400 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 figure 3 model 3 seasonal component in summary, the analysis points out that the behaviour of banhs exhibits stochastic trend and deterministic seasonality. as a result, any model based on assumptions of deterministic trend and seasonality is bound to be mis-specified. -800 -600 -400 -200 0 200 400 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 june july august september october november december january february march april may figure 4 individual seasonals in order to test the robustness of the models specified as well as to determine forecasting power of the three models considered, out-of-sample forecasting was undertaken. firstly, the three models are estimated over the period 2000:6 2005:5. these estimates are then used to forecast the behavior of banhs for the period 2005:6 2009:5. forecasts for models one and two are identical. even superficial observation of forecasts presented in figure 5, shows that in all cases, the variability in the actual data was difficult to predict with the exception of the specifications including the fixed seasonals. this is corroborated in table 2, which reports on the following two statistics that measure the forecasting power: the sum of absolute forecasting errors and the sum of squared forecasting errors. the results clearly show that the seasonality apparent in the actual data is significantly better picked up by the australasian journal of construction economics and building karamujic, h (2012) ‘modelling seasonality in australian building approvals’, australasian journal of construction economics and building, 12 (1) 26-36 34 modeling specifications charactreised by the fixed seasonal factors, supporting the earlier finding that the seasonal pattern in the number of dwelling units approved in victoria is deterministic and not stochastic. models 1 and 2 model 3 sum of absolute errors 9,987 27,574 sum of squared errors 5,063,177 19,201,467 table 2 sum of absolute / squared errors of the forecasting values 1500 2000 2500 3000 3500 4000 2000 2001 2002 2003 2004 2005 2006 2007 2008 original data model 3 model 1 and 2 figure 5 out-of-sample forecasting conclusion the study uses harvey’s (1989) univariate structural time series mode to examine the impact of seasonal influences on the australian housing time series, with the generic objective of enhancing the practice of modelling housing variables. specifically, the paper seeks to cast some additional light on the seasonal behaviour of banhs by: (i) establishing the presence, or otherwise, of seasonality in victorian banhs, (ii) if present, ascertaining is it deterministic or stochastic, and (iii) determining out of sample forecasting capabilities of the considered models. this is done by estimating three modelling specifications comprised of stochastic and deterministic trend and seasonal components. the goodness of fit measures and the diagnostic test statistics indicate that model two, which is comprised out of stochastic trend and deterministic seasonality, is unambiguously superior to the other two specifications. the examination of the out-of-sample forecasting power of the three models clearly shows that the seasonality apparent in the actual data is well picked up by specifications entailing deterministic seasonal factor, corroborating the earlier finding that the seasonal pattern in the number of dwelling units approved in victoria is deterministic and not stochastic. evidently the analysis of the three presented modelling specifications indicates that the conventional modelling approach, characterised by assumptions of deterministic trend and deterministic seasonality, would not identify seasonal behaviour of time series characterised by either stochastic trend or seasonality. australasian journal of construction economics and building karamujic, h (2012) ‘modelling seasonality in australian building approvals’, australasian journal of construction economics and building, 12 (1) 26-36 35 the analysis of model two points out that the behaviour of banhs exhibits statistically significant seasonal components. a possible explanation for the observed statistically significant reduction in banhs during december ( 7  ) and november ( 8  ) is the reduction of the level of activity caused by approaching to the ‘summer holidays’ season, while the season-related increases during june ( 1 ) and april ( 3 ) may be explained by a spike in the level of activity during the ‘end of financial year’ season and preparation for a surge in contraction activity during the ‘spring’ season. to corroborate the modelling results and explanations provided, the scope of the analysis would need to be extended. it is reasonable to expect that these substantial season-related changes in monthly banhs are, to a large extent, correlated with home loan drawdowns, housing starts and house prices. thus, extending the research to include home loan drawdowns and housing starts and house prices could be a rewarding area for further research. references abs (2006) census of population and housing, retrieved from http://www.censusdata.abs.gov.au/absnavigation/prenav/locationsearch?readform&pren 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(2000) ‘estimating the seasonal effects of residential property markets – a case study of adelaide’, proceedings of 2000 prres conference, sydney, australia, january quantitative analysis of criteria in university building maintenance in malaysia quantitative analysis of criteria in university building maintenance in malaysia olanrewaju ashola abdullateef, (department of civil engineering, universiti teknologi petronas) abstract university buildings are a significant part of university assets and considerable resources are committed to their design, construction and maintenance. the purpose of maintenance management is to optimize productivity and user satisfaction with minimum resources. this paper aims to identify, quantify, rank and discuss the criteria that influence maintenance costs, maintenance backlogs, user productivity and user satisfaction in relation to malaysian university buildings. following a review of the related literature, a questionnaire survey identifying thirty one factors which impact effective building maintenance management was issued to 50 university maintenance organizations. participants were required to evaluate the degree to which each of the identified criteria influences effective building maintenance management. the survey achieved a 66% response rate. survey results conclusively identified that quality of original components and materials, budget constraints and the age of the building/s are the most influential criteria. problems associated with in-house workforce, shortage of materials and components were identified as the least influential criteria. this paper also establishes that maintenance management is a strategic function in university administration. keywords: university buildings, maintenance management, service delivery, malaysia introduction this paper reports part of an ongoing research study. the main research seeks to develop a systemic university building maintenance management model. the aim of this present paper is to report a study on the analysis of the criteria that influence the management of the university buildings maintenance in malaysia. in order to achieve the set aim, the study identifies, quantifies, ranks and discusses the criteria that affect maintenance costs, user satisfaction, organizational productivity and total service delivery. the study combines a literature review with a questionnaire survey and analysis to achieve its aim. data obtained was analyzed using spss to produce statistics. the major conclusion drawn from the survey was that although there are many different criteria that influence maintenance management, some exert a greater influence than others. in order to model systemic maintenance management for university buildings the inclusion of the identified criteria is critical. furthermore, the paper argues that building maintenance is a strategic issue for an academic institution. the failure of universities to accept maintenance as a core service is a serious flaw on the part of a sector that prides itself on being a vehicle for change and advancement. the remainder of the paper is structured as follows; an overview of the relevant literature concerning university building maintenance; discussion of the research and data analysis methodology adopted; presentation and discussion of data analysis; major findings and conclusions. australasian journal of construction economics and building olanrewaju, a a (2010) ‘quantitative analysis of criteria in university building maintenance in malaysia’, australasian journal of construction economics and building, 10 (3) 51-61 52 literature review and background education is a very significant and integral part of the malaysian strategic thrust. the economy of malaysia has, since independence, been planned based on five-year strategic plans. for each of the plans, the education sector has featured prominently in terms of value and policy implementation. malaysia is now an educational hub and a destination for students from many countries, particularly africa, asia pacific, europe, america and the middle east. malaysia‟s quest to transform itself into a high income, knowledge based economy is a primary government focus. under the current malaysian plan or 10 pm (2010–2015) universities are expected to contribute significantly to the malaysian high-income economy status. this will require the universities to produce graduates who can meaningfully contribute regionally and globally towards economic and technological advancements and also for the universities to be able to commercialize any knowledge advancements. in order for the university sector to achieve these outcomes, university infrastructure must adequately meet the physical needs of world-class teaching, learning and research environments. the business of a university is to transmit and disseminate knowledge and culture, teach and conduct scientific research. university assets comprise finance, technology, humans, equipment and plant as well as the constructed facilities (i.e. buildings). the human resource is considered the most significant resource of the university organization because university education is labour intensive (miller 2007). nonetheless, apart from human resources, buildings are the second most significant asset of a university institution. university buildings are procured to create a suitable, conducive environment to support, stimulate and encourage learning, teaching, innovation and research. furthermore, a number of studies (housley 1997, price, matzdorf, smith & agahi 2003, green & turrell 2005, lavy & bilbo 2009) have affirmed positive correlations between the performance of educational buildings and the quality of education. constructing new buildings helps in providing better quality education. it is equally important to maintain performance standards of existing buildings for facilitating the transfer and development of knowledge and other academic related activities. buildings are critical factors of production in achieving desirable outcomes for university institutions. any inadequacy in building facilities represents a loss in value to the university institution, its users and other stakeholders. on the one hand, it is not possible to replace or rebuild all of an organization‟s buildings at one time. as an illustration, the replacement costs of the sixties buildings in english universities alone are estimated to be £11 billion (rawlinson & brett 2009). on the other hand, buildings cannot remain new throughout their entire life. in fact, before a building is completed, maintenance problems start to creep in. therefore, the need for maintenance will only intensify. building maintenance constantly affects everyone‟s life because people‟s comfort and productivity depend on the performance of the buildings they live, learn, conduct research and work in (e.g. homes, offices, schools, universities and markets). universities need functional buildings to operate. even virtual universities require some minimum amount of building to carry out their business. “maintenance” in this paper, is defined as the required processes and services carried out to preserve, repair, protect and care for a building‟s fabric and engineering services after completion, repair, refurbishment or replacement to current standards to enable it to serve its intended functions throughout its entire life span without drastically upsetting its basic features and use (olanrewaju 2010). from this definition, maintenance is not necessarily about the building per se but rather about the occupants of the buildings. therefore, “user care” is / should be the focus of maintenance. this is illustrated thus. buildings are procured for the sake of the australasian journal of construction economics and building olanrewaju, a a (2010) ‘quantitative analysis of criteria in university building maintenance in malaysia’, australasian journal of construction economics and building, 10 (3) 51-61 53 services (i.e. comfort, protection, accommodation, security and esteem) they offer to their users. it is the correct functioning of the building that the users desire, not the physical condition of the building. to the extent that the building is capable of allowing the users to perform their functions, the building is a source of value creation to the functional service of accommodating, learning, teaching and doing research-with specific reference to the university buildings. in malaysia, there is no conclusive statistical data on the size of maintenance of university buildings. however, based on the data obtained from the ministry of higher education, maintenance expenditure had expanded by nearly 85% from 2004 to 2008. for instance, expenditure on maintenance was nearly 340 million in 2004 while it increased to more than 600 million in 2008 even though the figure for 2008 was at july 2008. therefore, the size and scope of university building maintenance is huge and at the same time is on the increase. however, when comparing these amounts with the total expenditure on education, it can be seen that the government is investing roughly 1 % on university building maintenance. this is, however, inadequate, to cater for maintenance backlogs. however, the 1% may not be the issue per se; the main issue is with the total allocation to higher education as a sector. there are already signs of constraints in financing higher education. for example, public universities are been encouraged by the government to enter into public–private initiatives to finance some of their projects. primary factors that determine maintenance costs include the expected life span of the buildings, the quality of original materials and workmanship as well as the quality of maintenance invested in these buildings. it is most unlikely that a complete solution can be identified without an increase in funding allocation to the maintenance sector. nevertheless it is possible to improve building performance through a better management philosophy. building maintenance is an economic issue and needs to be considered as an investment in maintaining building performance rather than as a reaction to inadequate building performance. total maintenance management requires a multi-disciplinary approach: from the engineering, technological, commercial, economic and social perspectives. strictly speaking, maintenance is business. the maintenance department should be seen as a business unit. the most important segment in the total management of university buildings is the analysis of criteria that influence total maintenance management. this paper is based on the hypothesis that information on and knowledge of the criteria that influence maintenance of university buildings are positively correlated to user satisfaction, maintenance costs and organizational productivity. the lack of this knowledge and information would imply that the scarce resources will not be strategically and positively managed. poor maintenance management systems will lead to unnecessary increases in maintenance costs, poor user satisfaction and low productivity. research design and method of data analysis a questionnaire survey approach was used to collect primary data. the questionnaires were administered on 50 universities in malaysia. the list was drawn from a database prepared by the ministry of higher education. though it was not the intention of the research to carry out a census, all the universities were involved in order to boost the response rate. the questionnaire was designed with consideration of those previously conducted by springer and waller (1996), buys and nkado (2006), amaratunga and baldry (2000), shen, lo and wang (1998), el-haram and horner (2002) and chanter and swallow (2007) and a series of discussions with persons engaged in university building management. australasian journal of construction economics and building olanrewaju, a a (2010) ‘quantitative analysis of criteria in university building maintenance in malaysia’, australasian journal of construction economics and building, 10 (3) 51-61 54 thirty-one criteria were identified and addressed to the respondents. the data collection and collation commenced in july 2009 and lasted through to october 2009. a questionnaire with a cover letter was posted to individual university maintenance organizations (“maintenance managers”). the respondents were identified by their names and positions. it was found that addressing the letter to an individual respondent would encourage high participation. it was considered that the maintenance managers in the university maintenance organizations are appropriate to respond to the questionnaire because they are the people who establish the goals and objectives of the organizations. a self-addressed, prepaid envelope was provided to facilitate return. the respondents were asked to rank the 31 criteria in order of the influence they have on maintenance management. the criteria were previously identified as major sources of building maintenance related problems for the university sector. the following five-point ranking scale was used: 1 not at all influential, 2 – not influential, 3influential, 4very influential, and 5 extremely influential. the degree of influence of each of the criteria is determined by the mean and mode scores tests of each of the criteria. standard deviation is also calculated to determine the level of spread of each of the individual values from the mean score. from the individual mean score tests, the average mean score was determined. missing data (i.e. where the respondent refused to tick where applicable or where there is a multiple entry) could have a negative impact on the outcome of the findings. such an effect could be improved during data analysis by replacing the missing data with either the mode or mean of the data. nevertheless, in this paper the missing data is not treated as such; instead, the authors prefer to leave the data raw, as it were, so that the outcomes will not in any way be influenced by the authors. results and discussion demographic profile of the respondents this section presents the findings and discussions of the questionnaire survey. thirty-three questionnaires were returned and analyzed for this study. this is a response rate of 66%. this is considered very satisfactory for a postal survey. according to authors like sekeran and bougie (2010), 30% is the common response rate for postal surveys. however, this high response rate was possible because of the long survey duration and the numerous reminders sent to the respondents. analysis of the outcome of the survey shows that most of the respondents possessed sound academic qualifications. for instance, the survey revealed that about 50% of the respondents possessed a bachelor‟s degree and 21.9% had obtained msc degrees. the survey responses were differentiated into two categories depending on whether they are from private or public universities. from the 50 surveyed universities, 33 responded, which involved 17 (51.5%) private and 16 (48.5%) public universities respectively. the survey revealed that most of the respondents hold strategic positions. nearly 32% of the respondents were actually maintenance managers while about 19% were facilities managers. a substantial proportion of the “others” are directors of development and/or maintenance “executives”. maintenance executive is synonymous with maintenance manager. whatever the name given to the roles of the maintenance manager (maintenance executive, property manager or general manager) or the maintenance organizations (asset manager, facility manager or development division) the common intent is the same. the main issue is that one individual takes the overall control and responsibility for managing the activities of the various personnel. table 1 contains the annual maintenance budgets and respondents‟ industrial experience. the table also contains the respondents‟ industrial working experience. thus it australasian journal of construction economics and building olanrewaju, a a (2010) ‘quantitative analysis of criteria in university building maintenance in malaysia’, australasian journal of construction economics and building, 10 (3) 51-61 55 could be inferred that the majority of respondents have sufficient knowledge to complete the questionnaires. annual maintenance budget (rm) respondent’s working experience budget (million) frequency percentage experience frequency percentage less than 10 16 51.6 less than five years 15 46.9 10 to 20 12 38.7 five years to ten years 7 21.9 20 to 30 1 3.2 ten years to fifteen years 5 15.6 30 to 40 2 6.5 fifteen years and above 5 15.6 total 31 100.0 total 32 100.0 table 1 annual maintenance budgets and respondents’ working experience note: 1 usd = rm 3.15 table 2 contains the built-up areas for the surveyed universities. the table also contains the average age of buildings in the university campuses. from this it could be inferred that most of the university buildings are not that old, although a considerable amount of money is invested in their maintenance. nevertheless, there are considerable complaints about maintenance practices. size of the university built-up area (m2) age of buildings (yrs) frequency percentage age frequency percentage less than 40,000 7 21.9 less than 10 10 32.3 40,000 to 50,000 5 15.6 10 to 20 13 41.9 60,000 to 70,000 2 6.2 20 to 30 5 16.1 70,000 to 80,000 1 3.1 30 to 40 1 3.2 90,000 to 100,000 3 9.4 40 to 50 2 6.5 100,000 and above 14 43.8 total 31 100.0 total 32 100.0 table 2 university built-up area and average age of buildings criteria that influence maintenance management reliability test results indicate that the cronbach alpha for all the criteria is very satisfactory (cronbach's alpha: 0.923). thus, the internal consistency reliability of the criteria used is considered excellent. the validity score also ranges from 0.571 to 0.905. this also signifies the high validity of the result. table 3 contains the statistics for criteria. from the analysis, the average means score test for all the criteria was found to be 3.183. australasian journal of construction economics and building olanrewaju, a a (2010) ‘quantitative analysis of criteria in university building maintenance in malaysia’, australasian journal of construction economics and building, 10 (3) 51-61 56 criteria level of influential (mode values) mean sd ranking 1 2 3 4 5 use of the building 6.3% 9.4% 43.8% 31.3% 9.4% 3.2813 0.9914 16 budget constraints 0.0% 12.1% 21.2% 39.4% 27.3% 3.8182 0.9828 2 information on user performance satisfaction 0.0% 25% 50% 21.9% 3.1% 3.0313 0.7822 29 staff training / development 0.0% 6.1% 51.5% 30.3% 12.1% 3.4848 0.7954 8 quality of components and materials 0.0% 3.1% 37.5% 31.3% 28.1% 3.8438 0.8839 1 maintenance programme 9.1% 24.2% 27.3% 30.3% 9.1% 3.0606 1.1440 24 budgeting control 9.1% 21.2% 24.2% 39.4% 6.1% 3.1212 1.1112 20 maintenance performance indicator 6.1% 18.2% 39.4% 33.3% 3.0% 3.0909 0.9475 22 building automation system 0.0% 34.4% 34.4% 25.0% 6.3% 3.0313 0.9327 27 lack of skilled personnel 3.0% 12.1% 30.3% 42.4% 12.1% 3.4848 0.9722 7 age of building 0.0% 12.1% 27.3% 48.5% 12.1% 3.6061 0.8638 3 problems associated with inhouse workforce 3.0% 18.2% 54.5% 24.2% 0.0%) 3.0000 0.7500 30 shortage of materials and components 9.1% 27.3% 42.4% 12.1% 9.1% 2.8485 1.0642 31 problems associated with outsourcing 0.0% 27.3% 45.5% 21.2% 6.1% 3.0606 0.8638 25 involving maintenance expert during design stage 6.1% 12.1% 27.3% 27.3% 27.3% 3.5758 1.1998 4 worker motivation 0.0% 16.1% 41.9% 32.3% 9.7% 3.3548 0.8774 14 trust and confidence among staff 0.0% 29.0% 35.5% 32.3% 3.2% 3.0968 0.8701 21 application of maintenance management software 9.7% 22.6% 32.3% 25.8% 9.7% 3.0323 1.1397 26 lack of effective communication 0.0% 16.1% 45.2% 25.8% 12.9% 3.3548 0.9146 13 lack of maintenance manuals 0.0% 15.6% 46.9% 34.4% 3.1% 3.2500 0.7620 18 effective organization structure 0.0% 12.5% 37.5% 37.5% 12.5% 3.5000 0.8799 6 lack of maintenance standards 0.0% 21.9% 40.6% 28.1% 9.4% 3.2500 0.9158 17 top management support 6.3% 3.1% 37.5% 37.5% 15.6% 3.5313 1.0155 5 competency of maintenance managers 9.4% 3.1% 34.4% 37.5% 15.6% 3.4688 1.1067 9 complexity of design 6.5% 16.1% 45. 2% 29.0% 3.2% 3.0645 0.9286 23 availability of building service register 3.1% 21.9% 43.8% 18.8% 12.5% 3.1563 1.0195 19 clear maintenance objectives 9.4% 15.6% 46.9% 18.8% 9.4% 3.0313 1.0621 28 information on existing building performance 0.0% 15.6% 43.8% 34.4% 6.3% 3.3125 0.8206 15 user expectations 0.0% 16.1% 35.5% 41.9% 6.5% 3.3871 0.8437 10 maintenance response time 0.0% 12.5% 46.9% 31.3% 9.4% 3.3750 0.8328 12 complaint reporting system 6.3% 6.3% 46.9% 25.0% 15.6% 3.3750 1.0395 11 total average score 0.68 17.64 25.55 33.60 22.54 3.1834 0.9460 iv table 3 summary of distribution of frequency and mean of the criteria note: vi= very influential, sd = standard deviation australasian journal of construction economics and building olanrewaju, a a (2010) ‘quantitative analysis of criteria in university building maintenance in malaysia’, australasian journal of construction economics and building, 10 (3) 51-61 57 a total of eighteen criteria have individual mean score tests higher than the average mean test (the shaded criteria in table 3). this indicates that the eighteen criteria were either very influential or extremely influential in total building maintenance management. only a negligible (less than 1%) part of the respondents considered the criteria not influential at all, while nearly 18% indicated that the criteria were not very influential. the majority of the universities (33.6%) considered the criteria very influential and many (26%) of them regarded the criteria as influential. a sizeable percentage (23%) of the respondents considered the criteria to be extremely influential. the quality of components and materials was found to be the most influential criterion, followed by budget constraints and then the age of the building. the three least influential criteria in the order of least influential were storage of materials and components, in-house workforce and information of user performance satisfaction. it is only natural that the quality of materials and components used for maintenance (and design) is given due consideration. it is not surprising that about 95% of the respondents rated the criterion as influential, very influential and extremely influential. it is natural that the use of defective or sub-standard materials will lead to maintenance problems, if not at the commissioning stage then certainly later on when the facility is in operation. good quality materials can also fail to make the grade if used for the wrong purpose or in an unsuitable environment. it is also not unexpected that maintenance organizations rated budget constraints highly. this finding is not surprising. in fact, it only confirmed our undisclosed hypothesis that funding allocation for maintenance is inadequate. malaysia is already witnessing financial constraints in financing education. the government is already partnering with the private sector so that it can maintain control of the public universities. a private financial initiative contract has just been signed for the construction of an additional six campuses of universiti teknologi mara. the transaction is expected to save the government rm 500 million (nordin 2010). the reality is that it is not possible for, say, the government to provide all the funds sufficient to cater for maintenance backlogs to the publicly owned universities. further, it is interesting but surprising to find that the age factor was ranked as influential. the survey revealed that most (48.5%) of the respondents concluded that deterioration due to age can significantly influence maintenance management. nearly 27% of the respondents considered age to be influential. some 12.1% of the respondents believed the criterion to be extremely influential. the same percentage of the respondents considered it as not very influential, however. nevertheless, older buildings constructed of quality materials and components and using well tried and tested techniques (and which in all probability have been updated and improved) may not be subject to heavy maintenance works or expenditure. maintenance in terms of usage hinges on and is very much related to the culture of the occupants. the findings also revealed that the importance of maintainers‟ involvement is critical. this suggests that the maintenance organizations have a lot to offer to the design teams in terms of new development. this is important because design and maintenance are not always considered together. this creates a situation whereby the left hand does not know what the right hand is doing. however, maintenance is often given tactical consideration. the maintenance department is not always contacted on issues that relate to new development. while most universities consider new development a top management issue, maintenance is not given the same attention. top management only gets involved when things go wrong. for the maintenance organization to actively support the achievement of the university‟s core business objectives there is a need for top officers in the university administration to support the australasian journal of construction economics and building olanrewaju, a a (2010) ‘quantitative analysis of criteria in university building maintenance in malaysia’, australasian journal of construction economics and building, 10 (3) 51-61 58 maintenance organization. maintenance issues should be discussed in the university boardroom rather than at the technical desk. issues receive proper attention when brought to the attention of the “big boss”. the vice chancellors, rectors, directors, as the case may be, should have direct access to maintenance personnel. in fact, the maintenance managers should be active members of the university governing council. the vc or rector should be the head of the maintenance organization. in this way, maintenance issues will receive systemic attention. this will define and clarify the lines of communication. ninety percent of the respondents regarded organizational structure as influential, very influential and extremely influential. for effectiveness, the structure of the maintenance organization is very important. close to 90% also believed that communication is influential, very influential and extremely influential. the lack of effective communication could lead to problems, reworks, wastes of time and contribute to poor service delivery. if the organizational structure is not well defined and effective communication is lacking, it will affect the scope and quality of maintenance and at the same time, maintenance objectives will be ambiguously defined. under these conditions, there is no way that the user expectations and perceptions can be met or achieved. however, while only 7% of the university organizations believed that meeting user expectations was extremely influential, a sizeable proportion (16%) believed it is not influential. this is, indeed, unexpected. user expectations should constitute the foundation of maintenance service delivery. customer intimacy demands that companies must have sufficient and adequate knowledge of their customers‟ needs and wants. the service provider must look far beyond the immediate objectives of the products or services to the users. the providers must provide a service that has wider ends than the customers realized was possible (bartholomew 2008) however, a likely interpretation as to why maintenance organizations do not consider that meeting users‟ expectations is critical could be that the respondents did not quite understand what this implied or that they believed there is no way user expectations can be meet. alternatively, it could mean that the respondents were much more concerned about the building than the users. however, while the first justification is very unlikely, the second and the third justifications are the most likely reasons. however, it is very unfortunate that the service providers believed the users‟ expectations cannot be attained. this could be so where maintenance systems are not systemic and when maintenance is considered as an operational issue, only as opposed to a strategic issue. it is argued that this is the only plausible interpretation. fifty percent of the respondents regarded having information on user performance satisfaction as influential while (25%) considered that it is not very influential. logically, it is only by means of a user satisfaction survey that the needs and wants of the users can be revealed. it is, therefore, most unfortunate that maintenance organizations have not appreciated the usefulness of this instrument in driving value added initiatives. it is interesting to find that many of the respondents failed to understand that having information on building performance is influential. in fact, 25% of them also failed to appreciate the importance of a building register. information on the building performance and previous maintenance records should be well documented in a safe register. where this is not the case, a lot of time and effort will be wasted locating the necessary information when needed. many of the respondents also failed to see any reason why the competencies of maintenance managers or executives are influential. however, it was good that many of them considered skilled personnel as influential and very influential at the same time as more than 90% of them saw staff training and development as influential and very influential. labour is very important in maintenance operations. in fact, about 70% of maintenance cost is attributable to labour cost. the maintenance personnel must display a high level of competency and be able to work australasian journal of construction economics and building olanrewaju, a a (2010) ‘quantitative analysis of criteria in university building maintenance in malaysia’, australasian journal of construction economics and building, 10 (3) 51-61 59 cooperatively. it would not be difficult to postulate that even with high quality materials and components, the facility would eventually fail if the workers that put the objects together were not good at their jobs. poor workmanship could be the result of lack of know-how, training and skill, or just plain negligence. problems associated with out-sourcing and in-sourcing were also considered influential. more than 70% of the respondents considered both criteria influential, very influential or extremely influential. though the responses do not indicate both to be very influential and extremely influential, they are recurrent factors in maintenance issues. often organizations like the university consider building maintenance as a non-core activity. as such, they prefer to outsource much of their services to external contractors. however, building maintenance is very critical to the survival of university organizations. students and faculty members spend most, if not all, of their productive time in or around the classrooms, laboratories, theatres and/or tutorial rooms. universities should also invest in training their maintenance staff as they do for their academic staff. substantial commitment is required for continuing professional development for the building maintenance operatives. maintenance staff must be motivated. after all, enormous resources are committed to procure their buildings. in fact, it is a failing on the part of the university management to consider the management of their buildings as a non-core activity. maintenance is a core activity of the university organizations, since without it the university would not survive. external maintenance organizations could hold their clients to ransom. it also leaves the in-house maintenance organization staff less competent and inactive due to redundancy. it would be more profitable if the university could use in-house operatives for most of their maintenance services. furthermore, another issue in outsourcing is trust and confidence. the outsourcing operatives do not see themselves as part of the mainstream staff leading to the perpetration of dubious behaviour. analysis of reports of theft cases in a university revealed that more than 60% of the theft cases were actually carried out by operatives of `the outsourcing‟ organizations. these operatives came in during their off-duty time or in the evening to commit crimes such as stealing student laptops and other valuables. this is easy since the operatives had carried out repairs to locks, doors and cupboards. they often retain the spare key when they are supposed to return it immediately to the hostel administration. it is unfortunate, however, that about 30% of the respondents failed to consider trust and confidence among staff as influential. in fact, only 3% said it was extremely important. but trust and confidence are not the only issues that are related with the outsourcing arrangement. the in-house maintenance staff should also have confidence and trust in one another. otherwise, service delivery could be undermined. furthermore, empirical evidence has led to the conclusion that outsourcing could, in actual fact, be more expensive in the long run (springer & waller 1996). however, times have changed. it is high time that university organizations accepted and took care of their buildings (vis-à-vis the maintenance practices) efficiently. it is no longer acceptable for a university to invest only on improving methods of teaching and learning without improving the performance of the building assets. outsourcing maintenance always reduces maintenance procurement to a lump sum. however, the risk and uncertainty involved with maintenance services dictate that the traditional lump sum is undoubtedly unsuitable for maintenance works. as anticipated, respondents outlined the use of buildings as very influential. the attitude of users to a building affects maintenance costs. all built assets, irrespective of the material, components or construction methods used will, as a result of use and over time, encounter australasian journal of construction economics and building olanrewaju, a a (2010) ‘quantitative analysis of criteria in university building maintenance in malaysia’, australasian journal of construction economics and building, 10 (3) 51-61 60 structural deterioration and systemic decline. building users should be provided with the proper information in the form of manuals or guidebooks, not unlike those provided to someone who purchases a washing machine or toaster. furthermore, users can be educated and maintenance manuals would also assist greatly. whilst a number of the respondents did not think a maintenance manual has very much influence on building management, 80% of them thought otherwise. other aspects that a university maintenance organization must look into are the way maintenance complaints are lodged and the response time to complaints by the maintenance organization. users prefer one point of communication and do not want complications. they want someone to talk to if a problem arises. situations where unnecessary time is wasted in an attempt to contact the maintenance organization can only further frustrate users. they want to be able to report their complaint conveniently. the contact addresses (phone numbers) of those concerned with specific items/aspects of maintenance should be made available to the building‟s users. it will further facilitate easy reporting and communication if a toll-free phone can be provided so that users will not need to pay for the complaints they have made. this will go a long way to increasing the satisfaction of the users with the service delivery. conclusions this paper presents the outcome of a questionnaire survey on the maintenance of university buildings. a list of criteria, which had been gathered from the literature and discussions with experts, was addressed to university maintenance organizations to evaluate their agreement on the influence the criteria have on building maintenance. using the mean descriptive statistics technique, 18 criteria are found to be very influential or extremely influential and should be considered in maintenance decision making to enhance service delivery. the study criteria show that the criteria that influence the maintenance management of buildings cuts across technology, management, behavioral and cultural considerations and engineering. maintenance, as a concept, is technical in nature; this is perhaps the major reason why most practitioners and authors have considered maintenance management as a hard science or purely an engineering issue. this is also where the concept of condition-based maintenance originates. however, the essence of maintenance is not about the building itself but about the users. accordingly user satisfaction information is an essential requirement in maintenance management. the current maintenance systems regard the physical condition of the building as the main reason for maintenance demand. this paper concludes that university building maintenance is a core service of the university organization. there is a need for change in university administrators‟ mindsets towards buildings and maintenance. acknowledgments the authors gratefully acknowledge the assistance of the respondents who provided their time and other resources to complete the questionnaires for this study. we also thank the anonymous commentators who offered useful suggestions in order to improve the paper. references amaratunga, d. and baldry, d. (2000) „assessment of facilities management performance in higher education properties‟, facilities, 18 (7/8), 293-301 bartholomew (2008) building on knowledge: developing expertise, creativity and intellectual capital in the construction professional. uk: blackwell publishing limited buys, f. and nkado, r. (2006) a benchmark model for maintenance management systems in south african tertiary education institutions, proceedings of the annual research conference of australasian journal of construction economics and building olanrewaju, a a (2010) ‘quantitative analysis of criteria in university building maintenance in malaysia’, australasian journal of construction economics and building, 10 (3) 51-61 61 the royal institution of chartered surveyors (cobra 2006), edited by elaine silver, university college london 7th and 8th september 2006 el-haram, m, a and horner, m. w. 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(1996) „maintenance of residential rental property: an empirical analysis‟, the journal of real estate research volume, 12 (1), 89-99 early cost estimating for road construction projects using multiple regression techniques ibrahim mahamid, (hail university, saudi arabia) abstract the objective of this study is to develop early cost estimating models for road construction projects using multiple regression techniques, based on 131 sets of data collected in the west bank in palestine. as the cost estimates are required at early stages of a project, considerations were given to the fact that the input data for the required regression model could be easily extracted from sketches or scope definition of the project. 11 regression models are developed to estimate the total cost of road construction project in us dollar; 5 of them include bid quantities as input variables and 6 include road length and road width. the coefficient of determination r2 for the developed models is ranging from 0.92 to 0.98 which indicate that the predicted values from a forecast models fit with the real-life data. the values of the mean absolute percentage error (mape) of the developed regression models are ranging from 13% to 31%, the results compare favorably with past research which have shown that the estimate accuracy in the early stages of a project is between ±25% and ±50%. keywords: cost estimating, regression, road construction, early estimate introduction the term early estimate is used to describe the process of predicting a project’s cost before the design of the project is completed (sanders et al, 1992). the technique is used to estimate one characteristic of a system, usually its cost, from other physical and/or performance characteristics of the system (rose, 1982). this technique involves life cycle costs, a detailed data base, and the application of multivariable correlation (black, 1984). early cost estimating is considered as the most significant starting process to influence the fate of a new project (sodikov, 2005). the accuracy of cost estimation improves toward the end of the project due to detailed and precise information. the early or conceptual phase is the first phase of a project in which the need is examined, alternatives are assessed, the goals and objectives of the project are established and a sponsor is identified (holm et al., 2005). at this stage, estimate accuracy is between ±25% and ±50% (schexnayder et al., 2003) due to less defined project details. cost estimation of construction projects with high accuracy at the early phase of project development is crucial for planning and feasibility studies. construction clients require early and accurate cost advice prior to site acquisition and commitment to build in order to enable them to take a right decision regarding the feasibility of proposed project. however, a number of difficulties arise when conducting cost estimation during the early phase. major problems include lack of preliminary information, lack of database of works costs, lack of appropriate cost estimation methods, and the involvement of many environmental, political, social and external uncertainties. given its significance, conventional tools such as regression analysis have been widely employed to tackle the problem. in palestine, the construction industry is one of the main economic driving sectors, supporting the palestinian national economy. it contributes to 26% of the palestinian gdp. it also plays a basic role in providing homes, public facilities and infrastructure, absorbing australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 88 work forces and improving the whole palestinian national economy. however, many construction projects report poor cost, time and quality performances. according to mahamid et al. (2010), the cost overrun is a phenomenon in road construction projects in palestine. through a field study that investigated the cost diverge in road construction based on data of 169 road construction projects, they concluded that 100% of the projects suffer from cost diverge. they found that among these 169 projects, 76.33% were underestimated and 23.67 were overestimated. therefore, it is very important issue to improve accurate models that help in reducing cost diverge in construction projects. this study presents regression models that describe the total cost of road construction project as a function of bill of quantity (boq) and project size (i.e. road length and width). the estimating models were developed based on collected data for 131 awarded road construction projects in the west bank in palestine. as these cost estimates are required at early stages of the project, considerations were given to the fact that the input data for the required model could be easily extracted from sketches or scope definition of the project. objectives the objectives of this study are:  to develop preliminary cost estimating models of road construction projects as a function of unit quantities of road construction activities  to develop early cost estimating models of road construction projects as a function of project size (i.e. road length and road width) literature review ahuja et al. (1994) state that estimating is the primary function of the construction industry; the accuracy of cost estimates starting from an early phase of a project through the tender estimate can affect the success or failure of a construction project. they also state that many failures of construction projects are caused by inaccurate estimates. a cost estimate establishes the base line of the project cost at different stages of development of the project. as hendrickson et al. (1989) point out, a cost estimate at a given stage of project development represents a prediction provided by the cost engineer or estimator on the basis of available data. gould (2005) defined estimate as an appraisal, an opinion, or an approximation as to the cost of a project prior to its actual construction. according to jelen et al. (1983), estimating is the heart of the cost engineer’s work and consequently it has received appropriate attention over the years. holm et al. (2005) lists several reasons for making estimate, including:  feasibility studies  selection from alternate design  selection from alternate investment  appropriation of funds  presentation of bids and tenders a number of cost prediction models have been developed. bell (1987) developed multiple linear regression models for preliminary cost estimating to be used by alabama highway department (ahd) for long range cost forecasting. the total project cost per mile is the function of a list of probable predictors comprising line items, such as quantities of work items per mile. mahamid et al. (2010) developed multiple linear regression models for preliminary cost estimating of road construction activities as a function of project’s physical characteristics such as terrain conditions, ground conditions and soil drillability. australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 89 hegazy et al., (1998) used a neural network approach to manage construction cost data and develop a parametric cost estimating model for highway projects. they introduced two alternative techniques to train network’s weights: simplex optimization (excel’s inherent solver function), and gas (genetic algorithms). three cost prediction models were developed by christian and newton (1998) in order to determine an accurate cost for road maintenance. these models were developed in the province of new brunswick based on historical data during the period 1965–1994. based on the models and the management review, it was concluded that maintenance funding needed to be increased by 25%. lowe et al. (2006) developed linear regression models in order to predict the construction cost of buildings, based on 286 sets of data collected in the united kingdom. they identified 41 potential independent variables, and, through the regression process, showed five significant influencing variables such as gross internal floor area (gifa), function, duration, mechanical installations, and piling. han et al (2008) investigated the actual budgeting process in highway construction projects, under the research collaboration of the korean ministry of construction and transportation. they then developed two-tiered cost estimation models of highway construction projects, considering the target goals for forecasting, allowable accuracy, and available information at each phase of a project budgeting and initiation. recent work reveals that there are still many problems in cost estimation at the conceptual stage of a project cycle. the world bank had developed an international database for road construction cost in developing countries; the data was yielded in form of road costs knowledge system (rocks). it was designed to develop an international knowledge system of road work costs to obtain average and range unit costs based on historical data that could ultimately improve the reliability of new cost estimates. in that study, data from 65 developing countries were used to make comparisons between estimated costs at appraisal and actual cost at completion. among these projects 62% were overestimated, and the rest underestimated (rocks, 2002). research methodology the methodology approach in this research is shown in figure 1, each step will be discussed in succeeding paragraphs. figure 1 research methodology define the problem and scope of the research data collection and development selecting forecasting method to be adopted to develop the mathematical models for preliminary estimating of road construction cost selecting model variables model developments australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 90 problem definition the objective of this study is to develop regression models that estimate the total cost of road construction projects as a function of bid quantities and project size. data collection the estimating technique requires an extensive historical data base. the data were collected from contracts awarded by palestinian agencies, the clients for road construction projects, awarded in the west bank. the data collected comprised 131 projects awarded over the years 2004-2008. the data were tabulated to ensure that all costs were considered, none is double-counted and all are clearly defined. all the data were deflated to year 2008. the construction cost index of 2008 obtained from palestinian economic council for development and reconstruction (pecdar) is used to deflate the data. table 1 shows the index values over the years 2004-2008, the base year is 2008 (index = 1). year 2004 2005 2006 2007 2008 cost index 0.60 0.62 0.66 0.88 1 table 1 construction cost index value in the west bank (pecdar, 2009) to deflate the cost of a project in a certain year to cost in year 2008, its cost is divided on the cost index value of that year. the following guidelines were taken into consideration during the data collection: 1. distribution among year of award a consideration is taken to have approximately equal number of awarded projects over the years 2005-2008. in 2004, only projects that awarded in the last quarter of the year were considered in the study in order to avoid the second intifada effects. table 2 shows the distribution of projects based on year of award in the collected data. year of award no. of projects 2004 9 2005 34 2006 34 2007 28 2008 26 table 2 projects distribution based on year of award in the collected data 2. project size road construction projects in the west bank are classified by pecdar based on their cost as shown in table 3. category classification < usd150000 small project usd150000 usd300000 medium project > usd300000 large project table 3 classification of road construction projects in the west bank (pecdar, 2009) australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 91 in this study, a consideration is taken to have approximately equal number of projects under each category. table 4 shows the projects distribution based on project cost. category no. of projects small 46 medium 43 large 42 table 4 projects distribution based on project cost in the collected data moreover, a consideration is taken to have approximately equal number of projects under each cost category per each year of award. table 5 shows the projects distribution based on project cost per each year of award. year small medium large 2004 1 6 2 2005 10 10 14 2006 10 14 10 2007 14 6 8 2008 11 7 8 table 5 projects distribution based on size category in each year of award selection of forecasting method previous studies show many methods which are used to forecast future construction costs. some of these models describe construction cost as a function of factors believed to influence construction cost. the relationship between construction cost and these factors have been established from past records of construction cost. typically, the models established in this manner have been used to estimate the cost of individual contracts. these models with their relational structure are the only models expected to provide reliable long-term estimates (wilmot and cheng, 2003). regression estimating models are widely used in cost estimation. they are effective due to a well-defined mathematical approach, as well as being able to explain the significance of each variable and the relationships between independent variables (sodikov, 2005). the developed models in this study are of this type. proposed model’s variables many qualitative and quantitative factors affect the contract price as shown in previous studies. it is striking, however, that most of past construction models used only a few of them because the lack of information available in early stages of a project and information about qualitative factors surrounding each project are difficult to obtain. as the objective of this study is to develop estimating models that can be handled easily using calculators or simple computer programs in the early stages of project, the models were developed based on quantitative factors that have significant impact on contract price and that could be easily extracted from sketches at an early stages of a project. the following variables are used:  total project cost as output (dependent) variable which has been represented in year 2008 us dollar; it ranges from $42000 $2000000  input (independent) variables are shown in table 6. australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 92 models development once the variables to be included in the estimate equation have been identified, a series of models were developed using multiple regression analysis techniques. regression models are intended to find the linear combination of independent variables which best correlates with dependent variables. the regression equation is expressed as follows: y = c + b1x1 + b2x2 + … + bnxn (1) where, c: regression constant b1, b2, …, bn: regression estimates x1, x2, …, xn: independent variables y: dependent variable. where all variables are significant at the 0.05 level. the variables are described in table 6. description unit range earthwork; cut, fill, and topping m 3 250 28000 basecoarse m 3 350 22500 * pavement m 2 1000 87000 curb stone ml ** 200 7800 retaining wall concrete m 3 20 450 side walk concrete m 3 5 -570 road marking ml ** 100 6500 road length m 700 14000 road width m 3 10 table 6 input variables description in the collected data set *asphalt layer thickness is 5 cm, **ml: meter length results and discussion cost as a function of bid quantities once a set of probable predictors were identified for each project, a statistical model was developed using multiple regression technique. given the quantities per project for the predictor variables, the regression model predicted the total cost in us dollars for that project, based on six statistically significant variables as shown in table 7, where the pvalues for all coefficients considered in the model are less than or equal to 0.05: total cost ($) = 16773,8 + 4,6x1+ 32,5x2 + 14,1x3 + 156,5 x5 + 485,5x6 -15,5x7 (model 1) regression statistics variables coef. p-value multiple r 0,99 intercept 16773,8 0,0063 r square 0,98 earthworks (m 3 ) 4,6 0,0103 adjusted r square 0,98 basecoarse (m 3 ) 32,5 4e-12 observations 131 pavement (m 2 ) 14,1 2e-30 f 1031,5 retaining wall conc. (m 3 ) 156,5 0,0632 side walk conc. (m 3 ) 485,5 1e-10 road marking (ml) -15,5 0,0537 table 7 multiple regression results among total project cost and activities' quantities australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 93 data analyses show that the earthworks, base works, asphalt works and furniture works (i.e. all road construction activities excluding earthworks, base works and asphalt works) are the major activities in the 131 examined road construction projects. figure 2 shows the average contribution of these activities in the total project cost. figure 2 average contribution of major road construction activities in the total project cost as the furniture works include a lot of work items, an equation that describes the total project cost as a function of quantities of major construction activities excluding furniture works is formulated; this make the model more easy to be used in the early stages where a little information are available. the coefficient of determination r2 of the developed model is 0.97. the analysis of variance test confirmed the statistical significance of the model at a significance level of 0.05 as shown in table 8. the developed model is: total cost ($) = 23241 + 8,5 x1 + 28 x2 + 15,2x3 (model 2) where, x1 = earthwork; cut, fill, and topping quantities (m 3 ) x2 = basecoarse quantity (m 3 ) x3 = pavement quantity (m 2 ) regression statistics variables coef. p-value multiple r 0,98 intercept 23241 0,0013 r square 0,97 earthworks (m 3 ) 8,5 1,43e-05 adjusted r square 0,97 basecoarse (m 3 ) 28,0 1,79e-07 observations 131 pavement (m 2 ) 15,2 8,26e-28 f 1376,2 table 8 multiple regression results among total project cost and major activities quantities another way to estimate the total project cost is to find the estimated cost for each construction activity and then to sum them up. the formulated model will be in the form of: total cost ($) = earthworks cost + basecoarse works cost + asphalt works cost + furniture works cost three individual regression models that describe the cost of earthworks, basecoarse works and asphalt works as a function of bid quantities are developed. the results are shown in table 9. the analysis of variance test confirmed the statistical significance of the models at a significance level of 0.05. australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 94 activity variables coef. r 2 pvalue f best fit model asphalt works pavement quantity (m 2 ) = x3 12,19 0,97 ≈ 0 4503,8 asphalt cost($) = 12,19x1 base works basecoarse quantity (m 3 ) = x2 23,00 0,97 ≈ 0 5135,7 basecoarse cost($)= 23x2 earthworks earthwork quantity (m 3 ) = x1 6,00 0,89 ≈ 0 1032,9 earthwork cost($) = 6x3 table 9 regression models among cost of each major activity in road construction and its quantity the furniture cost can be estimated using one of the following equations (table 10): equation # variables p-value f r 2 mape best fit model 2 curb stone (ml) = x4 1,89e-11 118 0,81 72,40 % furniture cost($) = 37,4x4 + 324,6x5 + 388,5x6 + 19,3x7 retaining wall conc. (m 3 ) = x5 0,000342 side walk concrete (m 3 ) = x6 2,55e-07 road marking (ml) = x7 0,013973 3 road size (m 2 ) = x8∗x9 5,62e-49 560,5 0,81 48 % furniture cost($) = 4,8x8∗x9 4 pavement (m 2 ) = x3 7,80e-58 814,5 0,86 32 % furniture cost($) = 5,6x3 table 10 cost estimating models for furniture works table 10 shows that equation 3 is the best to be used for furniture cost estimation as it has the highest r2 and lowest mape. the coefficient of determination r2 for model 4, using equation 4 for furniture cost estimation (shown in table 11), is 0.97. then the developed model is: total project cost ($) = 6x1+ 23x2 + 12,19x3 + [5,6x3] ⇒ total project cost ($) = 6x1+ 23x2 + 17,79x3 (model 3) model 3 is similar to model 2, but model 3 could be used to estimate cost of one individual construction activity (i.e. asphalt cost, basecoarse cost, earthworks cost, and furniture cost). it can be seen that model 2 is better for estimates of the total project cost because it has better accuracy (mape) than model 3 as shown later in table 20. the correlation among input variables is tested; the results are shown in table 11. the results of r2 show that there is a high correlation between pavement quantity and basecoarse quantity, a medium correlation between pavement quantity and earthworks quantity, and a low correlation between pavement quantity and other input variables. australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 95 correlation among quantities of: r 2 pavement basecoarse 0,88 pavement earthworks 0,64 pavement retaining wall concrete 0,32 pavement curbstone 0,47 pavement road marking 0,29 pavement side walk concrete 0,21 table 11 correlation among used input variables as a result of the correlation between input variables, a regression model describing the total project cost as a function of pavement quantity is developed. the regression statistics results are shown in table 12. the model is useful in estimating project cost at early stages of the project since the information needed is only the pavement quantity, and so the estimation could be achieved within minutes. the developed model is: total project cost ($) = 34832,5 + 23,7x3 (model 4) where, x3 is the project’s pavement quantity (m 2 ). regression statistics variables coef. p-value multiple r 0,97 intercept 34832,5 0,0001 r square 0,95 pavement (m 2 ) 23,7 5,9e-86 observations 131 f 2466,7 table 12 multiple regression results among total project cost and pavement quantity cost as a function of project size a regression model that describes the total cost of a road construction project as a function of road width and road length is developed. the coefficient of determination r2 for the developed equation is 0.93. the regression statistics results for the developed model are shown in table 13. the developed model is: total cost ($) = 142,6x8+ 28882,7x9 – 196877,7 (model 5) where, x8 = road length (m) x9 = road width (m) regression statistics variables coef. p-value multiple r 0,97 intercept -196876,7 3,78e-10 r square 0,93 road width (m) 28882,7 9,43e-09 adjusted r square 0,93 road length (m) 142574,6 1,67e-75 observations 131 f 920,5 table 13 multiple regression results among total project cost and road length and width it can be seen that the model has a large constant (-196877,7) and so in small projects, the estimated total cost using the model will be not realistic or it may even be negative e.g. for a road width of 5 m and road length of 370 m, the estimated cost is 0. it may give a realistic estimated value when road length is more than 1 km and road width is more than 5 m. australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 96 therefore, a trial was performed to develop a model with zero intercept value, the results shown in table 14. the developed model is: total cost ($) = 139,3x8 – 542,1x9 (model 6) regression statistics variables coef. p-value multiple r 0,98 intercept 0 #n/a r square 0,95 road width(m) -542,1 0,80 adjusted r square 0,94 road length (m) 139,3 1,78e-67 observations 131 f 1305,2 table 14 multiple regression results among total project cost and road length and width when intercept = 0 table 14 shows that the p-value of the road width variable is 0.8 which is higher than 0.05, meaning it is not significant to be included in the model. as a result, the model uses road length as the only input variable is formulated. the regression statistics results for the developed model are shown in table 15. the formulated equation is: total cost ($) = 145,9x8 – 32626 (model 7) regression statistics variables coef. p-value multiple r 0,96 intercept -32626 0,01154 r square 0,92 road length (m) 145847 3,5e-71 adjusted r square 0,92 observations 131 f 1403,4 table 15 multiple regression results among total project cost and road length the developed model has high r2 and low p-value (less than 0.05), but for very small projects, it will give unrealistic results; e.g. at road length 220 m, the estimated cost is 0. the model may give good estimated results when the road length is higher than 600 m. therefore, a model is developed using the road length only as independent variables with zero intercept value, the results are shown in table 16. the developed model is: total cost ($) = 138,53x8 (model 8) regression statistics variables coef. p-value multiple r 0,98 road length (m) 138,53 4,07e-88 r square 0,95 adjusted r square 0,95 observations 131 f 2629,25 table 16 multiple regression results among total project cost and road length when intercept = 0 a model using variables interaction has also been developed, the resulting equation is: total cost ($) = 20,73 x8∗x9 (model 9) australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 97 the coefficient of determination r2 for the developed equation = 0.96. the regression statistics results for the developed model are shown in table 17. the results show that the analysis of variance test confirmed the statistical significance of the model at a significance level of 0.05. regression statistics variables coef. p-value multiple r 0,98 intercept 0 #n/a r square 0,96 road size (m 2 ) 20,73 1,69881e-89 adjusted r square 0,95 observations 131 f 2767,4 table 17 multiple regression results among total project cost and road size equations that describe the cost of the major road construction activities as a function of road length and width are developed. the best fit models are achieved when variables interaction is used and intercept value = 0. the results are shown in table 18. the table shows that r2 values are high. this indicates a good relationship between dependent and independent variables. activity coef. r2 p value f-test regression equation earthworks 1,56 0,78 ≈0 454,42 1,56x8x9 basecoarse works 4,60 0,98 ≈0 5067,75 4,6x8x9 asphalt works 10,00 0,93 ≈0 1780,67 10x8x9 furniture works 4,58 0,81 ≈0 560,65 4,58x8x9 table 18 cost of major road construction activities ($) as a function of project size (m2) then the total project cost can be calculated by summing up the cost of construction activities (model 10). the coefficient of determination r2 for the developed model is 0.92. total cost ($) = earthworks cost + basecoarse works cost + asphalt works cost + furniture cost (model 10) where; earthworks cost = 1,56x8x9 base works cost = 4,6 x8x9 asphalt works cost = 10 x8x9 furniture works cost = 4,58 x8x9 it can be seen that model 10 is similar to model 9 (both use variables interaction), but model 10 could be used to estimate the cost of one individual construction activity (i.e. asphalt cost, basecoarse cost, earthworks cost, and furniture cost). also it has better accuracy (mape) than model 9 as shown in table 20. testing accuracy of the developed models the mean absolute percentage error (mape) is used to measure the accuracy of the developed models. the following formula is used to compute the mape (lowe et al., 2006): mape = (1/n) ∗ 1 n i  │ (ai – fi)/ ai│ (5) where, australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 98 ai is the actual value fi is the forecast value n is number of fitted points table 20 shows a summary of the developed regression models in the study, 10 models are developed to estimate the total cost of road construction project in us dollar; 4 of them include bid quantities as independent variables (models 1 through 4), while the other 6 models include road length and road width as independent variables (models 5 through 10). it should be noticed that in the very early stages the bill of quantity (boq) is not available, meaning that the models using road width and length (models 5 through 10) are more easy and fit to be used. later, when the boq is available, the models based on boq (models 1 through 4) may be used. model no. regression models 1 total cost ($) = 16773,8 + 4,6x1+ 32,5x2 + 14,1x3 + 156,5 x5 + 485,5x6 -15,5x7 2 total cost ($) = 23241 + 8,5 x1 + 28 x2 + 15,2x3 3 total cost ($) = 6x1+ 23x2 + 12,19x3 + furniture cost; where, furniture cost = 5,6x3 4 total cost ($) = 34832,5 + 23,7x3 5 total cost ($) = 142,57x8 + 28882,7x9– 196877,7 6 total cost ($) = 139,3x8 – 542,1x9 7 total cost ($) = 145,9x832626 8 total cost ($) = 138,53x8 9 total cost ($) = 20,73 x8 x9 10 total cost ($) = earthworks cost + base works cost + asphalt works cost + furniture cost where; earthworks cost = 1,56x8x9, base works cost = 4,6 x8x9, asphalt works cost = 10 x8x9, furniture works cost = 4,58 x8x9. table19 summary of the developed regression models where, x1 = earthwork; cut, fill, and topping quantities (m3) x2 = basecoarse quantity (m3) x3 = asphalt quantity (m2) x4 = curb stone quantity (ml) x5 = retaining walls concrete quantity (m3) x6 = side walk concrete quantity (m3) x7 = road marking (ml) x8 = road length (m) x9 = road width (m) table 20 shows the mape resulting from using the developed regression models to estimate the total cost of 131 data sets of road construction projects. the results show the following:  the mape of the developed models is ranging from 13% to 31% which compare favorably with past researches which have shown that the estimate accuracy in the early stages of a project is between ±25% and ±50% (lowe et al., 2006; schexnayder et al, 2003; sodikov, 2005) australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 99  it can be seen that the models that use bid quantities as independent variables are more accurate than those using road length and road width as independent variables  the table shows that for the models that use bid quantities as independent variables, when the number of work items involved in the model increase, the r 2 value increase and mape value decrease  the table shows that for the models that use road length and width as independent variables, the mape is ranging from 18.8% to 31%. it shows that the model with highest accuracy is the model includes road length only with zero intercept value (model 8), while the model with least accuracy is the model includes road length and width (model 5)  the table shows that for the models that use boq as independent variables, the mape is ranging from 13% to 19%. it shows that the model with highest accuracy is the model includes all construction activities (model 1), while the model with least accuracy is the model includes pavement quantity only (model 5). model no. mape r 2 1 13,3% 0,98 2 14,7% 0,97 3 16,1% 0,97 4 19% 0,95 5 31% 0,93 6 29,2% 0,95 7 27,1% 0,92 8 18,8% 0,95 9 23,4% 0,96 10 21,8% 0,92 table 20 mean absolute percentage error (mape) and r2 of the developed regression models conclusion this study aims at developing early cost estimating models for road construction projects using multiple regression techniques. the models were developed based on 131 set of data collected in the west bank in palestine. such types of models are very useful, especially in its simplicity and ability to be handled by calculator or a simple computer program. it has a good benefit in estimating project cost at early stages of the project since the information needed could be extracted easily from sketches or scope definition of the projects. it must be remembered that an estimated project cost is not an exact number, but it is opinion of probable cost. the accuracy and reliability of an estimate is totally dependent upon how well the project scope is defined and the time and effort expended in preparation the estimate. in this study, 10 regression models are developed; 4 of them include bid quantities as independent variable and 6 include road length and width. the coefficients of determination r2 for the developed models range from 0.92 to 0.98. this indicates that the relationship between the independent and independent variables of the developed models is good and the predicted values from a forecast model fit with the real-life data. australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 100 the values of the mean absolute percentage error (mape) of the developed regression models are ranging from 13.3% to 31%. the results compare favorably with past researches which have shown that the estimate accuracy in the early stages of a project is between ±25% and ±50%. the findings reveal that the models that use bid quantities as independent variables are more accurate than those use road length and road width as independent variables. but they require more information. references ahuja, h., dozzi, s., and abourisk, s. (1944) project management techniques in planning and controlling construction projects. john wiley and sons, inc., new york bell, l. c. and bozai, g. a. (1987) preliminary cost estimating for highway construction projects, aace transactions, c.6.1–c.6.4 black, j. (1984) application of parametric estimating to cost engineering, aace transactions, b.10.1–b.10.5. christian, j. and newton, l. (1998) highway construction and maintenance costs. construction engineering and management group, university of new brunswick, fredericton, nb e3b 5a3, canada gould, f. (2005) managing the construction process: estimating, scheduling, and project control, pearson education, inc., new jersey han, s. h., kim, d. y., and kim, h., (2008) two-staged early cost estimation for highway construction projects, report (2008), civil & environmental engineering, yonsei university, seoul, korea hegazy, t. and ayed, a. 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(2010) ‘preliminary cost estimating models for road construction activities’, proceedings of the fig congress 2010 – facing the challenges – building the capacity, 12-16 april 2010, sydney, australia palestinian economic council for development and reconstruction (pecdar), personal communication, july, 2009, ramallah, west bank, palestine. rocks (2002) road costs knowledge system (v. 2.01), (the world bank, transport unit – tudtr). retrieved august 4, 2010, from http://www.worldbank.org/transport/roads/rd_tools/rocks_main.html. australasian journal of construction economics and building mahamid, i (2011) ‘early cost estimating for road construction projects using multiple regression techniques’, australasian journal of construction economics and building, 11 (4) 87-101 101 rose, a. (1982) ‘an organized approach to parametric estimating’, transactions of the seventh international cost engineering congress. london, england sanders, s.r.; maxwell, r.r.; and glagola, c.r. (1992) ‘preliminary estimating models for infrastructure projects’, cost engineering, 34 (8) schexnayder, c. j. and mayo, richard e. (2003) construction management fundamentals, mcgraw-hill higher education, boston, ma sodikov, jamshid (2005) ‘cost estimation of highway projects in developing country: artificial neural network approach’, journal of the eastern asia society for transportation studies, 6, 1036 – 1047. wilmot, c.g. and cheng, g. (2003) ‘estimating future highway construction costs’, journal construction engineering and management, 129 (3), 272-279 http://scitation.aip.org/vsearch/servlet/verityservlet?key=ascerl&possible1=wilmot%2c+c.+g.&possible1zone=author&maxdisp=25&smode=strresults&aqs=true http://scitation.aip.org/vsearch/servlet/verityservlet?key=ascerl&possible1=cheng%2c+g.&possible1zone=author&maxdisp=25&smode=strresults&aqs=true correlates of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria henry ndubuisi onukwube, (university of lagos, nigeria) abstract job satisfaction is the sense of wellbeing, good feeling and positive mental state that emerge in an incumbent worker when his obtained reward consequent upon his performance is congruent with his equitable reward. extant literature in other sectors of the economy points to the fact that factors such as poor working conditions, below competitive salaries, a lack of promotional opportunities are some of the factors contributing to employee dissatisfaction. the aim of this study is to ascertain the levels of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria. biographical and job descriptive index questionnaires (jdi) were administered to gather the data. the jdi measures job satisfaction on five facets, namely, pay, promotions, supervision, co-workers and the work itself. a total of 100 questionnaires were collected and used for the study. the survey covered quantity surveyors in consulting firms in lagos and the respondents were selected using stratified random sampling technique. data collected were analysed using mean item score, spearman rank correlation, correlation matrix, linear regression analysis where appropriate. findings of the study revealed that the respondents were satisfied with the relationship with co-workers, nature of work and the supervision they receive. major sources of dissatisfaction are promotion and salaries of the respondents. this finding is a bold step and necessary benchmark for resolving major sources of dissatisfaction among quantity surveyors in consulting firms. the roles of other contextual factors on job satisfaction need to be contemplated for future research. keywords: biograghical data, consulting firms, correlates, dissatisfaction, job descriptive index, job satisfaction, nigeria, quantity surveyors introduction jobs provide a sense of accomplishment and identity. most employees identify themselves with their jobs. as such, to be happy and satisfied with one’s job is very important. job satisfaction has been defined and measured both as a global construct and as a concept with multiple dimensions or facets (locke, 1976). satisfaction with job has always been an area of concern for most organisations, primarily because of the reason that job satisfaction significantly affects major organizational outcomes, such as individual performance, organizational productivity, employee absenteeism and employee turnover. job satisfaction is commonly interpreted as the intrinsic sense of accomplishment emerged from performing tasks while carrying out one’s contractual obligations. locke (1969) defines job satisfaction as, “pleasurable emotion al state resulting from the appraisal of one’s job as achieving or facilitating the achievement of one’s job values.” job satisfaction is defined as a collection of feelings that an individual holds towards his or her job (robbins, 2005). positive attitudes towards one’s job are associated with high levels of job satisfaction. the converse is also true (bowen et al. 2008). according to herzberg et al., (1959) work relatedattitudes have to do with need satisfaction. people have needs and jobs vary in their ability to fulfill needs. dipboye et al. (1994) classified job satisfaction theories into three: the two factor theory, comparative theories and cognitive theories. the two factor theory attempted to explain how job satisfaction is influenced by intrinsic factors such as responsibility australasian journal of construction economics and building onukwube, h n (2012) ‘correlates of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria’, australasian journal of construction economics and building, 12 (2) 43-54 44 and achievement, while job dissatisfaction is influenced by extrinsic employment factors such as salary and working conditions. comparative theories involve concepts such as needs and values. employees evaluate what they get out of their jobs and determine whether this accords with their needs and values while the last focused on cognitive processes. these three theories guide this study. the importance of job satisfaction and motivation to the well-being of the construction industry has been highlighted (loosemore et al., 2003). the importance lies with its stabilizing effects (reducing lateness, absenteeism and turnover).however, despite the wealth of research into job satisfaction, little research has been undertaken concerning its application to the construction industry(asad and dainty, 2005).as bowen et al., (2008) observed, studies focusing on job satisfaction among quantity surveyors are a relative rarity and in their study they used maslow’s hierarchy of needs in testing the satisfaction level of quantity surveyors. the approach in this study is to use biographical and job descriptive index to test the level of association of these factors with the overall job satisfaction of quantity surveyors. the purpose of this paper is to report on a study examining levels of job satisfaction of professional quantity surveyors in consulting firms in lagos, nigeria. organisational determinants and job satisfaction several studies have suggested that job satisfaction can be affected by three major factors: (1) factors relating to work settings; (2) factors relating to specific aspects of jobs; and (3) factors associated with the individuals involved (baron,1986).the organizational determinants examined in this study are work itself, remuneration/pay, supervision, promotion opportunities and co-worker. the work itself and overall job satisfaction locke (1995) postulates that employee job satisfaction is dependent on job satisfaction with the job components, such as the work itself. robbins et al, (2003) refer to the work itself as “the extent to which the job provides the individual with stimulating tasks, opportunities for learning and growth and the chance to be responsible and accountable for results. oshagbemi (2000) found a statistically significant relationship between job satisfaction and work itself. results from other studies conducted indicate that a dimension such as the work itself can result in either job satisfaction or dissatisfaction (oshagbemi, 1997). remuneration/pay and overall job satisfaction pay satisfaction is of primary concern to both employers and employees. for employees, pay is of obvious importance in terms of satisfying their economic needs. it is important that they are satisfied with their overall pay as this may impact their attitudes and behaviours. employee dissatisfaction with pay, for instance, can decrease commitment to the job, increase stealing, and catalyze turnover (currall et al., 2005). according to equity theory, pay satisfaction is based on perceptual and comparative processes (adams, 1963; lum et al., 1998). employees who feel under-rewarded will attempt to restore equity by reducing inputs such as increasing absenteeism, coming late to work, taking longer breaks, and decreasing productivity, or by leaving the organization, all of which are very costly for an employer (greenberg, 1990).research appears to be equivocal regarding the influence of pay on job satisfaction. in a study conducted by oshagbemi (2000) amongst united kingdom academics, a statistically significant relationship was established between pay and job satisfaction. however, a study conducted by young et al., (1998) among public sector employees failed to find any significant relationship between the two variables. australasian journal of construction economics and building onukwube, h n (2012) ‘correlates of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria’, australasian journal of construction economics and building, 12 (2) 43-54 45 supervision and overall job satisfaction supervision forms a pivotal role relating to job satisfaction in terms of the ability of the supervisor to provide emotional/technical support and guidance with work related tasks (robbins et al, 2003). a relationship with immediate supervisor is an important antecedent of employee’s job satisfaction (dupre and day, 2007). the consideration a supervisor has for his/her subordinates’ feelings, well being, and contributions are an important predictor of job satisfaction ((mccormack et al. 2006; gagnon and judd, 2004).gagnon and judd (2004) found that employees with supervisors displaying democratic management styles experienced higher levels of job satisfaction compared to those who had supervisors who exhibited autocratic leadership style. promotion opportunities and overall job satisfaction a number of researchers are of the opinion that job satisfaction is strongly related to opportunities for promotion (pergamit & veum, 1999).this view is supported by ellickson and logsdon (2002) in their study on municipal government workers where they established a statistically significant relationship between promotion and job satisfaction. bowen & cattel (2008) found a positive relationship between promotion and job satisfaction. keitner and kinicki (2001) however, state that the positive relationship between promotion and job satisfaction is dependent on perceived equity by employees. co-workers and overall job satisfaction social network theory has shown that social support from co-worker networks serves as a resource that affects job satisfaction ( bonache, 2005) a number of authors maintain that having friendly and supportive colleagues contribute to increased job satisfaction (kreitner & kinicki, 2001). by the same token, raabe and beehr (2003) argue that co-worker relationships have an important influence on employee organizational commitment that results from employee job satisfaction. indeed, close relationships with one’s co-workers increase job satisfaction particularly in a situation where co-workers are regarded as friends, as a support system (mcneese-smith and nazarey, 2001). job satisfaction and personal characteristics studies have indicated that personal characteristics affect job satisfaction in different and complex ways. among these personal characteristics is gender, age, education, and work experience. gender and job satisfaction several studies conducted with regard to the relationship between gender and job satisfaction have yielded contradictory results (chiu, 1998). several studies have found women to be more satisfied than men (sloane & williams, 2000). tang and talpade (1999) found that men tend to have higher satisfaction with remuneration in relation to females, while females tended to have higher satisfaction with co-workers than males. oshagbemi (2000) however, failed to find that gender affects job satisfaction. age and job satisfaction several researchers have examined the link between age and job satisfaction. the findings of these studies have been contradictory, with researchers reporting five different types of relationships. for instance, hunt and saul (1975) reported that there is a positive linear relationship between age and job satisfaction. a negative linear relationship was reported by muchinsky (1978), and a u-shaped relationship was described by clark et al. (1996) and such a relationship is strong at the beginning, but keeps declining till mid 30s and gradually increasing australasian journal of construction economics and building onukwube, h n (2012) ‘correlates of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria’, australasian journal of construction economics and building, 12 (2) 43-54 46 till 60s.positive significant relationship was discovered by oshagbemi (2003), yet ronen (1978) found no significant relations. researchers have also found that older employees are better able to balance personal needs and jobs/organizations than are younger employees (lewis, 1991). in addition, older employees are more likely to cognitively justify remaining in the organization, as they may have limited alternative employment opportunities and greater costs than do younger employees. as a result, older employees are likely to develop more positive attitudes toward their jobs. education and job satisfaction studies have found positive relationships between levels of education and job satisfaction. a study conducted by (kh metle, 2003) amongst kuwaiti women employed in a public government sector environment, showed that a strong relationship existed between the level of education and overall job satisfaction. according to ting (1997), researchers have argued that employees with more education can improve job satisfaction by rationalizing available alternatives for changing jobs or leaving employers. other researchers have maintained that more educated workers have a greater number of job alternatives and, thus, are less likely to become trapped in any job or organization. as a result, they are less likely to develop great affection toward their job and organization (ting, 1997). in addition, educated workers may have expectations that their employers may not be able to meet. this affects attitudes toward jobs and organizations, either positively or negatively. experience and job satisfaction research conducted by (oshagbemi, 2003, clarke et al, 1996) conformed that there is significant relationship between experience and job satisfaction. oshagbemi (2000) attribute the increase in job satisfaction over the length of time to factors such as job stability and opportunities for promotion. in his study of the relationships between personal characteristics and job satisfaction of turkish workers, bilgic (1998) indicated that the contribution of experience to good feelings toward one’s job is positive. his findings indicated that people with more work experience have more respect for their jobs and can apply their experience to their job; they were also more likely to enjoy the physical work environment (bilgic, 1998). hypotheses of the study the study postulates the following null hypotheses h0a: that there is no positive significant relationship between facets of job satisfaction and overall job satisfaction of quantity surveyors h0b: male quantity surveyors in consultancy firms will not be more satisfied with their jobs than with their female counterparts h0c: older quantity surveyors in consultancy firms will not be more satisfied with their jobs than younger quantity surveyors h0d: quantity surveyors who have postgraduate degrees are not more satisfied than quantity surveyors with a bachelor’s degree or less education h0e: years of experiences will not have a significant positive impact on the job satisfaction of quantity surveyors the positive hypotheses is used to test the null hypotheses australasian journal of construction economics and building onukwube, h n (2012) ‘correlates of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria’, australasian journal of construction economics and building, 12 (2) 43-54 47 methods the target population for this study comprised quantity surveyors in consultancy firms in lagos state, nigeria. research into correlates of job satisfaction is scanty in quantity surveying profession in nigeria; hence this is an attempt to contribute to knowledge to fill this gap. lagos state was chosen as the research area because it is a cosmopolitan town with the largest concentration of practicing quantity surveyors domicile in the state. a simple random sampling technique was adopted for consultancy firms. the firms were sampled from a list of registered quantity surveying firms with the nigerian institute of quantity surveyors. the population was stratified according to fellows, corporate and non-corporate members. a total of 125 questionnaires were distributed, and 100 were returned, representing 80.0% response rate. measures facets of job satisfaction the jdi is one of the most popular measures of job satisfaction and has been found to produce highly reliable results. it measures facets of job satisfaction in the area of supervision, work itself, co-worker relationship, pay and promotion. the abridged version of the jdi (stanton et al., 2001) was used to assess the five facets of job satisfaction: satisfaction with pay, promotion opportunities, coworkers, supervision, and the work itself. internal consistency reliability was acceptable (α = .85, .81, .91, .90, and .83 respectively). the measure contained 25 descriptor items (five for each facet). items were answered on a 5-point likert scale, a summed composite of the responses was calculated, with higher scores indicating greater satisfaction. scores for each facet ranged from a low of 0 to a high of 25. job satisfaction in general the job in general scale (jig).the jig was constructed to reflect the global long term evaluation of the job (balzer et al., 1997). this measure contained 18 descriptor items using the same presentation format and 5-point likert scale as the jdi. sample items included as advocated, a summed composite of the responses are calculated, with higher scores indicating greater overall satisfaction. scores for this scale ranged from a low of 0 to a high of 90. the internal consistency reliability was acceptable (α = .93). personal characteristics the abridged version of the demographic instrument (dirani and kuchunke, 2011), was used to measure gender (2 items), age (3 items), education (3 items) and experience (2 items). results and discussion demographic data from the biographical information of the respondents presented in table 1, 73 percent of the respondents are male while 27 percent are female. this result shows that this is a male dominated profession. in terms of the age distribution of the respondents, majority of the respondents, 40% are forty one years and above. as regards educational qualification of the respondents, 65% of them had first degree or equivalent, while 32% had second degrees and the remaining 3% had doctorate degrees. in terms of the professional qualification of the respondents, 73% of the respondents are professionally qualified and this means that their contribution in this research will be useful. as regards the working experience of the respondents, 60% of the respondents had not more than ten years experience while 40% had more than ten years experience. this result may be because most consulting firms do not pay an economic wage, hence turnover intentions is usually high. australasian journal of construction economics and building onukwube, h n (2012) ‘correlates of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria’, australasian journal of construction economics and building, 12 (2) 43-54 48 table 1 demographic profile of respondents relationship between overall job satisfaction and facets of job satisfaction table 2 reveals descriptive statistics (means and standard deviations) and pearson correlation coefficients of the variables. there are several interesting findings that should be noted. the correlation coefficient indicates that all the five facets of job satisfaction are positively and significantly related with overall job satisfaction. hypothesis h1a: that there is positive significant relationship between facets of job satisfaction and overall job satisfaction of quantity surveyors is strongly supported by this result. this finding agrees with previous research (locke, 1995; oshagbemi, 2000; bowen & cattel, 2008; and bonache, 2005) with regards the relationship between pay and overall job satisfaction, this result contradicts the findings of young et al. (1998) who failed to find any significant relationship between the two variables. variables range m sd 1 2 3 4 5 6 job satisfaction 0-90 72.90 60.79 (0.93) work itself 0-25 20.42 12.12 0.73** (0.83) pay 0.25 9.62 5.67 0.47** 0.40** (0.85) promotion 0-25 10.10 6.26 0.44** 0.34** 0.33** (0.81) supervisor 0-25 16.22 8.94 0.57** 0.39** 0.32** 0.41** (0.91) co-worker 0.25 20.71 12.80 0.52** 0.44** 0.27** 0.23** 0.37** (0.90) table 2 means, standard deviations and correlations for overall job satisfaction and jdi facets of job satisfaction n = 100, figures in parentheses are alpha reliabilities for each scale, **= p < 0.001 freq. cum. freq. percentage cum. percentage sex of respondents male 73 73 73% 73% female 27 100 27% 100% total 100 age of respondents less than 30 years 25 25 25% 25% 31-40 years 35 60 35% 60% 41 years and above 40 40 40% 100% total 100 educational qualification hnd/b.sc 65 65 65% 65% m.sc 32 97 32% 97% ph.d 3 100 3% 100% total 100 professional qualification non qualified members 27 27 27% 27% mniqs 55 82 55% 82% fniqs 18 100 18% 100% total 100 australasian journal of construction economics and building onukwube, h n (2012) ‘correlates of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria’, australasian journal of construction economics and building, 12 (2) 43-54 49 presented in table 3 are the mean differences in job satisfaction between male and female quantity surveyors. the data in table 3 show that male quantity surveyors have higher mean scores in the job satisfaction subscales of pay, promotion, and supervision than do female quantity surveyors. on the other hand, female quantity surveyors have higher mean scores on job satisfaction subscales of the work itself and co-workers. with regard to overall satisfaction, both male and female quantity surveyors tend to be equally satisfied with their jobs. based on this finding, one can suggest that since mean scores of male quantity surveyors were higher in pay, promotions, supervision, and overall job satisfaction than were the mean scores of female quantity surveyors, male quantity surveyors seemed to be more satisfied with these facets of job satisfaction than were female quantity surveyors. from this information, hypothesis h1b: male quantity surveyors in consultancy firms will be more satisfied with their jobs than will their female counterparts is supported. this result is in agreement with tang and talpade (1999) who found that men tend to have higher satisfaction with remuneration in relation to females, while females tended to have higher satisfaction with co-workers than males. job satisfaction areas (mean scores) male (n=73) female (n=27) p-value the work itself 31.6167 34.5446 0.001* pay 37.2400 31.8291 0.000* supervision 40.4337 29.6773 0.012* promotion 39.2088 28.9182 0.014* co-workers 26.2269 35.2032 0.005* overall job satisfaction 33.3201 31.7245 0.021* table 3 differences in job satisfaction means based on gender (n=100) (t-test) * denotes significant differences among groups at the 0.05 level one-way analysis of variance (anova) was conducted to determine whether differences in job satisfaction exist among the quantity surveyors surveyed in this research. table 4 indicates that the mean scores for quantity surveyor 31 through 40 years of age (mean, 36.5778) and quantity surveyors 41 years or older (mean, 37.1992) with respect to satisfaction with pay were greater (at the .05 level of significance). thus, quantity surveyors 31 years and older were more satisfied with their pay than were their counterparts, aged 30 years or younger (mean, 27.5443). age groups job satisfaction area (mean scores) ≤ 30 31-40 ≥ 41 p value the work itself 32.6552 37.8882 36.4458 0.1633 pay 27.5443 36.5778 37.1992 0.0204* supervisor 19.8886 26.9556 28.8188 0.1645 promotion 26.9334 28.9095 29.2775 0.1796 co-workers 35.3700 35.4544 34.7808 0.1958 overall job satisfaction 27.2210 37.1610 32.4445 0.0105* table 4 differences in job satisfaction means based on age (n=100) (one-way anova) * denotes significant differences among groups at the 0.05 level the findings in table 4 indicate that significant differences were found in the overall job satisfaction of quantity surveyors 30 years old or younger and quantity surveyors 31 years and australasian journal of construction economics and building onukwube, h n (2012) ‘correlates of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria’, australasian journal of construction economics and building, 12 (2) 43-54 50 older, and no significant differences were found with respect to satisfaction with the work itself, promotion, co-workers, and supervision. from these findings, hypothesis h1c: older quantity surveyors in consultancy firms will be more satisfied with their jobs than younger quantity surveyors is supported. these findings align with earlier studies (lewis, 1991) this could imply that the quantity surveying consultancy firms appreciates older workers and fosters a challenging, respected, and creative work environment that gives older workers a sense of accomplishment. also, satisfaction with the subscale of pay could imply that older quantity surveyors are better paid and their organizations value their wisdom, experience, and expertise, whereas younger quantity surveyors think that their expertise is not appreciated and that they are poorly paid. on the other hand, the results of this study contradict the findings of clark and colleagues (1996), who asserted that the age-job satisfaction relationship of british employees is u shaped. table 5 indicates that there were significant differences among quantity surveyors with regard to their education level on the subsection of present pay and their overall job satisfaction at the 0.05 level of significance. quantity surveyors with postgraduate degrees were significantly more satisfied with their present job, pay, promotion, supervision, co-workers, and overall job satisfaction than were quantity surveyors with bachelor’s degrees at the 0.05 level. hypothesis h1d: quantity surveyors who have postgraduate degrees are more satisfied than quantity surveyors with a bachelor’s degree or less education is supported. educational qualification hnd or b.sc m.sc ph.d p value job satisfaction areas mean scores (n=65) (n=32) (n=3) the work itself 30.15 31.82 35.08 0.033* pay 24.74 33.27 36.20 0.000* supervisor 24.23 27.90 29.47 0.003* promotion 17.93 24.75 35.18 0.011* co-workers 32.71 34.54 37.30 0.050* overall job satisfaction 27.35 30.65 32.64 0.002* table 5 differences in job satisfaction means based on education (n=100) (one-way anova) * denotes significant differences among groups at the 0.05 level table 6 indicates that there were significant differences among quantity surveyors with regard to some facets of job satisfaction, such as satisfaction with the work itself, pay, supervisor, and coworkers at the 0.05 level of significance. no statistical differences were obtained with a 0.5 level of significance between satisfaction with promotion and overall job satisfaction. with respect to pay and satisfaction, those quantity surveyors who had ten or more years of experience were more satisfied in these areas than were quantity surveyors with fewer than ten years’ experience .from these findings, hypothesis h1e: years of experience will have a significant positive impact on the job satisfaction of quantity surveyors is supported. the results of this study are consistent with the findings of bilgic (1998) and maghradi (1999). these findings could indicate that people with more work experience have more respect for their jobs, can apply their experience to their jobs, and are skilled and successful in doing their jobs. if they are effective and efficient in doing their jobs, they are likely to be paid more and are more likely to enjoy their supervisors, coworkers, and physical work environment. australasian journal of construction economics and building onukwube, h n (2012) ‘correlates of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria’, australasian journal of construction economics and building, 12 (2) 43-54 51 years of experience job satisfaction areas (mean scores) ≤ 10 ≥ 10 p – value the work itself 32.5152 38.4452 0.003* pay 30.8402 35.9291 0.020* supervisor 23.8336 29.7713 0.766 promotion 19.8120 20.2287 0.036* co-workers 36.3662 35.9102 0.005* overall job satisfaction 31.5210 32.3440 0.123 table 6 differences in job satisfaction means based on years of experience (n=100) (t-test) * denotes significant differences among groups at the 0.05 level. conclusions the purpose of this paper is to report on a study examining levels of job satisfaction of professional quantity surveyors in consulting firms in lagos, nigeria. the key findings of the study were that job satisfaction is strongly correlated to facets of job satisfaction and the personal characteristics of quantity surveyors. the results of the study suggest that job satisfaction variables are not unidirectional in their effects. for example, the job itself can be a source of both satisfaction and dissatisfaction. any particular aspect of job satisfaction (satisfaction with the job itself, pay, promotion, supervision, coworkers, and overall job satisfaction) may have significant impact on a quantity surveyor’s overall job satisfaction, and vice versa. the implication of this finding is that decision-makers should be mindful of factors that contribute to job dissatisfaction, and attempt to improve them to achieve greater job satisfaction .with regard to age, the findings of this study tend to support the assumption that job satisfaction increases with age. it can also be concluded that older quantity surveyors experience greater job satisfaction than do younger quantity surveyors, because they have job experience, tenure, job security, and higher income, as well as maturity that only age can bring. implications of this finding are that management should focus its efforts on improving the job satisfaction of younger and newly employed quantity surveyors by developing management training programs, workshops, financial incentives, and other non–work-related activities that would encourage and support them to stay and grow with the organization. the data for this study indicate that educational achievement affects job satisfaction. the implication of this finding is for organizations to encourage quantity surveyors to further their education. results also show that male and female quantity surveyors had significantly different levels of satisfaction. male quantity surveyors were more satisfied with their jobs than were their female counterparts. management should strive to encourage more women into management positions by trying to enhance job satisfaction; this can be done by furthering their education, establishing a comparable pay policy, creating equal opportunity for promotion, and improving work environment for both sexes. recommendations the result of this study shows a statistically significant relationship between job satisfaction of quantity surveyors and works itself. hence in support of robbins et al.(2003) work, it is important for top management of consulting quantity surveying firms to provide stimulating tasks, opportunities for learning and growth to quantity surveyors in their employment. a statistically significant relationship was established between pay and job satisfaction of quantity surveyors. this agrees with result of study done by oshagbemi (2000), hence it is important that australasian journal of construction economics and building onukwube, h n (2012) ‘correlates of job satisfaction amongst quantity surveyors in consulting firms in lagos, nigeria’, australasian journal of construction economics and building, 12 (2) 43-54 52 consulting quantity surveying firms pay quantity surveyors in their employment an equitable pay as this will help them to satisfy their economic needs and enhance their commitment to duty. the association between supervision and job satisfaction of quantity surveyors is statistically significant. hence it is strongly recommended that consulting quantity surveying firms should display of research result of mccormack et al ;( 2006). promotions should be based on merit and performance. promotions would then be perceived by quantity surveyors as fair and equitable and would encourage productivity and enhance job satisfaction. since this study established a statistically significant relationship between co-worker and job satisfaction of quantity surveyors, it is important that consulting quantity surveying firms should always educate their employees on the importance of establishing positive relationship in the work place. since educational attainment predicts job satisfaction, quantity surveyors should be encouraged to further their education. this can be achieved by offering in-service 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(1998) ‘organizational commitment among public service employees,’ personnel journal, 27 (3), 339-348 microsoft word ajceb vol.2 no.1 compiled sized.doc capital budgeting evaluation practices of building contractors in hong kong the australian journal of construction economics and building vol.2 no.1 81 capital budgeting evaluation practices of building contractors in hong kong k. c. lam, s.o. cheung and c. m. tang, city university of hong kong s. t. ng, university of hong kong introduction capital assets are used by the company in the physical process of producing goods and services and are ordinarily used for a number of years. the amounts involved are so large that businesses need to plan and evaluate expenditures for capital assets with care. the plan for expenditures is called a capital budget. the process of determining both how much to spend on a capital assets and which assets to acquire is called capital budgeting. most firms prepare at least a short-run budget that indicates planned capital outlays for the current and near future periods. many firms also prepare intermediate and long-term capital budgets that project capital requirements for three to five, and sometimes even ten years ahead. capital budgets are based on sales forecasts and on the anticipated plant and equipment needed to meet those expected sales (hunt and terry, 1993). previous research studies on capital budgeting have mainly focused on the application and improvement of modelling techniques. for instance, brealey and myers (1991), hassmann (1968), van horne (1980) and weston and brigham (1981) adopted operational research techniques to model the budgeting of capital finance. other researchers proposed the use of mathematical and optimisation methods for capital budgeting (e.g. aston, 1978; bhaskar, 1978; jennergren, 1990). while these modelling techniques are significant to the improvement of capital budgeting decision-making, relatively little research has been directed towards the behaviour of financial management within the construction industry, in particular the practices of capital budget evaluation used by contractors in different countries. this paper examines the capital budget evaluation procedures used in the construction industry of hong kong (hk) in 1994 and 1999 (cf. lam et al., 1994), and highlights the financial management behaviour in hong kong construction industry and so provides a reference for contractors against which they can compare their behaviour. the paper consists of three sections: the sampling method, an analysis of capital budgeting evaluation practices and procedures, and the findings of a discriminant function analysis (dfa). the purposes of the dfa are to classify the financial management practices according to the peculiar characteristics of firms, and to establish the variables which have the greatest impacts on capital budgeting evaluation practices. methodology two hundred building engineering contractors out of 1000 (approx.) were randomly selected from the membership list of the hong kong construction association. six contractors had changed address or gone bankrupt at the time of survey; the remaining 194 contractors were divided into three groups according to their size (maximum capacity) as defined by the hksar’s architectural services department. classification was based on the total contract value that contractors are allowed to tender, i.e. group a up to hk$20 million, group b up to hk$50 million, and group c having no upper limit. the surveys were carried out by mail, followed by telephone contact. the questionnaire was modified from pike’s study (1988). in all 60 questionnaires were received, representing a response rate of 30.92%. group a had 19 responses out of 62 (30.65%); group b had 10 responses out of 48 (20.82%) and group c had 31 responses out of 84 (36.90%). although the number of responses from group c contractors was higher than those from the other groups, the response rates across the three groups were very close, indicating that the results were not overly biased towards the large organisations. respondents were asked to rate the usage of the capital evaluation techniques, investment appraisal methods, risk analysis approaches and management science techniques. the rating was based on a fivepoint scale (i.e. 0=no, 1=rare, 2=often, k. c. lam, s.o. cheung, c. m. tang and s. t. ng 82 the australian journal of construction economics and building vol.2 no.1 3=mostly and 4=always). to examine the popularity of these methods, the positive attitude (pa) was devised to represent the combined number of responses of rare, often, mostly and always. since the usage of a particular technique depends on the nature of decision being undertaken, some techniques might have been rarely or always used by a contractor. the pa therefore helps to distinguish between those contractors who did or did not use a particular technique at all. besides the pa, the median (me), mode (mo) and testing of null hypotheses were also considered to establish the extent of usage and the pattern of usage between the groups. capital budget evaluation the literature shows that “searching and screening of alternatives”, “financial evaluation”, “risk analysis” and “best/worst estimate” are the most commonly used capital budget evaluation techniques in construction (riggs, 1986). the findings of the current study concur with the literature. as shown in table 1, the “searching and screening of alternatives” had the highest observed frequency of usage (pa=96.6%), followed by “financial evaluation” (pa=93.1%), “best/worst estimates” (pa=90.7%), and “risk analysis” (pa=89.5%). searching and screening of alternatives an analysis of the median (table 1) reveals that groups a and c firms often adopt “searching and screening of alternatives” for capital budget evaluation (me=2), while the usage of this technique by group b was only rare (me=1.00). the result of a nonparametric one-way anova was 0.894, supporting the null hypothesis that there were no significant differences between the three groups in the usage of this technique. financial evaluation “financial evaluation” was often used by small to large contractors (me=2 for all three groups). in the large firms category, a high proportion of respondents mostly adopted “financial evaluation” technique (mo=3), indicating that it is a very popular capital budget evaluation technique for contractors of that size. we uphold the null hypothesis of no difference between groups of firm (the three groups of firms showed similar interest in a “financial evaluation”), with the value of significance being 0.502 at 95% level of confidence. table 1: comparisons of the usage of capital budget evaluation techniques size of firm group a group b group c overall firms have mo me mo me mo me mo me pa (%) searching and screening of alternatives before accepting projects 1.00 n=22 2.00 1.00 n=9 1.00 1.00 n=27 2.00 1.00 n=58 2.00 96.6 formal financial evaluation 2.00 n=22 2.00 1.00 n=9 2.00 3.00 n=27 2.00 2.00 n=58 2.00 93.1 formal analysis of risk 1.00 n=21 1.00 2.00 n=9 2.00 1.00 n=27 2.00 1.00 n=57 2.00 89.5 analysis under different assumptions (best/worst estimates) 2.00 n=21 2.00 2.00 n=7 2.00 2.00 n=26 2.00 2.00 n=56 2.00 90.7 number of cases = 60 capital budgeting evaluation practices of building contractors in hong kong the australian journal of construction economics and building vol.2 no.1 83 risk analysis large and medium sized firms often undertook “risk analysis” (me=2). not too many small firms were keen on analysing their risks (me=1, mo=1) although they are more prone to financial problems. a significance of 0.493 was found in the null hypothesis test, confirming that there were no differences between the groups in the use of the “risk analysis” technique for capital budget evaluation. best/worst estimates an analysis of projects under different assumptions, i.e. “best/worst estimates”, was often used by contractors of various sizes (me=2 for all groups). this may be because the “best/worst estimate” is a relatively simple and quick process. the significance value was 0.509, which was below the level corresponding to a 95% degree of confidence. the null hypothesis was rejected, and indicated that there are no significant differences in the application of this technique between the groups. despite the high pa values, it should be noted that the mode and median regarding the usage of the capital budget evaluation techniques discussed above were not particularly high in the current study. some of these techniques involve sophisticated evaluation procedures and require a large amount of human resources. contractors need to undergo a series of thorough investigations, discussions and evaluations prior to each investment, which may discourage some contractors in hk from adopting a proper capital budget evaluation technique. appraisal techniques generally, after the cash flows have been estimated, firms evaluate their financial position to determine whether the investment should proceed. several techniques are available to evaluate investment proposals. the popular investment appraisal methods namely “payback period” (pbp), “average accounting rate of return” (aarr), “internal rate of return” (irr), and “net present value” (npv) were used (samuels, willes and brayshaw, 1991). respondents were asked to rate their usage of the methods. as shown in table 2, pbp was the most predominant investment appraisal technique used by practitioners (pa=86.4%), and this is in line with many previous similar studies (kelly and northcott, 1991; klammer and walker, 1984; patterson, 1989; pike, 1988). the aarr technique ranked second (pa=83.3%). although npv has been argued as a popular technique for normative capital budgeting (breadley and myers, 1991; horngern and foster, 1991), npv and irr shared only an equal third ranking (pa=69.0%). table 2: comparisons of usage of investment appraisal techniques size of firm group a group b group c overall appraisal techniques in use mo me mo me mo me mo me pa% payback period (pb) 2.00 n=22 1.50 2.00 n=9 2.00 2.00 n=28 2.00 2.00 n=59 2.00 86.4 one-way anova significance value = 0.094 average accounting rate of return (aarr) 2.00 n=22 1.50 2.00 n=9 2.00 2.00 n=29 2.00 2.00 n=60 2.00 83.3 one-way anova significance value = 0.167 internal rate of return (irr) 1.00 n=22 1.00 1.00 n=9 0.00 1.00 n=27 1.00 1.00 n=58 1.00 69 one-way anova significance value = 0.793 net present value (npv) 1.00 n=22 1.00 1.00 n=9 1.00 1.00 n=27 1.00 1.00 n=58 1.00 69 one-way anova significance value = 0.348 number of cases = 60 k. c. lam, s.o. cheung, c. m. tang and s. t. ng 84 the australian journal of construction economics and building vol.2 no.1 the within group analysis reveals that there was not much difference for pbp and aarr. large and medium contractors often used pbp and aarr for investment appraisal (me=2, mo=2), while usage by small firms was between rare and often (me=1.5, mo=2). all three groups of contractors indicated that they rarely used npv and irr methods (me=1, mo=1). the median on the usage of irr in group b was zero (me=0) indicating the some of these firms did not use irr for appraising their investments. risk analysis and management science techniques the techniques that managers might use for the evaluation of projects include risk analysis and management science techniques. there are several methods for analysing the riskiness of capital projects, and various management science techniques for evaluating or controlling projects. this section examines the usage of these methods by hk contractors. risk analysis every construction project is unique and each has different risk allocation, capital requirements, management teams, construction methods and sequences, and so on. all these factors could affect project price, and it is necessary to identify and analyse the risks associated with capital budget. academic literature (horngren and foster, 1991; pike, 1998) advocates that the evaluation of projects should account for different risk characteristics through various risk analysis techniques, such as “shortening payback period”, “raising required rate of return”, “probability analysis”, “sensitivity analysis”, and “beta analysis”. table 3 shows the pas of various risk analysis approaches. their popularity in descending orders is “shortening payback period” (pa=88.3%), “raising required rate of return” (pa=79.3), “probability analysis” (pa=75.4%), “sensitivity analysis” (pa=64.9%), and “beta analysis” (pa=48.2%). more than half of the respondent (51.8%) did not use “beta analysis” for risk analysis suggesting that this technique is not popular in hk. table 3: comparisons of usage of risk appraisal techniques size of firm group a group b group c overall method in use for analysis risk: mo me mo me mo me mo me pa% shortening payback period 2.00 n=22 2.00 2.00 n=9 2.00 2.00 n=29 2.00 2.00 n=60 2.00 88.3 one-way anova significance value = 0.757 raising required rate of return or discount rate 1.00 n=22 1.50 0.00 n=9 2.00 1.00 n=29 1.00 1.00 n=60 1.00 79.3 one-way anova significance value = 0.688 probability analysis 1.00 n=22 1.00 0.00 n=9 1.00 1.00 n=29 1.00 1.00 n=60 1.00 75.4 one-way anova significance value = 0.026 sensitivity analysis 0.00 n=22 1.00 0.00 n=9 0.00 1.00 n=29 1.00 1.00 n=60 1.00 64.9 one-way anova significance value = 0.0004 beta analysis 0.00 n=22 1.00 0.00 n=9 0.00 0.00 n=29 0.00 0.00 n=60 0.00 48.2 one-way anova significance value = 0.976 number of cases = 60 capital budgeting evaluation practices of building contractors in hong kong the australian journal of construction economics and building vol.2 no.1 85 the median and mode of “shortening payback period” was the highest (me=2.00; mo=2 for all three groups) indicating that this technique was often used by contractors in analysing risks. the usage of “raising required rate of return” (me=1 for large; me=2 for medium; me=1 for small), “probability analysis” (me=1 for all groups), and “sensitivity analysis” (me=1 for small and large; me=0 for medium) was rare. “beta analysis” had the lowest median and mode (me=0; mo=0 for medium and large groups). according to the results of null hypothesis testing, only “sensitivity analysis” (significance=0.0004) and “probability analysis” (significance=0.026) were statistically significant. these methods showed strong correlations in the use of the techniques between groups. management science techniques in accordance with the study, “planning programming” (e.g. critical path method, pert) was the most commonly used management science technique in the construction industry (pa=87.3%) (table 4). a corporate cash flow can be obtained from the contract programme in conjunction with the resources, and the contract programme should preferably be in the form of a critical path in which early and late progress can be shown. in the process of planning, the contractor will follow the sequence and logic of the planning cycle to prepare his planning programme. with the logic and sequence of construction determined, a cumulative early-and-late progress envelope can be derived and converted into an early-and-late contract cash flow (clough and sears, 1991). the above procedures are common corporate cash flow forecasting methods. many construction projects in hk are very complex, and the cash flow of these projects is likely to be influenced by the sequence of operations. it is normal that a high proportion of respondents uses “planning programming” as a technique for investment decision-making. the technique which ranked second is “mathematical programming” (pa=62.1%), followed by “decision theory” (pa=57.9%) and “computer simulation” (pa=55.9%). a higher proportion of respondents in groups b and c always use “planning programming” as a management science technique (mo=4 for both groups; me= 3.5 for medium firms and me=3 for large firms). in contrast, only group a firms often use “planning programming” (me=2.00; mo=2.00). the usage for other three management science techniques is rare (me=1 in virtually all cases). table 4: comparisons of the usage of management science techniques size of firm group a group b group c overall management science techniques mo me mo me mo me mo me pa% mathematical programming 0.00 n=22 1.00 0.00 n=9 1.00 1.00 n=29 1.00 0.00 n=60 1.00 62.1 one-way anova significance value = 0.954 computer simulation 0.00 n=22 1.00 0.00 n=9 0.00 0.00 n=29 1.00 0.00 n=60 1.00 55.9 one-way anova significance value = 0.304 decision theory 0.00 n=22 1.00 0.00 n=9 2.00 0.00 n=29 1.00 0.00 n=60 1.00 57.9 one-way anova significance value = 0.467 planning programming 2.00 n=22 2.00 4.00 n=9 3.50 4.00 n=29 3.00 2.00 n=60 2.00 87.3 one-way anova significance value = 0.004 number of cases = 60 k. c. lam, s.o. cheung, c. m. tang and s. t. ng 86 the australian journal of construction economics and building vol.2 no.1 table 5: comparisons of the usage of computer packages or financial modelling systems size of firm group a group b group c overall mo me mo me mo me mo me pa% firms use of computer package/ financial modelling: 0.00 n=22 0.00 0.00 n=9 0.00 0.00 n=29 0.00 0.00 n=60 0.00 30 one-way anova significance value = 0.543 number of cases = 60 in the null hypothesis testing only “planning programme” is of statistical significance, with a value of 0.004. the use of the four management science techniques was influenced by the size of the firms, with a bias towards usage by firms in groups a and c. computer packages or financial modelling systems for investment analysis computer simulation packages are thought to be more realistic than theoretical calculations. however, the survey results indicate that the computer package is not very popular in capital financing (pa=30%) particularly for small (pa=27.3%) and medium (pa=22.2%) contractors (table 5). in other words, over 70% of contracting firms in the various groups do not use computer various groups do not use computer modelling systems. the mode and median in all three groups are zero, indicating that an extremely low proportion of firms use computer modelling for capital budget evaluation. the testing of the null hypothesis has a significance of 0.543 at 95% confidence level, and thus the null hypothesis is rejected. there is no association between groups in applying computer packages or financial models to investment analysis. this is not surprising considering the extra resources required for purchasing computer packages and/or financial modelling systems. table 6: comparisons of the usage of methods for anticipating inflation size of firm group a group b group c overall firms which mo me mo me mo me mo me pa% consider inflation at risk analysis/ sensitivity stage 1.00 n=22 1.00 2.00 n=9 2.00 1.00 n=29 2.00 1.00 n=60 2.00 84.3 one-way anova significance value = 0.076 specify cash flows in constant process and apply a real rate of return 2.00 n=22 2.00 0.00 n=9 2.00 2.00 n=29 2.00 2.00 n=60 2.00 81.4 one-way anova significance value = 0.826 adjust for estimated changes in general inflation 2.00 n=22 2.00 2.00 n=9 2.00 2.00 n=29 2.00 2.00 n=60 2.00 96.6 one-way anova significance value = 0.283 specify different rates of inflation for all costs and revenues 2.00 n=22 2.00 2.00 n=9 1.00 1.00 n=29 2.00 2.00 n=60 2.00 86.2 one-way anova significance value = 0.295 number of cases = 60 capital budgeting evaluation practices of building contractors in hong kong the australian journal of construction economics and building vol.2 no.1 87 table 7: comparisons of 1999 and 1994 surveys year of study 1999 1994 pa (%) firms have mo me mo me 1999 1994 capital budget evaluation searching and screening of alternatives before accepting projects 1.00 n=27 2.00 1.00 n=29 2.00 96.3 96.6 formal financial evaluation 3.00 n=27 2.00 4.00 n=30 3.00 93.1 86.7 formal analysis of risk 1.00 n=27 2.00 4.00 n=29 2.00 89.5 96.6 analysis under different assumptions (best/worst estimates) 2.00 n=27 2.00 2.00 n=29 2.00 90.7 75.9 investment appraisal payback period (pb) 2.00 n=28 2.00 3.00 n=30 3.00 89.3 86.7 average accounting rate of return (aarr) 2.00 n=29 2.00 2.00 n=29 2.00 93.1 86.2 internal rate of return (irr) 1.00 n=27 1.00 2.00 n=29 2.00 89.7 82.8 net present value (npv) 1.00 n=27 1.00 2.00 n=29 2.00 74.1 75.9 risk analysis shortening payback period 2.00 n=29 2.00 2.00 n=28 2.00 86.2 82.1 raising required rate of return or discount rate 1.00 n=29 1.00 3.00 n=29 2.00 74.1 86.2 probability analysis 1.00 n=29 1.00 1.00 n=27 1.00 81.5 74.1 sensitivity analysis 1.00 n=29 1.00 1.00 n=27 1.00 81.5 77.8 beta analysis 0.00 n=29 0.00 0.00 n=26 1.00 48.1 57.7 management science mathematical programming 1.00 n=29 1.00 0.00 n=29 1.00 66.7 72.4 computer simulation 0.00 n=29 1.00 0.00 n=29 1.00 40.7 65.5 decision theory 0.00 n=29 1.00 0.00 n=30 2.00 51.9 66.7 planning programming 4.00 n=29 3.00 3.00 n=27 3.00 96.3 92.6 number of cases = 60 k. c. lam, s.o. cheung, c. m. tang and s. t. ng 88 the australian journal of construction economics and building vol.2 no.1 inflation it is necessary to consider and anticipate inflation in capital budget planning. the most commonly used inflation anticipation methods were to “adjust for estimated changes in general inflation” (pa=96.6%), “specify different rates of inflation for all costs and revenues” (pa=86.2%), “consider inflation at risk analysis stage” (pa=84.3%), and “specify cash flows in constant processes and apply a real rate of return” (pa=81.4) (table 6). virtually all groups often use these four techniques for the forecast of inflation (me=2). as for the significance tests, all variables are outside the 95% significance level therefore the null hypotheses for all four techniques were accepted. this suggests there is no significant association between the groups in considering the techniques for adjusting inflation in the investment decision. discussions — comparison of 1994 and 1999 surveys the results of the current study were compared with those of a similar survey conducted in 1994 (lam et al., 1994) to determine if the capital budget evaluation practices as adopted by the hk contractors had remained consistent over the five year period. the comparisons indicate that more contractors became aware of the importance of capital budget evaluation, and the popularity and usage of certain capital budget evaluation techniques increased from 1994 to 1999. capital budget evaluation a comparison of the pas reveals that there was a general increase in the popularity of various capital budget evaluation techniques from 1994 to 1999 (table 7), except for “risk analysis” (from 96.6% to 89.5%). the most remarkable increase was the “best/worst estimate” (from 75.9% to 90.7%). however, when examining the mode, falling trends are noted in the extent of usage in some techniques. the drop in mode for “financial evaluation” was rather moderate (from mo=4 to mo=3), while there was a more significant drop in use of “risk analysis” (from mo=4 to mo=1). appraisal techniques the pas for the four investment appraisal techniques in the 1999 study were slightly higher than those of the 1994 study, except for npv which dropped slightly from pa=75.9% (1994) to pa=74.1% (1999). in terms of the extent of usage, there was a decrease in usage of pbp between 1994 and 1999 (from me=3 to me=2). this implies that smaller contracting firms in hk prefer to use the pbp technique (cf. fremgen, 1973). in fact, pbp does have some disadvantages: cash flows outside the pbp are ignored when appraising an individual project both the post-payback returns and the distribution of returns within the pbp are ignored when used for comparing projects detailed information about the actual calculation of pbp is not provided. davis and cosenza (1990) have suggested that the sophistication of pbp rules can be increased by setting minimum payback percentages at various points in time or using discounted returns. risk analysis comparing the results of the 1994 and 1999 studies shows that there were increases in the popularity of “shortening payback period” (from pa=82.1% to pa=86.2%), “probability analysis” (from pa=74.1% to pa=81.5%), and “sensitivity analysis” (from pa=77.8% to pa=81.5%). there was however a drop in the popularity of “raising required rate of return” (from pa=86.2% to pa=74.1%) and “beta analysis” (from pa=57.7% to pa=48.1%). the extent of usage of “raising required rate of return” dropped from me=2 to me=1, while for “beta analysis” the drop was from me=1 to me=0. management science techniques the only technique which had a slight increase in its popularity was “planning programming” (from pa=92.6% to pa=96.3%). the popularity of the other three techniques diminished, especially for the computer simulation (a drop from pa=65.5% to pa=40.7%). the high pa of “planning programming” indicates that hk contractors are by no means discounting the values of management science techniques. however, since the time and budget of construction projects are much tighter than before, contractors will direct their resources to those management science techniques which they are more familiar with and can rely on. in terms of the extent of usage, there was no particular improvement or decline in the use of different management science techniques between 1994 and 1999. capital budgeting evaluation practices of building contractors in hong kong the australian journal of construction economics and building vol.2 no.1 89 discriminant function analysis to further investigate the practices of capital budget evaluation, a discriminant function analysis (dfa) was employed to classify the firms according to a set of variables that best represent their characteristics (instead of grouping by size). dfa is a technique for deciding into which category a case (in this instance, a contractor) is most likely to fall. the “size of firm” was used as a variable for initial grouping, and groups a, b and c were represented as groups 1, 2 and 3 respectively in this analysis. the variables on capital budget evaluation, as examined in the above analyses, were used for the dfa. the dfa generated two sets of standardised discriminant function coefficients (λ: function 1 and function 2, where the two functions represent two distinctive characteristics of contractors – see table 8). based on these two functions, it is possible to compute the discriminant scores for each case. as shown in table 8, for function 1, the variable having the greatest impact on capital budget evaluation was “net present value” (with an absolute of 1.426). this was followed by “internal rate of return” (1.252), “raising required rate of return” (1.250), and “specify different rates of inflation for all costs and revenues” (1.166). table 8: standardised canonical discriminant function coefficients variable criteria (θ ) discriminant function coefficients ( λ ) function 1 function 2 searching and screening of alternatives before accepting projects -0.364 -0.821 formal financial evaluation -0.131 0.788 formal analysis of risk 0.398 0.377 analysis under different assumptions (best/worst estimate) 0.003 -0.091 payback period -0.032 0.480 average accounting rate of return 0.358 0.241 internal rate of return -1.252 -0.298 net present value 1.426 0.251 shortening payback period 0.168 -0.497 raising required rate of return or discount rate -1.250 0.373 probability analysis -0.030 0.192 sensitivity analysis 0.748 0.224 beta analysis 1.091 -1.150 mathematical programming -0.531 -0.070 computer simulation 0.487 0.027 decision theory -0.725 -0.533 planning programme 1.101 -0.118 consider inflation at risk analysis/sensitivity stage 0.103 0.567 specify cash flows in constant process and apply a real rate of return -0.269 0.375 adjust for estimated changes in general inflation 0.384 -0.443 specify different rates of inflation for all costs and revenues -1.166 0.754 computer package or financial modelling system used for investment analysis 0.475 -0.272 k. c. lam, s.o. cheung, c. m. tang and s. t. ng 90 the australian journal of construction economics and building vol.2 no.1 the group centroids (i.e. group means) of the three groups are summarised in table 9. for function 1, group 1 had a mean of -1.770, while the means for groups 2 and 3 were +1.455 and +1.160 respectively, indicating that the characteristics of group 1 are opposite to groups 2 and 3. the attitudes of group 1 contractors on the usage of “net present value”, “internal rate of return”, “raising required rate of return”, etc. were distinct from those of group 2 and 3 contractors. for function 2, the mean for group 2 was in negative territory (-2.342), while the means for groups 1 and 3 were positive (+0.007 and +0.673 respectively). a territorial map showing the centroid and borders of each group within functions 1 and 2 is shown in figure 1. the dfa also generated classification results. this includes a predicted group membership, which represents an expected classification of the different cases. the measure is evaluated by comparing the observed misclassification rate to that expected by chance alone. the percentage of cases correctly classified can be regarded as a measure of effectiveness of the discriminant function. as shown in table 10, 89.9% of all cases were correctly classified, i.e. only 10.2% of the cases (overall) were misclassified. the group breakdowns indicate that 90.0% of cases in group 1, 83.3% of cases in group 2, and 91.3% of cases in group 3 were correctly classified and predicted. table 9: canonical discriminant functions evaluated at group centroids (group means) discriminant score discriminant score group function 1 function 2 1 -1.770 0.007 2 1.455 -2.342 3 1.160 0.673 figure 1: scatterplot of canonical discriminant functions for all groups function 1 420-2-4-6 fu nc tio n 2 3 2 1 0 -1 -2 -3 -4 legends group centroids group c (> 50) group b (< 50) group a (< 20) group c (> 50) group b (< 50) group a (< 20) capital budgeting evaluation practices of building contractors in hong kong the australian journal of construction economics and building vol.2 no.1 91 table 10: table of classification results from the discriminant function analysis predicted group membership actual group (classified by size of firm) number of cases 1 2 3 group a (< 20 m) 1 20 18 90.0% 0 0.0% 2 10.0% group b (< 50 m) 2 6 0 0.0% 5 83.3% 1 16.7% group c (> 50 m) 3 23 1 4.3% 1 4.3% 21 91.3% percentage of “grouped” cases correctly classified: 89.8% since the performance of a contractor’s financial management may not be easily represented by its size, the purpose of dfa is to identify a set of variables (table 8) which could help in scrutinizing the performance of a firm in capital budgeting. the variables used in this analysis are the primary factors involved in managing capital budgets, and these variables are highly correlated with the firms’ competence in managing their finances. based on this analysis, contracting firms can be classified in accordance with their level of performance in managing the capital budgeting process. conclusion this paper reports a study on the capital budget evaluation techniques used by building contractors in hk. the majority of firms studied employed some forms of evaluation techniques for investigating project finance. the most popular capital budget evaluation technique were “searching and screening of alternatives” and “financial evaluation”, while pbp and aarr were considered as the most popular appraisal techniques. the findings are different from the standard literature, which argues that npv and irr are the predominant techniques for capital budgeting. risk analysis is very important in decisionmaking as risks may exist in any prospective investments. many firms undertook a formal risk analysis, with the most commonly used technique being “shortening payback period” and “raising required rate of return”. less than half of the respondents used “beta analysis”, indicating the unpopularity of this technique in hk. with the rapid development in computer technology, many techniques in capital budgeting have been computerised. most firms, however, still rely on “planning programming”, such as critical path analysis or pert, rather than using computer simulations. this may be due to cost burdens imposed by additional equipment and specialists. although computerisation was not particularly popular in hk, most contractors agreed that a systematic and highly developed capital budgeting system was important in making sound investment decisions. a comparison of the 1994 and 1999 studies reveals that there is a general increase in the popularity in the usage of capital budget evaluation techniques. the most remarkable increase in popularity included the “best/worst estimate”, “financial evaluation”, aarr, irr, and “probabilistic analysis”. despite the conservative nature of the construction industry in hk, construction companies are aware of the importance of financial management and now apply a greater variety of techniques in capital budget evaluation. there was, however, a significant drop in the popularity of “computer simulation” between 1994 and 1999, highlighting a need to examine why hk contractors are moving away from the use of the computer as a decision aid for financial management. this survey carried out for this study limits any generalisation of findings to those of the construction finance practices of hk contractors. however, the survey helps to ensure that the results can accurately reflect the perceptions of respondents in hk. this makes the work valuable in terms of adding to the knowledge of contemporary practice, and identifying issues which may shape and direct in the future. k. c. lam, s.o. cheung, c. m. tang and s. t. ng 92 the australian journal of construction economics and building vol.2 no.1 acknowledgements the work described in this paper was partially supported by a grant from the research grant council of the hong kong special administrative region, china (project no. 9040593). the authors would like to thank professor richard pike for kindly permitting his questionnaires to be adapted for use in this survey. sincere thanks are extended to all contracting firms in hk who participated in the two surveys. references ashton, d.j. (1978) the construction and use of mathematical programming models for the analysis of the integrated investment and financial decision within a firm. unpublished phd thesis, university of warwick. bhaskar, k.n. (1978) linear programming and capital budgeting: the financial problem, journal of business finance and accounting, 5 (2), spring, 159–194. brealey, r.a. and myers, s.c. (1991) principles of corporate finance, 4th edition. mcgraw-hill inc. clough, r. h. and sears, g. a. (1991) construction project management, 3rd edition. wiley, new york. davis, d. and cosenza, r.m. (1990) business research for decision making. pws-kent publishing company. fremgen, j.m. (1973) capital budgeting practices: a survey. management accounting, may, 19–25. hanssmann, f. (1968) operational research techniques for capital investment, john wiley and sons, new york. horngren, c.t. and foster, g. (1991) cost accounting: a managerial emphasis, 7th edition. prentice-hall, englewood cliffs, n.j. hunt, b. and terry, c. (1993) financial instruments and markets, 2nd edition. thomas nelson, australia. jennergren, l.p. (1990) valuation by linear programming — a pedagogical note. journal of business finance and accounting, 17 (5), winter, 751–756. kelly, m. and northcott, d. (1991) divergence of management accounting practices from theory: some observations based on a field study. accounting forum, september, 44–80. klammer, t.d. and walker, m.c. (1984) the continuing increase in the use of sophisticated capital budgeting techniques. the california management review, 33 (3), spring, 756. lam, k.c., tam, c.m. and so, a.t.p. (1994) a survey of capital budgeting techniques used by contracting firm in hong kong. in: proceedings: 1st international conference — changing role of contractors in asia pacific rim, chartered institute of building, may, 281–287. patterson, c.s. (1989) investment decision criteria used by listed new zealand companies. australian journal of management, 27 (1), december, 59–69. pike, r.h. (1988) an empirical study of the adoption of sophisticated capital budgeting practices and decision-making effectiveness. accounting and business research, 18 (72), autumn, 341–351. riggs, l. s. (1986) cost and schedule control techniques in industrial construction. a report to the construction industry institute, university of texas at austin. samuels, j.m., willes, f.m. and brayshaw, r.e. (1991) management of firm finance, 5th edition. chapman and hall. van horne, v.c. (1980) financial management and policy, 5th edition. prentice hall, englewood cliffs, n. j. weston, j.f. and brigham, e.f. (1981) managerial finance, 7th edition., dryden press, hinsdale, ill. capital budgeting evaluation practices of building contractors in hong kong the australian journal of construction economics and building vol.2 no.1 93 appendix i: positive attitudes of respondents for variables variable group a (< 20 m) group b (< 50 m) group c (> 50 m) over all a specific research for and screening of alternatives before accepting projects 100.0% 100.0% 92.6% 96.4% a formal financial evaluation 100.0% 88.9% 88.9% 93.1% a formal analysis of risk 81.0% 100.0% 92.6% 89.5% analysis under different assumption (best and worst estimates) 95.2% 85.7% 88.5% 90.7% payback period 81.8% 88.9% 89.3% 86.4% average accounting rate of return 77.3% 66.7% 93.1% 83.3% discounting internal rate of return 68.2% 66.7% 70.4% 69.0% discounting net present value 63.6% 66.7% 74.1% 69.0% shorten payback period 90.9% 88.9% 86.2% 88.3% raising required return or discount rate 90.9% 66.7% 74.1% 79.3% probability analysis 72.7% 62.5% 81.5% 75.4% sensitivity analysis 54.5% 37.5% 81.5% 64.9% beta analysis 52.4% 37.5% 48.1% 48.2% mathematical programming 54.5% 66.7% 66.7% 62.1% computer simulation 54.5% 44.4% 60.7% 55.9% decision theory 63.7% 62.5% 51.9% 57.9% planning programme 77.3% 83.3% 96.3% 87.3% consider at risk analysis/sensitivity stage 81.8% 66.7% 92.9% 84.7% specific cash flow in constant process and apply a real rate of return 77.3% 66.7% 89.3% 81.4% adjust for estimated changes in general inflation 95.5% 88.9% 100% 96.6% specific different rates of inflation for all costs and revenues 90.9% 66.7% 88.9% 86.2% computer package or financial modelling system used for investment analysis 27.3% 22.2% 34.5% 30% book review construction management: understanding and leading an ethical project team jason g smith, construction analysis and planning llc, 2011, isnb 10:061540314x, isbn-13:978-0-615-40314-4, usd 32.50 introduction the book’s title, “construction management: understanding and leading an ethical project team” was initially, at least, somewhat misleading. i made the mistake that i often tell my students not to make by simply reading the first part of the title and assumed that the book was simply about construction management. it wasn’t until i got into the book that i realised that in fact the book was about more than that and that its major focus was really about ethics, leadership and management generally. these aspects are applied to the construction process and this grounding gives them relevance to our industry be it construction itself or education. the book is well written and is worth reading especially if you have an interest in ethics in the construction industry or you aspire to a leadership position in the industry. background the structure of the book soon makes it clear that the book is really intended as a series of exemplars based on case studies presumably from the author’s own work experience. if you are an academic you will be disappointed if you expect to find references, citations and sources throughout the book. they simply do not exist and it is clear that the book is really a compilation of the author’s own experiences. in a sense the examples used could collectively be referred to as components of one large case study based on the author’s own work experience. whether or not this “case study” was based on an appropriate research methodology is simply not clear. my feeling is that it is really an anthology of lessons learned by a person with significant construction experience. that alone is good enough reason to read the book. the book is well written and easy to read. it is not a particularly long book and can be read in an afternoon. the writing style is uncomplicated and engaging; the messages are clear and i often found myself wondering how i would have dealt with some of the situations cited in the book. the book is also written from a north american perspective and although many of the lessons are generic the reality is that not all of them are and there are differences in terms of industry structure, industry practices and industry legislation that may make some of the situations cited in the book inapplicable to other countries e.g. i understand that many large construction companies in the usa still maintain a pool of labour that they can use as field crews when required. in australia this practice ceased several years ago and almost all people working on a construction site today are actually sub contractors. similarly the terms used in the book are american terms and it does take a bit of time getting used to what they mean; however most meanings are clear. the one thing that did annoy me when reading the book related more to the production process i.e. i found the contrast between the stark black print on the brilliant white glossy paper background upsetting as no matter where i sat or what lighting i used the glare emanating from the pages was disturbing. australasian journal of construction economics and building smith, j g (2011) book review, australasian journal of construction economics and building, 11 (4) 116-118 117 structure the book is structured around 3 modules and a series of chapters written around the different members of the procurement team. each chapter is followed by a series of questions and scenarios that are intended to consolidate the learning gained from the readings. clearly the intention is that the book be used as a text. module 1 deals with sub contractors, general contractors and field crews. the predominant message for me was the vastly different perspectives that each player brings to the table especially with respect to money and the actions used to acquire it during the construction process. there were some scenarios that upon first reading appeared to be quite normal and ethical and it wasn’t until i read the explanations from other perspectives that i began to get a feeling of exactly what was going on and how easy it is to convince oneself that one is acting in the interests of the client when in fact the interest was often self serving. when and if you pass on discount or interest savings was a case in point. as the author says, “people have a tendency to view money differently when it is their own than they do when it belongs to someone else”. module 2 deals with architects and sub consultants. the predominant message for me was the working relationship between the architect and sub consultants. architects seem to accept unreasonable design schedules and then find themselves cutting corners, in terms of documentation, in order to fulfil the tight schedule. unfortunately, this impacts on both the quality and accuracy of the architects’ and sub consultant’s documentation and can set both groups against each other. similarly, because sub consultants rely on the architect for interdisciplinary co-ordination, this lack of time can lead to lack of leadership and will almost certainly lead to significant coordination issues and possible conflict when progress claims or variations are refused by the construction manager. as one can appreciate, this is not a tenable position for members of the design team who are, “contractually obligated to provide the most economical and efficient design possible……not solely for direct work but also for indirect costs”. module 3 deals with project owners and construction managers. the predominant message for me was the relationship between the owner and the construction manager and the fact that, at times, the owner may well coerce the construction manager into actions that go against the interests of other project team members. this places the construction manager in an ethical dilemma as his/her professional and ethical obligation is to all the members of the project team. “as the ultimate project authority a construction manager has a professional and ethical obligation to ensure that all those involved with a project are treated fairly and impartially in all financial matters”. in each of the examples cited in the book the author suggests a way of dealing with the issues such that the basic tenet of the book, namely ethical action and strong leadership, are maintained. conclusion the book is easy to read and, although north american biased, is generic enough to be understood by most construction industry professionals in most countries around the world. as such it adds to the knowledge base of our industry and proposes a series of actions that support ethical actions and leadership. from an academic perspective, the book would make a good text in most construction programs although i would leave it to be used towards the end of a 4 year construction degree when the student has acquired a broad enough knowledge base and industrial experience to both understand and appreciate the value of the book. australasian journal of construction economics and building smith, j g (2011) book review, australasian journal of construction economics and building, 11 (4) 116-118 118 the author’s fundamental ethics revolve around collaborative teams and respect for all members of the team. in support of this he cites several lessons that his grandmother gave him when he was a child and how these can be translated to modern business practices in our industry. unfortunately as the author himself points out there are many people in our industry who treat unethical action as simply the cost of doing business…….a lesson that i learnt many years ago as a young architect when a client refused to pay my bill. when i asked him if there was anything wrong with my work, he responded, “no. your work is fine. it is simply good business for me not to pay you. eventually you will settle for half the amount that we agreed to”. i wish that i had read this book back then. george zillante associate professor building/construction university of south australia microsoft word paper 3 dec.doc the role of e-commerce systems for the construction industry by associate professor peter stewart page 24 the australian journal of construction economics & building the role of e-commerce systems for the construction industry associate professor peter stewart, head of department rmit university department of building and construction economics, melbourne, victoria introduction e-commerce is being used extensively in other sectors of the economy, and examples include airline booking systems, internet banking and online shopping malls. some of these applications are more obvious to the public such as electronic banking. banking on the internet has grown rapidly, and customers can now access services such as balances, account transfers, bill payment, loan applications and investment planning. these developments have relied on the existence of a large market, a variety of services, and a need to store and communicate consumer data without having to rely on third parties. obviously the market place in which our profession operates is not a mass market but the remaining two drivers have important implications for the profession. a recent report in the uk suggests that if the construction industry adopted ebusiness then they could expect to save up to 2.3% of building costs and reduce completion times by 15% (buildonline 2000). if savings of this magnitude could be realised in australia then it would deliver significant benefits for contractors, professionals and other stakeholders. there are two areas in which ecommerce systems are being utilised, firstly in the business to consumer (b2c) marketplace and secondly with business to business (b2b) transactions. the value of business to business activities exceeds business to consumer transactions by a ratio of 5:1, and this hints at the potential for b2b ecommerce transactions in the construction industry. these ecommerce systems require reengineered processes, revised work practices, a re-skilling of staff, computer hardware and software and finally a connection to the internet. a company also needs a clear strategy and marketing approach to ensure that the systems deliver the desired level of returns. while a range of it systems can be found in most construction companies these normally include only fragments of the current range of e-commerce systems. the reasons for this include the high levels of investment required to operate these systems, the uncertainty of returns arising from these systems and the new skill sets required of staff. it is clear however that it will be necessary for these inhibitors to be overcome as e-commerce systems become more deeply embedded in the construction industry. as was suggested earlier the benefits are considerable, and they will flow to all of the stakeholders. another likely outcome of the use of e-commerce in the construction industry is the creation of an information management role for one or more of the professional groups. the construction profession needs to be proactive in securing such a role, as there will be many others seeking to secure this management role. the following sections of this paper will explain how the development of the internet has supported application integration and the development of ecommerce systems, and how ecommerce systems are fundamentally changing the way in which businesses and customers are interacting. a number of examples will then be offered to show that e-commerce is not just a new technology, but also one that acts as a stimulus to seeking new ways of undertaking business. in a final section of this paper it will be argued that ecommerce systems will need to be embraced to secure an ongoing or expanded role for the construction profession. the role of e-commerce systems for the construction industry by associate professor peter stewart the australian journal of construction economics & building page 25 the distinction between e-commerce and e-business it is important to define the terms ecommerce and e-business since their use is often interchanged. “e-commerce” is normally associated with buying and selling transactions that use some form of digital media. e-commerce data is transferred in a number of forms including legal documents, corporate data, project data, financial data and knowledge. companies normally attempt to limit the distribution of this data to a specific set of recipients, and to prevent disclosure of this data to their competitors. therefore e-commerce provides new ways to deliver information, services, financial and other business transactions. while the use of e-commerce in australia is still relatively low, financial institutions are now making changes to lower the transactions costs and to increase the security for transactions. clearly financial transactions require an appropriate legal environment for the security of all parties, and similar concerns were overcome when the facsimile gained wide use. the commonwealth government has moved to address these issues in the electronic transactions bill 1999. while it is not intended that this paper cover these issues in any great detail it will be shown that the intent of this legislation is to put electronic commerce and paper-based commerce on the same legal footing. “e-business” encompasses more than ecommerce transactions, as it demands a review and redefinition of business models and a greater use of it to maximise the value delivered to customers. this would normally require that an organisation review existing processes, develop new skill sets, modify corporate culture, accept a new level of risk taking, acquire new technologies and build new customer and business relationships. these information, services and business transactions can be business to business (b2b) or business to customer (b2c). however it has been found that for every dollar spent on business to consumer, business to business e-commerce spends five more. therefore the focus of many companies is on ensuring the b2b transactions are operating effectively. sloan and low (2000) suggest there are three key stages of business-to-business e-commerce and these are provision of information, exchange of legally binding documents and electronic payments. as a company moves to a higher level of electronic transactions it is argued that business value is increased. therefore ecommerce can be seen as a subset of a greater move towards improved business processes and the development of new services. from software fragmentation to integration before examining e-commerce in more detail, it is necessary to understand how the evolution of personal computers and the internet has provided a framework for business activities. the origins of the internet can be traced back to the late 1960’s when the us government funded a network of computers that would be used by researchers, government workers and defence contractors. the network protocol was named arpanet and this reflects the agency within the department of defence that provided the funding. in the 1970’s arpanet was replaced with the tcp/ip protocol suite and this continues to be used for the internet. the network grew the number of users, and electronic mail was a major application used in the early years. cunningham (2000) suggests that the internet has effectively been available for just fourteen years. in the past two decades we have experienced substantial changes in it, moving from a centralised model where computing power and applications were controlled and distributed to users, to one where the personal computer provided the user with control and flexibility in choice of applications, to a stage now where we appear to be cycling back towards a scenario with the role of e-commerce systems for the construction industry by associate professor peter stewart page 26 the australian journal of construction economics & building more powerful computing power at server level, and less powerful workstations. the last change has also delivered lan’s, wan’s and connections to the internet to users. the fragmentation of software applications has effectively created ‘islands of computing’ and the computer industry has responded by building networking and data translation software. bjork (1987) has described these developments in terms of islands of automation, and he contends that developments in the past decades are focussed in distinct discipline based groups, and that over time integration of these applications will be achieved. initially it was achieved by software bridges, and data exchange standards however the building product model was seen to be a major integration mechanism. accounting & data management 60’s 70’s 80’s 60’s 70’s 80’s 70’s 80’s 90’s 3d visualisation 2d drafting engineering design 80’s90’s structural analysis coastline of the 2000 building product model dxf architectural design parametric component design construction production planning figure 1 islands of automation (bjork 1987) all of the islands described in his model including architectural design, engineering design and construction existed, and many of the applications can be recognised on typical construction projects. the model conveys an impression of evolution, a series of professional boundaries and integration, both horizontal and vertical, of all applications associated with each island. it is evident that the fragmentation of professional roles has also generated a fragmentation of applications, and that the integration of applications is tenuous and relies on rigid data exchange standards. in the past decade computer users and software development companies have sought to introduce a number of integrating applications. most computer users will be familiar with the integrated office suites, which are now being linked directly to web browsers and associated editors. a number of the role of e-commerce systems for the construction industry by associate professor peter stewart the australian journal of construction economics & building page 27 construction applications such as timberline demonstrate higher levels of application integration. the internet is also being used for integrating software applications and there are a number of web based project management systems and the buildonline web site (www.buildonline.com) is an example of this type of resource. in the past year two consortiums have announced the development of similar web based ecommerce hubs for use by companies in australia. the growth in internet and e-commerce use in australia obviously the use of e-business and ecommerce applications is limited unless there is an available communications and technology infrastructure in place. in this section the current uses of the internet and e-commerce will be discussed. in the past ten years the internet has been widely used by business and private users and it undoubtedly provides business with a considerable public communications infrastructure and a range of business applications. recent forecasts suggest that internet usage around the world is expected to grow to 268 million users by the end of 2001. the use of the internet has also increased substantially in australia and the abs has published data that showed: micro small total mediu m large all % % % % % % businesses with access to internet 17 24 19 49 85 21 businesses with web site 2 7 3 18 50 5 table 1 proportion of businesses using the internet, by size (abs 1999) the figures show that there was a relatively large number of companies using the internet, and that the uses centred on communication and data transfer. a similar survey that measured the business use of it reported that the proportion of businesses using computers rose to 63% in june 1997 (abs 1999). while all large businesses (200 or more employees) and 94% of medium sized businesses (20-199 employees) used computers, the proportion for all small businesses (less than 20 employees) was 60%, and for 'micro' businesses (less than five employees) 56%. one in three businesses had used computers for five years or more, and one in ten had used them for less than two years.(abs 1999) another report (noie 2000) suggested that large australian businesses have nearly reached saturation point in terms of internet adoption and are nearing saturation in home pages. it was also reported that 21% of small manufacturing enterprises (smes) connected to the internet were engaged in internet based sales, and 22% were actively placing orders for goods and services. it was found that small businesses in australia had much lower levels of connections to the internet, at 48%, than medium size firms at 82%. all companies with 100 or more employees were using computers, and of these 87% have access to the internet, and 58% have a home page. companies with incomes exceeding $500 million are all using computers and have access to the internet. most of these companies also have an internet presence that included a home page. the role of e-commerce systems for the construction industry by associate professor peter stewart page 28 the australian journal of construction economics & building the building and construction industry lags other industries with 80% of companies using computers, and only 43% of companies had internet access and less than 14% of construction companies had a home page. this may be explained by the complex nature of communication on construction projects where only limited agreement and adoption of electronic data standards and systems has been achieved. for example the documentation of projects is often undertaken using a variety of cad systems, and something as simple as the layering standards and description of objects continues to limit the exchange of drawing data. other studies have found that while it is used to generate considerable quantities of construction information, most is distributed in paper-based form. electronic data interchange (edi) and common data standards such as step offered a number of benefits however the construction industry has not yet adopted these technologies to the same levels that other industries have. other developments promoted by the iai to develop and implement international standards in the construction industry are yet to deliver the necessary level of change. fortunately the wider use of computers, internet and the related open communication standards are likely to remove a number of the existing communication infrastructure barriers, reduce setup and operating costs and permit more flexibility in these communication activities. there are also a number of web based project management systems being used in the uk and us, and these suggest future directions for the australian construction industry. in the past two years increased accessibility of the internet and lower connection costs have motivated companies to move edi transactions from private networks to the internet. this supported by the abs report that found that: about 5% of businesses had a website/home page at june 1997… the main uses of the internet were email and information gathering. only 1% of businesses used the internet for selling or purchasing goods or services…internet commerce currently comprises a small proportion of all electronic commerce in australia. the number of electronic commerce transactions is large; in 1997 there were 1.5 billion such transactions in australia. their value was about $16,000b, the bulk of which related to payments and clearances (valued at $15,300b). there were 500 million eftpos transactions, with a total value of $27.5b and an average value of $55, and 600 million direct entry transactions, with a total value of $540b and an average value of $900. consumer internet transactions were valued at about $55m.(abs 1999) it is apparent that the potential of ecommerce is now being realised. the noie report (2000) disclosed that an additional 49% of smes were interested in adopting e-commerce and 70% of those interested intended to do this within a year. therefore one of the major findings of this report was that continued growth in both business to consumer (b2c) and business to business (b2b) e-commerce was likely. therefore the internet is becoming a major impetus to the development of ecommerce in australia, and the following table categorises categories of internet applications by the degree of interactivity and by media richness. as can be seen in table 1, as applications become more dynamic then the richness of media content increases, and this is further enhanced, as applications become real time and bi-directional. it is interesting to note that applications with higher levels of interactivity tend towards the b2c e-commerce type, and that b2b e-commerce applications have lower levels of interactivity and often of the basic bidirectional level and static media type. this is expected given that the common use of b2b e-commerce in the construction industry would involve a the role of e-commerce systems for the construction industry by associate professor peter stewart the australian journal of construction economics & building page 29 interactivity increased media richness ( ) high (real time, mulitdirectional) inter relay chat video conferencing, internet phone extended (value added, multidirectional) discussion forum, classified ad. financial transaction collaborative working, virtual reality basic (bi-directional) internet, fax and email video mail, voice mail, interactive television. reader service (unidirectional) web banner, content index, online directories web content, company portfolios, product information live broadcasting audio streaming abstract (multimedia segments) static (picture, text) dynamic (video and voice) table 2 interactive service attribute matrix (sloan and low 2000) number of structured and standardized transactions. obviously the exceptions to these general rules are applications used for video conferencing or virtual team meetings. while it may be difficult for australian practitioners to appreciate how the construction profession may participate in current e-commerce developments, practitioners could offer much of the contract documentation in electronic form, by implementing higher levels of electronic communication and by increasing the levels of electronic lodgement for claims and other documentation. the “www.buildonline.com” and “www.virtualstep.com” collaborative web sites provide examples of these systems from the uk and usa respectively. drivers of e-business in the past five years the use of ebusiness systems has increased, and these systems are becoming more common in business and private transactions. there is no single driver for these developments, and the following table lists a number of these drivers. as can be seen in table 3, the major changes in consumer expectations derive from automation of processes and the integration of services. the remaining drivers apply to b2b transactions, and these focus on automation, process and informational improvements. many of the service/process and organisational trends can be related directly to the construction industry. however if we were to review the enterprise technology trends in the context of the same industry then it is evident that a number of these have yet to impact on an industry that lags the technology levels of other industry sectors. for example the convergence of infrastructure can be seen in some of the major companies but is lacking in many of the smaller companies. the integration of computer, telephony and voice recognition is uncommon as is the application of wireless applications. therefore the impact of these trends is likely to be localised and delayed until companies adopt these technologies more widely. e-business designs the adoption of e-business systems is often undertaken with a focus on maximizing value and reducing the risks associated with implementation. there are essentially three basic e-business designs that can be used: the role of e-commerce systems for the construction industry by associate professor peter stewart page 30 the australian journal of construction economics & building drivers of e-business consumer trends speed of service self service: removal of intermediaries integrated service service/process trends convergence of sales and service: acquire and retain customers, narrow the sales/service gap ease of use: consistent and reliable information, single points of contact flexible fulfillment and convenient delivery: streamlined supply chain organisational trends become brand intensive not capital intensive retain the core processes and outsource the rest increased process transparency and visibility: permit customers to track progress continuous innovation and employee retention enterprise technology trends enterprise applications: connect the organisation infrastructure convergence: merge voice, data and video multi channel integration of systems: includes computer, telephony and voice recognition wireless applications as an alternative to wired technologies leveraging legacy investments to make data accessible across the organisation table 3 drivers of e-business (kalakota and robinson 1999) • service excellence by delivering what the customers want, with superior value. the drivers include consumer expectations such as speed of service, greater use of self-service, the integration of services and permitting customers to track progress. • operational excellence by delivering quality products quickly but at reasonable prices. the drivers include narrowing the sales/service gap, a streamlined supply chain, outsourcing of noncore processes, leveraging legacy investments to improve information transfer and the use of new technologies to integrate systems. • continuous innovation excellence by delivering products that extend performance boundaries and high value to customers. the drivers include continuous innovation and employee retention, the development of integrated service, flexible fulfillment and convenient delivery systems and increased process transparency. the following table provides a number of e-business examples from a wide range of industries. each of these examples contains a player, product and description of a process. it is clear that companies can be the traditional or a virtual player, but either of the role of e-commerce systems for the construction industry by associate professor peter stewart the australian journal of construction economics & building page 31 player product process physical virtual physical virtual physical virtual amazon.com books logistics marketing, ordering, payments emfinance.co m mortgage mortgage applications and processing detr and bre material info exchange 2nd hand and un-utilised materials logistics, payment pricing information, matching buyers and sellers table 4 new business models of e-commerce (sloan and low 2000) these can deal with physical and virtual products. the physical products have a requirement to transform raw materials into a product using some form of production process. the virtual product could be a financial transaction or arrangement such as a mortgage or reprocessed information. there can be both physical and virtual processes used in generating these products. the example for detr and bre illustrates a construction related ebusiness design where a physical product (surplus and secondhand materials) is traded using a virtual marketplace, using both physical and virtual processes. this application demonstrates a hybrid model where both physical and virtual components contribute to an improved business design. other examples that construction professions will be familiar with include web based project management systems, the provision of cost data and advice and electronic tendering portals. there have been two recent announcements of b2b e-commerce services in australia and each is supported by a number of major construction companies and associated finance and consulting organizations. the drivers for these developments appear to have come from the need to share the costs of development and to provide companies with the opportunity to electronically procure goods and services. both of these initiatives include supplier and sub contractor representatives and other industry stakeholders. similar announcements have also bee made in the uk, europe and these also seek to deliver a range services to a virtual construction community. it should also be recognised that these systems are by their nature “borderless” and that companies with offices and projects in different geographic locations, as well as global competitors can make use of these services. the types of services in the systems include: • online tendering • online procurement • online project collaboration • online auctions • online contractual agreements • online payment, and • online information services one major assumption of these new ebusiness systems is that existing processes will be reviewed and reengineered to make use of the benefits of new technologies. transforming a traditional process design into an e-business design the opportunity to derive competitive advantage from strategic it systems is the role of e-commerce systems for the construction industry by associate professor peter stewart page 32 the australian journal of construction economics & building higher in industries where it infrastructures of competitors are less developed or when they are not seen as a core competence. weill and broadbent (1998) suggest that competitive advantages will be sustained for only two to three years before competitors copy or improve the innovation. these periods will obviously depend on the nature of the it systems, the extent to which competitors can source similar applications and the willingness of staff to adopt new business processes. porter (1985) suggests that the phrase “technology diffusion” could be used to describe the duration of the leadtime for other companies to take up new technologies. technologies that incorporate these links or separately developed proprietary technologies slow diffusion rates and enhance long-term competitive advantage. therefore the initial users of it have advantages, although other users can dissipate these advantages through aggressive investments. advantages for initial users include: the ability to create and control the development of standards for the technology; the achievement of legal protection for proprietary systems and early profit taking. companies who adopt the same or similar it systems may have to invest heavily to neutralise the first mover advantages. the disadvantages associated with first movers are normally associated with costs and risks relating to user acceptance and reduced costs of technology as it matures. the issue of seeking to attain technological leadership is also an important decision for companies. hansen and tatum (1989) contend that every company is either a technological leader or follower, and that the choice is determined by a combination of three factors, the sustainability of technological lead, first mover advantages and first mover disadvantages. the value of these new it systems comes from the enabling of new applications that in turn create business value. there are a number of examples of construction companies who have sought technological leadership (construct it 1997) however it is clear that these companies have also introduced reengineered processes. some construction companies in australia have also committed to a continuing investment in technological advancement and organisational change (disr 1998). many of these companies have succeeded in staying ahead of their competitors by moving beyond automation of existing processes to a position where they reengineer their organisation as well. the following steps can be used when considering which processes could be transformed to generate increase value. it is important to ensure that you understand what customers value or care about, as it will be increased value that will help to deliver increased competitive advantage. once this has been established then it will be important to review the range of existing and emerging technologies, and the ways in which these can be used to re-engineer existing business processes. many of these new technologies will require substantial levels of process change, and it is imperative that the company makes a realistic assessment of the feasibility of these changes. the next step is to decide what business designs will deliver higher levels of value to the major customer groups, and what resources are required to create these experiences. once the new processes have been identified it is necessary to examine the extent of organizational change required if these new processes are to be successfully adopted. the final step is then to plan the implementation of these changes and to ensure that adequate levels of resources are provided. examples of it being used for competitive advantage a recent report (disr 1998) provides two examples of companies who have used it to achieve competitive advantage, and these are flower and samios and national engineering. flower and samios have re-engineered its business processes to obtain maximum benefits from the technology: the role of e-commerce systems for the construction industry by associate professor peter stewart the australian journal of construction economics & building page 33 “by developing and maintaining a 3d model of the design from the outset, relevant drawings and documentation can be ‘peeled off’ the model at different stages without further work. designs are easily amended, with instantaneous updating of elements of the model. integrated use of multimedia packages has meant ease of communication of designs to customers. furthermore, the combination of land modelling, measurement and costing capabilities in their systems has meant that they are not only faster, more efficient and more accurate, but that there are enhanced capabilities to manage and control the contracting and project administration process. communications with suppliers and consultants is increasingly electronic, with e-mailed cad drawings and documents now the norm.” (disr 1998) future developments are likely to have a far greater impact on the company and the other companies they work with: “john flower foresees that in the near future, those external consultants involved in a project will access the 3d model of the project on the firm’s server, and will undertake their specialist component of the design work on-line, while having read-only access to the rest of the model. “when all the parties are working concurrently on a project in this way,” john comments, “they will transform the industry.””(disr 1998) the second example provided in the report comes from the construction contracting sector and it describes a substantial communication based development. national engineering has developed it systems to enable rapid communications and exchange of information while increasing value in the design, manufacture and construction processes. in one area the company uses cad-cam (computer-aided design and manufacture) systems to manufacture complex steel structures. steel cutting and robotic welding machines are able to derive the measurement and shape information from the cad drawings. drawings and many other documents are stored and transmitted electronically and this both improved productivity while removing delays in distributing information to a geographically dispersed project team. the buildonline web site provides a series of case studies that can be used to illustrate the competitive advantage of adopting e-business systems. one of the cases relates to project collaboration and it describes the exchange of contract documentation with a geographically dispersed design team. the major benefits realised by the project team were: • a substantial increase in the speed of communication associated with the electronic transfer of documents • increased accuracy of communications with reduced errors and rework costs. • substantial reductions in travel costs that would have been high given the dispersion of consultants. • reduced copy for reproduction of hardcopy documents, distribution and storage. the second case study from buildonline related to the letting of a scaffolding contract, and it describes how e-business systems were used to electronically tender this work with five potential suppliers. photographs and a detailed description of the works were provided on the web site, and suppliers were able to view these documents and respond to the rfq. the benefits included reduced time for tendering the project, and reduced costs for suppliers to bid on the project. benefits of adopting e-commerce all of the stakeholders in the construction process can benefit in some manner from the introduction of e-commerce. these benefits will be described in more detail in this section of the paper. firstly the noie report included a number of macro economic forecasts relating to the higher the role of e-commerce systems for the construction industry by associate professor peter stewart page 34 the australian journal of construction economics & building use of e-commerce, and the key benefits for the economy were: • an increase in national output (gdp) by 2.7%; • real investment would increase by 4%; • consumption would increase by 3%; • real wages would increase by 3.5%; • aggregate employment would increase by 0.5%; • real exchange rate would increase by 2%. this report (noie 2000) also forecast that the greatest usage of the internet by business will be between businesses, since e-commerce offers savings in inventories, shipping, reporting, sales transaction and customer support. it has been also forecast that the number of companies in australia who are active in e-business will increase up to five times and this will result in more than 40,000 companies using e-business by 2005 (noie 2000). howarth and skotniki (2000) also suggest that e-business alters business value since it offers increased transactional speed and eliminates many manual activities. “in general, e-commerce seems to offer the prospect of moving economic activity closer to some of the ideals of perfect competition: low transaction costs, low barriers to entry, and improved access to information for the consumer. it may significantly lower prices while improving quality. in doing so, e-commerce may significantly improve the efficiency of economies, enhance their competitiveness, improve the allocation of resources and increase long-term growth”. (docita 2000) many of these outcomes would in turn deliver the construction industry increased levels of activity and profitability. a wide range of benefits for stakeholders in the construction industry have been suggested (buildonline 2000) and these include: • lenders – improved project transparency and improved risk management • owners/developers – lower contingencies, increased project efficiency, reduced construction cost, reduced construction periods • designers and other consultants – time savings, improved communications, accuracy and specification • contractors/sub-contractors – lower costs, time savings, increased control, enhanced communication and procurement processes • suppliers – lower inventories, reduced costs • manufacturers – reduced supply chain costs, improved information, purchasing and supply processes the impact of e-commerce and ebusiness are far greater than the generation of benefits from improving the efficiencies of transaction processing, they are transforming the processes used in many industries. “it is already clear that e-commerce will bring significant changes to business, consumers, government and the economy. companies are changing the way that they undertake their business. new industries are emerging and old ones are getting a new lease of life. others may not fit in this new environment and may decline.” (noie 2000) internal and external impacts of ecommerce there are essentially two major categories of impact, internal effects such as the replacement of manual processes and external effects such as the flattening of marketing and sales structures. it is argued that these effects can offer up to a 30% cost savings for business (howarth and skotniki 2000). the potential impact of e-business on employment levels is not clear as the employment levels in the the role of e-commerce systems for the construction industry by associate professor peter stewart the australian journal of construction economics & building page 35 banking and finance sector have been mostly static while the sector has increased its share of gdp from 6.6% to 7.6%. given that many sectors of the economy have high employment levels, the introduction of these technologies could result in reduced employment levels. these views are countered by supporters of e-commerce suggest that it will lift aggregate employment and productivity gains will raise real wages. the noie (2000) report argues that the greatest usage of the internet is likely to be between businesses (b2b), and that business to customer (b2c) levels will be significantly less. there are a number of examples of e-business systems introduced by australian companies and the system introduced by mosaic ecommerce solutions offers an online marketplace for companies to offer procurement contracts to tender (foreshew 2000). lend lease, an australian property development company, has also launched a financial product on the internet which offers personal portfolio services (kirby 2000). therefore it strategies including the use of the internet and e-commerce are becoming essential ingredients in a competitive strategy, given that they can offer sustained competitive advantage. summary it has been shown that e-commerce is now becoming widespread in its use and a number of stakeholders in the construction industry have also commenced developments in this area. the growth in the use of internet and e-commerce in australia suggests that the construction industry will become users of these technologies, and that when this occurs it will have a significant impact on the manner in which production takes place. the drivers of e-business were show to be predominantly service/process, organizational and enterprise technology trends. a number of e-business designs were described and examples were provided to show how e-business opportunities could be mapped into a process and product matrix. companies in the construction industry can therefore use these tools to identify e-business opportunities for their specific areas of operation. a process for transforming a traditional business design into an ebusiness design was discussed and again construction companies can use this. it is however important that before any new business application is developed that the value framework of the client be reviewed, to identify potential technologies. once this is complete it is necessary to review the capacity of the company to introduce these new systems. while it is currently the larger companies that are championing these developments, it is clear that the many stakeholders will engage with e-commerce systems in the future. while the wider use of e-commerce exchanges could lead to a polarization of stakeholder communities, and threaten the roles of middlemen, sloan and low (2000) suggest that these developments may offer new strategic opportunities that could be used by current intermediaries to strengthen their position. references australian bureau of 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(1998), leveraging the new infrastructure: how market leaders capitalise on information technology, harvard business school press, cambridge, ma microsoft word ajceb vol.2 no.1 compiled sized.doc performance of design-build projects in terms of cost, quality and time: views of clients, architects and contractors in singapore the australian journal of construction economics and building vol.2 no.1 37 performance of design-build projects in terms of cost, quality and time: views of clients, architects and contractors in singapore florence yean yng ling, national university of singapore edwin fu kang leong, shimizu corporation, singapore introduction there is a growing trend towards the use of the design-build (db) procurement system in singapore, which may be reflect the inherent advantages of db. however, db should not be viewed as a panacea for all the flaws of the traditional design-bid-build method. moore and dainty (2001) found that db teams are not integrated because individuals continue to work as disparate individuals based on professional divisions, hierarchical relationships and noninteroperability of project participants’ cultures. katsanis and davidson (1998) found that the db procurement system requires owners to be highly sophisticated. in addition, making db contractors solely responsible does not solve the fragmentation of the industry but merely transfers the problems from owners to contractors. it is therefore necessary to determine the performance levels of db projects in terms of their time, cost and quality, so that when this procurement method is used the parties enter into the contract with full knowledge of what db can and cannot achieve. the objective of this paper is to determine the performance of db projects from the singapore clients’, architects’ and contractors’ points of views, and to compare these views. in particular, performance is discussed based on projects’ time, cost and quality performance. the importance of this study is that with the project performance known, better procurement decisions can be made to give clients value for money. the comparison of views reveals how different participants in the construction industry regard db arrangements. biased views are identified and steps can then be taken to change the mindsets of people who are prejudiced towards the db arrangement. literature review in db projects, contractors are responsible for the design as well as construction of a project. when the contractor provides all the design, based on the owner’s brief, and subsequently undertakes construction, this is known as ‘pure db’ (janssens, 1991; turner, 1995). this arrangement is also known as the ‘traditional db form’ (akintoye, 1994; bennett et al., 1996), ‘true db’ (caunce, 1995) and ‘complete db’ (turner, 1995). it also includes package deal and turnkey arrangements. this traditional db form accounts for 20% of all db work in the uk (bennett et al., 1996). the main hybrids of db are ‘develop and construct’ and ‘novated db’. in develop and construct, the owner signs a contract with its architects and engineers to produce the preliminary design (chan, 2000). after the contract is awarded the contractor selects and appoints its own consultants to develop the design. they are responsible for ensuring structural sufficiency, method of construction and other special requirements. in this arrangement the owner’s consultants are responsible for the documents they prepare and contractors are responsible for technical efficacy, price and schedule (ciob, 1988). novated db is also known as ‘consultantswitch’ (pain and bennett, 1988: 312). novated db has two distinct stages, the prenovation stage which is similar to the design-bid-build system, and post novation stage. in the pre-novation stage the consultants engaged by the owner may develop 30% to 80% of the design (chan and lam, 1995). at the post novation stage contractors must employ these same consultants who had carried out the preliminary design under the owner. several studies on db project performance have been undertaken. in the uk, owners have above average satisfaction with db projects in terms of cost, time and quality performance (ndekugri and turner, 1994). in a later study it was shown that db projects have greater time and cost certainty, better value for money and are 50% more florence yean yng ling and edwin fu kang leong 38 the australian journal of construction economics and building vol.2 no.1 likely to finish on time and be delivered on the agreed budget compared to design-bidbuild projects (bennett et al.,1996). in a usa study, konchar and sanvido (1998) found that quality, cost and time performance of db projects are generally better than those of design-bid-build projects. chan et al. (2001) suggested that the overall success of db projects should be based on the projects’ quality, time and cost performance. following this idea the sections below review the specific performance of db projects in terms of quality, time and cost. quality walker (1995) noted that in the majority of cases it is not the procurement route that gives poor quality but the quality of the client’s brief — whether db is able to deliver a quality project, depends to a great extent on the quality and clarity of the client’s brief (akintoye, 1994). murray (1995) agrees, stating that if the final version of the brief does not sensitively and comprehensively reflect and fulfil client aspirations, then the end result will be a dissatisfied client and certainly an unsatisfactory building. hashim (1996) believes that the db client’s brief must be clear and comprehensive and contain not only the aesthetic, technical and performance criteria for the project, but also, equally importantly, his primary and secondary objectives in terms of functional quality, time and cost. the concept of quality is very subjective and can be divided into four separate aspects (pain and bennett,1988): functional quality, architectural quality, technical quality and workmanship quality. functional quality pain and bennett’s (1988) study to assess the functional quality of various types of construction works revealed that projects procured under db met their objectives generally better than the conventional approach would have been expected to do. napier and freiburg’s (1990) study showed that functional quality of db projects, which can be represented by conformance to client’s expectations, was above average expectations and overall owner satisfaction was also above average. architectural quality there is a school of thought, the “garden shed” school, that considers db suitable only for very simple structures such as garden sheds (ndekugri and turner, 1994), and “the method seem[s] appropriate only for cheap and cheerful buildings” (walker, 1995). ndekugri and church (1996) also noted that aesthetics is seldom considered in the evaluation of tenders for db projects with costs as main priority. a survey of architects by akintoye and fitzgerald (1995) also showed that aesthetic quality is generally sacrificed in db. however, pain and bennett (1988) interviewed contractors, clients and independent architects and found that majority of the respondents felt that projects under db arrangements have similar aesthetic quality as compared to those procured using the traditional methods. a few respondents even felt that db projects gave better aesthetic quality. technical quality pain and bennett (1988) found that majority of the respondents thought that db produced buildings of similar technical quality in terms of materials, components, fittings and finishes as compared to the traditional approach. in fact, in certain situations, the results were thought to be even better. this is partly due to the establishment of a single point of responsibility resulting in an immediate reduction in the number of interfaces with whom the client comes in contact (murray, 1995). with contractors’ early involvement, the db method not only improves communication but also provides the opportunity to overlap the design and construction phases and to incorporate the concept of buildability into the design (rowlinson, 1987). workmanship quality in pain and bennett’s (1988) study it was established that the workmanship quality of db projects is generally the same as the traditional method would have produced. in absolute terms, many of the respondents felt that workmanship quality was satisfactory. one of the reasons could be that of single point of responsibility as mentioned before whereby the contractor is solely responsible for design, workmanship and materials. another reason is that db projects are more buildable. rowlinson (1987) feels that the quality of construction is improved in db as the architect is expected to seek buildable solutions, thereby enhancing ease of performance of design-build projects in terms of cost, quality and time: views of clients, architects and contractors in singapore the australian journal of construction economics and building vol.2 no.1 39 construction. the involvement of contractors in the planning and design stages reduces construction problems during the execution stage and they are thus able to propose highly buildable design and construction systems with which they are familiar (ling, 1995). time an attractive feature of db projects as compared to those using the traditional procurement method is that of shorter time duration. timely completion is also of vital importance in the success of the project. shorter project duration in a survey by songer and molenaar (1996) to assess public and private sector attitudes towards db and to gain an insight into owner design-build selection factors, it was concluded that shortening the duration of construction was the most important reason why owners choose the db arrangement. the majority of the architect respondents in ndekugri and turner’s (1994) survey agreed that db is generally faster than the traditional arrangement. in a hong kong hospital project, db was chosen specifically because the client had a tight schedule (chan, 2000). in a survey carried out in the usa which compared different project delivery systems, db projects were found to be at least 12% faster than the traditional design-bid-build projects and 7% faster than construction management projects (konchar and sanvido, 1998). there are several reasons for these shorter times. time saving in the overall project duration is possible by overlapping the design and construction process (akintoye and fitzgerald, 1995) as the db arrangement permits the contractor to commence construction before the complete set of design is completed. furthermore, ndekugri and turner (1994) attributed the shorter duration to contractor’s superior knowledge of the state of the industry in terms of lead times of key items of materials and components, and so arrange his/her affairs to minimise delay in their procurement. ling (1995) further commented that the db contractor, being responsible for both design and construction, can recommend the use of highly buildable designs coupled with construction systems familiar to the contractor, resulting in time-savings. completion on time pain and bennett (1988) found that half of the db projects finished on time, with one finishing six weeks early. in a survey of uk contractor’s views, akintoye (1994) found that 54% of the contractors felt that db projects could finish on time. a survey by molenaar et al. (1999) of usa public sector owners found that schedule performance was excellent under db arrangements — 77% of the db projects were within 2% or better of the schedule established when the builder was hired. this was extremely impressive considering that 73% of db contractors are hired with 25% or less of the design completed. cost previous studies are not in complete agreement on db projects’ performance relating to cost, with some saying that db projects are cheaper, others saying they are more expensive or the same as design-bidbuild projects. a survey by songer and molenaar (1996) revealed that reduction in cost is the second most important reason for clients to select db. in another survey by akintoye and fitzgerald (1995), the results indicated that 53% of the architects claimed that db could achieve savings in construction cost of between 1% and 15%. this survey revealed very similar results compared to a previous one on contractors (akintoye, 1994), where 62% of the contractors believed that up to 20% of costs can be saved by using db. db contractors are expected to involve experienced sub-contractors and suppliers to help architects produce designs which economise on materials used and adopt methods that they are experienced in. on the other hand ernzen and schexnayder (2000) found that db projects are more risky, and the average profit margin is 3.5% greater than that for non-db work. pain and bennett (1988) concluded from their case studies that the cost of db projects may be the same as traditional designbid-build projects. turner (1995), in a comparison of performance between different procurement methods, suggested that there was no evidence to indicate any differences in the prices tendered under either db or traditional methods. rowlinson (1987) commented that a lot of resources are committed to prepare a db florence yean yng ling and edwin fu kang leong 40 the australian journal of construction economics and building vol.2 no.1 tender and the risks of not being awarded the contract are usually high. ling (1995) highlighted that tender costs could be as much as 10 times more than those under the traditional arrangement. following that, ndekugri and church (1996) stated that the cost of abortive tenders would ultimately be borne by owners of future projects and society at large. in view of such wastage of resources, the code of procedure for selective tendering for db (njcc, 1985) recommends there be a maximum of four tenderers as a way of minimising the high costs of abortive db tendering. several studies in the uk have also shown that db projects are more likely to be delivered to budget (chappell, 1991; akintoye and fitzgerald, 1995). in a survey of 50 owners in the uk, 40% said that db is useful when a guaranteed price is crucial for the project (chevin, 1993). bennett et al.’s (1996) study, also in the uk, showed that 60% of owners feel that it is important to have a guaranteed maximum price, which can be achieved if the owner’s requirements are detailed. molenaar et al.’s (1999) study in the usa on db project performance revealed that cost performance was excellent with 59% of the db projects within 2% of the budget established when the db contractor was hired. the review above shows that db is generally advantageous and performs well in the usa and the uk, however before singapore adopts db with greater intensity, it is necessary to study how db projects perform in singapore. methodology in order to seek singapore contractors’, architects’ and clients’ opinions and perceptions of db, a questionnaire was formulated based on the issues uncovered in the literature review. in the questionnaire the first set of statements relates to quality of db projects, the second set of statements pertains to the time performance of db projects while the third set was designed to determine what respondents felt about the cost aspect of db projects. respondents were asked to state their level of agreement or disagreement with the issues raised on a five-point likert scale, where 1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = agree and 5 = strongly agree. respondents were also asked demographic questions in the second part of the questionnaire. after the questionnaires were prepared, copies were sent out to contractors, clients and architects who are based in singapore. each questionnaire was accompanied by a cover letter indicating the objectives of the research and attached with a selfaddressed and stamped envelope. the responses were returned within a month of mailing. survey forms were sent to 100 randomly selected architects listed in the singapore institute of architects’ member directory. another 100 questionnaires were sent to clients — this comprised: all the 40 public sector clients listed in the singapore government telephone directory, and 60 randomly selected private clients listed in the singapore real estate developers association directory. only large contractors were surveyed because it was felt that they would have the resources to undertake db projects. there are 155 large building and civil engineering contractors (paid up capital above us$1 million each) registered with the building and construction authority (bca) and all of them were selected for this study. random sampling of architects and private sector clients was done because it would have been too time consuming and expensive to survey the whole population. random sampling was done by using a table of random numbers to pick the required number of samples. in hindsight it would have been more appropriate to increase the sample sizes for these two groups because the response rates were low. because of the manageable population sizes all public sector clients and large contractors were surveyed. results usable responses were received from 40 contractors, 15 architects and 15 clients. this represented response rates of 26%, 15% and 15%, which is considered to be adequate for a study of this nature. responses from one public sector architect and 14 private architects were received with 93% of the architect respondents having practised in the construction industry for more than 10 years. the architects have been involved in public sector db projects, private sector ‘pure’ db projects and novated db projects. a small number have performance of design-build projects in terms of cost, quality and time: views of clients, architects and contractors in singapore the australian journal of construction economics and building vol.2 no.1 41 also undertaken develop and construct projects. there were nine and six usable responses from private and public sector clients respectively — 93% of the client respondents have practised in the construction industry for more than 10 years and have been involved in public and private sectors db projects. of the 40 building and civil engineering contractors 33 (83%) had practised in the construction industry for more than 10 years — 90% of the respondents had handled db projects in the past. the demographic characteristics of the respondents indicate that they are very experienced people in the construction industry. a large majority of them also have experience in db projects, therefore their views on db should be noteworthy. mean ratings for all the statements relating to db performance were calculated for each of the categories of respondents (see table 1). these mean ratings are merely those of the sample. it is therefore necessary to find out whether the population would agree with these db performance attributes, using student’s t-test. this statistical test is adequate for this type of evaluation because it can deal with situations in which the sample size is not large (n=15 for architects and clients) and a standard normal distribution may not exist (newbold, 1991). for each performance attribute, the null hypothesis that the attribute did not receive agreement amongst the population and the alternative hypothesis that the attribute was agreeable are set out below. to test the null hypothesis ho: µ ≤ µo against the alternative hypothesis h1: µ > µo, where µ is the population mean. µo is the critical rating above which the attribute was considered agreeable by the population. in this study, µo was fixed at 3 because, by the definition given in the rating scale, ratings above 3 (i.e. 4 and 5) represented ‘agree’ and ‘strongly agree’. the significance level was set at 0.05. when the calculated significance (“sig.” in table 1), p < 0.05, it can be concluded that the population agrees with the statement at a 95% confidence interval. the results of the statistical tests (see table 1) show that contractors agree with 23 of the 30 db performance attributes. clients agree with 18 of these statements, while architects agree to only 17 of these statements. in many instances the three groups of respondents did not have the same level of agreement relating to a performance attribute of db. discussion the discussion in this section is based on the statistical results in table 1. quality performance table 1 shows that contractors and clients felt that db projects perform well in terms of functional (h1), architectural (h2) and technical quality (h3). clients and contractors did not agree that contractor-led db projects concentrate on costs and buildability at the expense of aesthetics (h9) and quality (h10). this is consistent with uk and usa studies. in the uk, bennett et al.’s (1996) study revealed that db performs consistently better in meeting quality standards in complex or innovative buildings rather than simple and standard traditional buildings. moreover, db projects deliver more consistent aesthetic quality than traditionally procured buildings, and score marginally higher in terms of aesthetic quality. konchar and sanvido’s (1998) usa study showed that quality of db projects is higher than design-bid-build projects. clients and architects do not agree that workmanship quality (h4) of db projects are good, and that db procurement maximises overall client satisfaction (h7). neither do they agree that db projects are aesthetically pleasing (h5). however, they felt that architect-led db would ensure quality and aesthetics of projects (h11). contractors disagreed with this, as it may mean that the arrangement is not much different from design-bid-build, which carries with it inherent disadvantages such as low buildability and fragmentation of design and construction. all the respondents felt that the administrative burden of db projects are not lower than traditional design-bid-build projects (h6). they also felt that when the schematic design is developed to an advanced stage before tendering, quality of db project will be good (h8). clients may determine the cost of quality of the db projects using the methodology developed by hall and tomkins (2001). florence yean yng ling and edwin fu kang leong 42 the australian journal of construction economics and building vol.2 no.1 table 1: statistical results of architects, clients and contractors’ ratings no. db performance statements architect client contractor mean t value sig. mean t value sig. mean t value sig. h1 functional quality of db projects satisfies client’s requirement. 3.333 1.160 0.133 3.733 4.036 0.001 4.050 8.483 0.000 h2 architectural quality of db projects meets client’s expectation. 3.000 0.000 0.500 3.467 1.825 0.045 3.875 7.306 0.000 h3 technical quality of db projects satisfies client’s requirements. 3.200 0.823 0.212 3.867 5.245 0.000 4.100 11.000 0.000 h4 workmanship quality of db projects is good. 3.133 0.564 0.291 3.200 0.899 0.192 3.825 8.204 0.000 h5 db projects are aesthetically pleasing. 2.800 -0.676 0.745 3.267 1.293 0.109 3.675 4.970 0.000 h6 administrative burden in db projects is lower. 2.867 -0.397 0.349 3.467 1.606 0.066 3.000 0.000 0.500 h7 usage of db procurement maximises overall client’s satisfaction. 3.067 0.211 0.418 3.400 1.572 0.069 3.725 5.619 0.000 h8 when schematic design is developed to an advanced stage before tendering, quality of db project is good. 3.600 2.358 0.017 3.667 3.162 0.004 3.725 5.619 0.000 h9 contractor-led db projects concentrate on costs and buildability at the expense of aesthetics. 3.800 3.055 0.005 3.333 1.099 0.150 2.675 -1.801 0.961 h10 contractor-led db projects concentrate on costs and buildability at the expense of quality. 3.800 3.055 0.005 3.333 1.099 0.150 2.300 -3.749 1.000 h11 architect-led db projects would ensure quality and aesthetics of projects. 3.733 2.048 0.030 3.533 2.086 0.028 3.100 0.561 0.289 h12 usage of db reduces physical construction time. 3.533 1.835 0.044 4.067 4.298 0.001 4.075 7.654 0.000 h13 overlap of design and construction phases in db reduces overall project time. 3.533 2.477 0.014 4.267 6.971 0.000 4.275 9.521 0.000 h14 response time to design changes is faster in db projects. 3.400 1.702 0.055 3.600 2.806 0.007 4.375 12.338 0.000 h15 early involvement of contractor in db allows his expertise in buildability to be incorporated for time and cost savings. 3.600 3.154 0.004 4.600 12.220 0.000 4.575 15.662 0.000 h16 contractor's knowledge of lead times of key items and components allow materials and equipment to be procured faster in db projects. 3.733 3.556 0.002 4.200 8.290 0.000 4.125 9.394 0.000 h17 high degree of consultation, co-operation and good information flow ensures that design discrepancies are resolved faster in db projects. 3.533 2.779 0.008 4.000 4.583 0.000 4.275 10.743 0.000 h18 usage of innovative construction methods reduces construction time in db projects. 3.400 1.871 0.041 3.733 4.036 0.001 4.175 9.945 0.000 h19 db contractors are willing to start physical construction works with limited design information. 3.333 1.435 0.087 3.333 1.234 0.119 3.700 4.462 0.000 h20 the overall pre-contract period is shortened in db as compared to the traditional designbid-build method. 3.600 2.806 0.007 3.467 1.284 0.110 3.700 4.857 0.000 h21 in db projects, detailed working drawings are not necessary as design can be developed as construction is going on. 2.867 -0.381 0.646 3.133 0.459 0.327 3.375 1.922 0.031 h22 risk of costs exceeding budget is minimal in db projects. 2.867 -0.397 0.651 3.267 1.000 0.167 3.550 4.113 0.000 h23 db contractors make use of value engineering to reduce costs without reducing quality. 3.467 2.168 0.024 3.800 4.000 0.001 4.050 9.297 0.000 h24 db contractors make use of value engineering to increase quality without increasing costs. 3.467 2.168 0.024 3.800 4.000 0.001 3.900 8.473 0.000 h25 contractors tend to reduce professional fees in db projects. 4.067 4.000 0.001 3.400 1.702 0.056 3.150 1.183 0.122 h26 db contractors pursue cheaper design solutions all the time. 4.067 5.172 0.000 3.600 2.201 0.023 3.125 0.842 0.203 h27 db contractors use standardised components. 3.867 4.516 0.000 3.467 2.432 0.015 3.475 3.427 0.001 h28 usage of db procurement route provides clients with early knowledge of the maximum project cost. 3.600 3.154 0.004 3.733 3.214 0.003 3.775 5.894 0.000 h29 db contractual arrangement leads to fewer disputes and claims. 3.267 0.939 0.182 3.600 2.553 0.012 3.775 5.176 0.000 h30 there is a reduction in the usage of architect and engineers’ services by db contractors. 2.933 -0.222 0.587 3.000 0.000 0.500 2.850 -1.183 0.122 performance of design-build projects in terms of cost, quality and time: views of clients, architects and contractors in singapore the australian journal of construction economics and building vol.2 no.1 43 time performance with regard to time performance, table 1 results show that all the three groups of respondents agree that the usage of db reduces overall project development time (h13) and physical construction time (h12). this is consistent with bennett et al.’s (1996) uk study which showed that db projects are 12% faster in construction speed compared to design-bid-build projects, with total delivery (design and construction) speed being 30% faster. it is also consistent with konchar and sanvido’s (1998) finding that delivery speed and construction speed of db projects in usa are faster than design-bidbuild projects. tam (2000) also reported that construction time has been shortened because of the use of db in a hong kong project. the associated reasons for the lesser time to complete the project, which are agreed by the three groups of respondents are: contractors’ early involvement allows them to incorporate buildability (h15) contractors’ knowledge of lead times of key items and components allow materials and equipment to be procured faster (h16) high degree of consultation, co-operation and good information flow ensures that design discrepancies are resolved faster (h17) use of innovative construction methods (h18). the findings are consistent with chan et al.’s (2001) hong kong study, which established that contractors’ competencies contribute to good time performance. clients and contractors agreed on the issue of a reduction in response time because of the use of db(h14) — it is understandable that architects disagreed with this, as they would not want to admit that they have not responded quickly enough to design changes. another issue affecting time performance is the completeness of drawings before the commencement of construction. contractors agreed that they are willing to start physical construction work with limited design information (h19). in addition, detailed working drawings are not necessary as design can be developed as construction is ongoing (h21). this can be achieved by applying concurrent engineering principles (anumba and evbuomwan, 1997), and dynamic tracking and control methodology (pena-mora and li, 2001). it should be noted that some clients prefer to have construction drawings for site supervision and control, and in db projects, this may not be readily available (tam, 2000). clients indicated that the overall precontract period involving preparing of client’s brief, tender documentation, and tendering process, evaluation and award, is lengthened for db projects compared to traditional projects (h20). this is in agreement with previous studies that found that careful preparation of client’s brief is one of the success factors for db projects (akintoye, 1994). to ensure careful preparation, time and effort need to be expanded, and this would lead to longer pre-contract period. cost performance table 1 shows that all the three groups of respondents felt that costs of db projects may be lower (h23). this is in concordance with konchar and sanvido’s (1998) finding that unit cost of db projects are lower than those on design-bid-build projects. this is because db contractors would have conducted value engineering to make their offers more competitive and can propose design solutions that reduce cost without reducing quality, or increase quality without increasing cost (h24). in addition, contractors would use standardised components (h27). clients and architects felt that the cost of db projects may be lower because contractors pursue cheaper design solutions all the time (h26) — as expected, contractors deny this. clients, architects and contractors agreed that the use of db procurement system allows clients to have early knowledge of the maximum project cost (h28). bennett et al.’s (1996) study also showed that db projects are more likely to be completed on budget, or within 5% of the budget; 75% of db projects were completed within 5% of the budget, compared to 63% of traditional projects. tam (2000) found that db is advantageous because the client can obtain a firm price for the project at the outset. clients and architects felt that the risk of costs exceeding budget in db projects is not minimal (h22). this contradicts konchar and sanvido’s (1998) finding that cost growth for db projects is only 2.17%, while that of design-bid-build projects is 4.83%. florence yean yng ling and edwin fu kang leong 44 the australian journal of construction economics and building vol.2 no.1 clients and contractors also agreed that db contractual arrangements lead to fewer disputes and claims (h29). the absence of variations enables db projects to have higher cost certainty and they are also able to proceed without the disruptions and claims associated with variations (bennett et al., 1996). with regard to professional fees, architects felt that contractors tend to reduce professional fees in db projects (h25), but contractors denied this. notwithstanding this, all the different groups of respondents felt that the services or architects and engineers are still very important in db projects (h30). this study has several limitations. the responses gathered from architects and clients constitute a relatively small sample and a bigger sample would therefore give a more accurate indication of opinions. secondly, investigating the opinions of clients, architects and contractors is still not sufficient to draw conclusions on the performance of db projects in singapore — a possible future study could entail the use of a more rigorous method to measure the performance of db projects. conclusion the findings suggest that while contractors rated the performance of db projects highly in terms of quality, architects seem to give the thumbs down on db projects’ performance with regard to quality. clients appear to have a more balanced view, as they indicated that functional, architectural and technical quality are acceptable. workmanship quality, however, still needs improvement. the finding that ‘when schematic design is developed to an advanced stage before tendering, quality of db project will good’ indicates that the construction industry in singapore may not be ready for pure db as yet, but may instead be more comfortable with the develop and construct form. the findings also show that all clients, architect and contractors generally agree that db projects can be completed in a shorter time. the main reason for this is contractors’ early involvement in the project, giving them the opportunity to contribute to the design upstream of the construction process. however, the shorter development time is offset to some extent by the longer time taken by clients in the pre-contract stage. clients, architects and contractors also agreed that db projects cost less than traditional projects because of the use of value engineering and standardised components. even though fees payable by contractors to architects and engineers may be lower, the extent of their services is not reduced. this should reassure clients that db projects may not be less professionally designed than traditional projects. the responses of these three major parties in a db project are encouraging, reflecting that db, in general, performs well. these findings indicate that db has the potential to grow and its future seems bright. with more people recognizing its inherent benefits, the usage of db may increase in the near future. it can be concluded from the findings that architects did not feel that db projects have good quality, time and cost performance. as clients view db projects’ performance favourably perhaps it is time for architects to be more receptive towards db. for contractors, being in the leadership position in db projects entails many responsibilities, for both design and construction. contractors should take full advantage of the opportunity presented by db to exercise their management abilities and to push the construction industry to achieve better performance. it is recommended that clients consider carefully the procurement method to be adopted, instead of adopting traditional design-bid-build as a matter of course. with the many advantages of db identified in this paper, clients are urged to seriously consider db as a viable procurement system. references akintoye, a. 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(1995) changing attitudes. new builder, 23 june, 26–28. nigerian building professionals’ ethical ideology and perceived ethical judgement nigerian building professionals’ ethical ideology and perceived ethical judgement john oko ameh, (department of building, university of lagos, nigeria) koleola tunwase odusami, (department of building, university of lagos, nigeria) abstract in recent years, nigeria is often cited in the international media in connection with corruption and other unethical practices. the professionals in the nigerian building industry are not immune from the perceived national trend in ethical erosion. moral philosophy or ethical ideology has been used to explain individuals‘ reasoning about moral issues and consequent behaviour. this study examines building industry professionals‘ ethical ideologies with a view to understanding their ethical behaviour in professional practice. in carrying out this investigation, building professionals in clients‘ organisations, contracting and consultancy organisations within the industry were asked to respond to the ethics position questionnaire (epq) designed by forsyth in order to determine their idealism and relativism level. subsequently, they were classified into one of four groups, representing different ethical ideologies. the result indicates that the dominant ethical ideology of building industry professionals is situationism. the study predicts that the attitude of building industry professionals in practice, given the current socio-political and economic situation of nigeria would possibly be unethical because of the extreme influence situational factors have on their behaviour. this finding is a bold step and necessary benchmark for resolving ethical issues within the industry and should be of interest to policy makers. it is also useful for intra professional ethical comparison. keywords: professional, building industry, ethical ideology, ethical judgement, nigeria introduction corrupt practices are found in every phase of the procurement of building projects during planning and design, in the award of contracts, during the construction process, and post construction stage including maintenance of completed projects. many features of the building industry present enormous opportunities for corruption to flourish. first is the size of building projects where contracts tend to be huge in monetary value and yet the companies with financial and technical capability to implement them are few (shakantu 2003). secondly, the uniqueness of many projects makes costs difficult to compare, which in turn makes it easier to inflate costs or hide bribes (robb 1996, zhuwakinyu 2003). furthermore, there is the issue of the concealed nature of a large proportion of building works. for example, foundations, which cost between 10% and 15% (depending on foundation types) of the total building cost, are concealed beneath the ground; structural steel works are concealed within concrete, electrical and mechanical fittings are concealed within walls. this makes it costly or difficult to verify bad workmanship or inferior materials after the work is completed. and, where the government is the client, unnecessary bureaucratic bottlenecks (usually associated with government projects) and numerous permits for private projects are subject to abuse by government officials. following the growing consensus that corruption and other unethical practices are endemic in the building industry, coupled with scarce empirical academic research on professional ethics in the nigerian building industry, there is a need to examine professionals‘ ethical ideologies with a view to understanding their ethical behaviour in professional practice. australasian journal of construction economics and building ameh, j.o and odusami, k.t. (2010) ‘nigerian building professionals’ ethical ideology and perceived ethical judgement’, australasian journal of construction economics and building, 10 (3) 1-13 2 ethical ideologies and decision making ethical ideologies can be explained as a set of beliefs, values and attitudes, which may influence an individual‘s judgment and decision-making when faced with difficult situations and ethical dilemmas. henle et al. (2005: 219) defined ethical ideology as ―a system of ethics used to make moral judgment, which offers guidelines for judging and resolving behaviour that may be ethically questionable‖. perhaps, the significance of ethical ideology as suggested by henle et al. (2005) is that ethical ideology may be an important mechanism through which organizations can determine which employees will engage in socially disapproved behaviour. reducing, and ultimately, controlling the occurrence of these behaviours is paramount to organizations as the costs are high, both in immediate economic impact and in long-term effect on organizational culture and human resource management. differences in moral philosophy or ethical ideology are contending with differences in ethical judgments (schlenker and forsyth 1977, forsyth 1980, 1992). it is well accepted that moral philosophy or ethical ideology influences an individual‘s reasoning about moral issues and consequent behaviour (fritzsche and becker 1984). individuals often adopt a set of philosophical assumptions as a basis for making ethical decisions. philosophy divides assumptions about ethics into two: the teleological and the deontological approaches. these two approaches differ in terms of the ways they understand what constitutes ethical behaviour (johnson 2003). the teleological approach, also known as consequentialism, determines the moral worth of behaviour totally by the (anticipated) consequences. this suggests a cost benefit view, perhaps invoking the judgmental criterion of ―the greatest good for the greatest number‖. three examples of the teleological approach to ethics are egoism, utilitarianism and altruism. egoism focuses on self-interest. this ethical principle is used as justification when something is done to further an individual's own welfare. thus, egoism concerns pursuit of self-interest and so can be related to common business criteria (notably profit maximisation). the principle of utilitarianism embodies the notion of operating in the public interest rather than for personal benefit. the principle extracted from this theory determines an action to be right if it maximises benefits over costs for all involved, everyone counted equal. the principle extracted from altruism determines an action to be right if it maximises the benefits of some persons, even at the cost to oneself, i.e. that man has no right to exist for his own sake, that service to others is the only justification of his existence, and that self-sacrifice is his highest moral duty, virtue, and value. the deontological approach, stresses the methods or intention involved in a particular behaviour. according to a deontological framework, actions are essentially right or wrong regardless of the consequences they produce. an ethical action might be deduced from a duty (pluralism) or a basic human right (contractarianism) but it never depends on its projected outcome. duties and obligations have been classified under several categories including duties to god, duties to oneself, and duties to others, which include duties to family, social duties, and civic duties. ethical theory dealing with rights generally can be summarised as providing a guide for the decision maker to insure respect for the right of individuals. the following five rights have been suggested by moral theorists (cavanagh et al. 1981): the right to free consent, the right to privacy, the right to freedom of conscience, the right to free speech and the right to due process. schlenker and forsyth (1977) suggest that individual variations in personal moral philosophies can be described most parsimoniously by taking into account the degree to which an individual is relativistic and/or idealistic. relativism describes the extent to which individuals reject universal moral rules or principles. idealism on the other hand, describes individual‘s attitudes toward the consequences of an action and the effect of the action on the welfare of others. highly idealistic individuals believe in moral absolutes and rely on universal moral principles or laws to evaluate the ethics of an action (forsyth 1992). to australasian journal of construction economics and building ameh, j.o and odusami, k.t. (2010) ‘nigerian building professionals’ ethical ideology and perceived ethical judgement’, australasian journal of construction economics and building, 10 (3) 1-13 3 describe extremes, some individuals idealistically assume that desirable consequences can always be obtained with the ‗right‘ action and those with less idealistic orientation admit that undesirable consequences will often be mixed in desirable ones (forsyth 1980). in an effort to understand ethical conduct, forsyth (1980) argued that the belief in maximising positive consequences can be represented in terms of a range (i.e., high vs. low acceptance of harm). similarly, the acceptance of moral absolute could be perceived not as binary but as a continuum (i.e. high vs. low acceptance of absolutes). forsyth employed the term idealism to represent a moral dimension related to the acceptance of harm (i.e. concern for others). relativism was chosen as the moral dimension that identifies the degree of acceptance of moral absolutes. the 2 x 2 matrix of these two dimensions yield forsyth‘s ethical taxonomy. forsyth‘s taxonomy indicates that individuals may adopt one of four different approaches to making ethical judgments: situationism, absolutism, subjectivism and exceptionism. the situationists distrust the absolute moral principles and argue that each situation needs to be examined individually. the subjectivists on the other hand are high on relativism and low on idealism. they reject the idea of universal ethical principles and believe moral decisions are based on individualistic judgments and negative consequences do not necessarily make any action immoral. on the non-relativistic or low relativistic side of the typology are absolutists and exceptionists. absolutists tend to reject the use of consequences of an action as basis for moral evaluation and appeal to natural law or rationality to determine ethical judgments. exceptionists on the other hand are low on relativism and low on idealism. they endorse the statement that morality of an action depends upon the consequences produced by it. inclusion in one of these groups is determined by whether a person espouses idealistic or non-idealistic values and believes moral rules are universal or relative (forsyth 1980). it also suggests that relativists and idealists both can be either low or high in relativism and idealism. each one of the four approaches draws from a specific school of thought in philosophy of ethics. for example, the high relativism groups—the situationists and subjectivists—are individuals who endorse an ideology related to ethical scepticism (forsyth 1980). skeptics believe that morality can be viewed in different ways and all kinds of scepticism criticize proponents of specific ethical principles. ethical egoism, for example, is a sceptical ethical philosophy in which a pragmatic approach is taken to evaluate actions. on the nonrelativistic/low relativistic side of the typology are absolutists and exceptionists. absolutists tend to agree with statements that are consistent with a general approach to moral philosophy known as deontology (forsyth 1980). a deontological system is based on the rules and principles which govern decisions (hartman 1998). this ethical philosophy rejects the use of consequences of an action as the basis for moral evaluation and appeals to natural law or rationality to determine ethical judgments. the statements endorsed by exceptionists are more compatible with teleological ethical philosophy (forsyth 1980). the teleological approach proposes that the morality of an action depends upon the consequences produced by it. one is ethically bound to act in a way that produces good for the greatest number which is best represented by the utilitarian concept of greatest good for the greatest number. figure 1 indicates forsyth‘s taxonomy of ethical ideologies along with a brief description of the characteristics of individuals within each category. this conceptualization is based on philosophical theories of deontology, teleology and ethical scepticism (schlenker and forsyth 1977, forsyth 1980). australasian journal of construction economics and building ameh, j.o and odusami, k.t. (2010) ‘nigerian building professionals’ ethical ideology and perceived ethical judgement’, australasian journal of construction economics and building, 10 (3) 1-13 4 relativism high relativism low relativism id e a li s m h ig h i d e a li s m situationist rejects moral rules; advocates individualistic analysis of each act in each situation; relativistic justice concepts absolutist assumes that the best possible outcomes can always be achieved by following universal moral rules norm, rights & rule concepts l o w i d e a li s m subjectivist appraisals based on personal values and perspective rather than universal moral principles; relativistic egoism concepts exceptionist moral absolutes guide judgments but pragmatically open to exceptions to these standards; utilitarian categorical imperative & utilitarian concepts figure 1 taxonomy of ethical ideologies source: modified from forsyth (1980: 176) the connection between building industry professionals‘ ethical behaviour and ethical ideology is significant in understanding the value held by professionals as well as providing a basis for altering behaviour in a more ethical direction in the best interest of society where the situation warrants. similar studies have been conducted among marketing managers in america (fritzsche and becker 1984), managers in large manufacturing enterprises in india (monga 2001), psychologists and physicians in canada (hadjistavropoulos et al. 2003), senior australian managers (fernando et al. 2007) and portuguese chartered accountants (marques and pereira 2009). the aim of this research is to extend studies based on forsyth‘s taxonomy of ethical ideologies to professionals in the building industry. this is in view of the negative image of the industry globally and the international community perception of nigerian especially as regards corruption and other unethical conducts. research method the research area comprised four major nigerian cities: abuja, kano, lagos and portharcourt. these cities were selected because they are major cities located in four of six geopolitical zones in nigeria having the highest number of registered construction contracting and consultancy organisations with the various professional institutions. furthermore, these cities have high professional concentrations because of the high volume of construction workload and activities and have experienced high incidence of building collapse in the last decade. the target population for this study comprised core building industry professionals involved in the procurement of building projects. these include architects, builders/construction managers, structural engineers, quantity surveyors, and services engineers (electrical and mechanical). other built -environment professionals such as estate surveyors and town planners were excluded because of the insignificant role they play in the procurement process of building projects. the population sample was drawn from professionals in 18 client organisations, 55 consulting and 35 contracting organisations in the building industry, making 108 organisations. due to unavailability of a single data base for all construction professionals in the different organizations (consultancy, contracting and client organisations) in the research areas from which an accurate sampling frame could be developed, the list of registered consulting firms in the respective professional institutions were used. these include: nigerian institute of architects (nia), nigerian institute of building (niob), nigerian institute of quantity surveyors (niqs); and nigerian institution of structural engineers (nise). data relating to australasian journal of construction economics and building ameh, j.o and odusami, k.t. (2010) ‘nigerian building professionals’ ethical ideology and perceived ethical judgement’, australasian journal of construction economics and building, 10 (3) 1-13 5 contractors were sourced from the lists of contractors accredited by the nigerian institute of building (niob) as published in the register of contractors (2003). a simple random sampling technique was adopted for consultancy and contracting organisations. consultancy firms were sampled based on a registration list of consultancy firms obtained from the professional institutions of the sampled professional groups. the construction firms were sampled from the list of contracting firms accredited and registered with the nigerian institute of building. the population was stratified according to their operational base within the research areas and a simple random sampling of the population within each city in the research area was carried out using tables of random numbers. a snowball sampling technique was adopted for professionals in client‘s organisations because of the unavailability of a sample frame from which an accurate sample size could be drawn. forsyth‘s (1980) ethics position questionnaire (epq), which contains 20 attitude statements was used to measure ethical ideologies and moral philosophy held by individuals. this instrument was used because it has demonstrated acceptable level of internal consistency (schelenka and forsyth 1977, forsyth 1980). it is valid and not reflective of social desirability bias (barnett, bass, brown, and hebert, 1998). the epq has also been used in a variety of studies, such as singhapakdi et al. (1994), barnett et al. (1994), rawwas and patzer (1995), bass et al. (1999) and recently fernando, et al. (2008) and marques and pereira (2009). there is at present no acceptable alternative instrument for measuring the level of idealism and relativism other than the epq. the first ten questions of the epq form a subscale to measure idealism and the next ten, measure relativism. the response format originally designed by forsyth (1980) was altered in several previous studies. van kenhove et al. (2001) uses 5-point likert scale (cronbach‘s coefficient was .84 for idealism scale and .77 for the relativism scale). redfern and crawford (2004) reported reliability estimate of .86 and .70 for idealism and relativism respectively. fernando et al. (2008) uses 4point likert scale. no reliability estimate was reported in fernando et al‘s study, however, seven out of ten idealism items and eight out of ten relativism items were used in the study. marques and pereira (2009) uses 7-point likert scale (cronbach coefficient was .80 and .87 for idealism and relativism respectively. wilson (2003) reported cronbach‘s coefficient of .79 and .68 for idealism and relativism respectively for a 7-point likert scale. in this study, instead of the 9-point likert scale used in forsyth‘s (1980) study, a 4-point likert scale was used for measurement, with 4 indicating ‗‗strongly agree‘‘ and 1 indicating ‗‗strongly disagree‖.the choice of a 4-point likert scale used in this study (without ‗neutral‘ response) is for simplicity in rating respondents‘ degree of agreement and is based on the conviction that a neutral answer really does not indicate an ethical position. the idealism scale for this sample appear to be internally inconsistent, having cronbach‘s alpha of .60 while the relativism scale had a cronbach‘s alpha of .82. principal-component factoring and orthogonal varimax rotation yielded 13 factors (all ten factors from idealism scale and three factors from relativism scale) that accounted for 69.85% of the total variance and had eigenvalues ≥ 1.0. questions 16 – 20 on the relativism scale did not load on the rotated component matrix (suppressed absolute value <.4) and removing items with low extraction communalities did not improve the reliability estimate. it appears that the decision to simplify the scale format by reducing them to four affected the reliability of the idealism sub-scale. idealism and relativism scores of each respondent were assessed by calculating the mean of the answers to the first 10 items and the last 10 items, respectively. higher scores on both idealism and relativism dimensions indicate higher levels of idealism and relativism. australasian journal of construction economics and building ameh, j.o and odusami, k.t. (2010) ‘nigerian building professionals’ ethical ideology and perceived ethical judgement’, australasian journal of construction economics and building, 10 (3) 1-13 6 to classify the respondents into one of the four ethical ideologies, idealism and relativism scores were used. this was done by using the median scores of idealism and relativism as cut-off points. the median scores for both idealism and relativism were 20. the maximum score an individual can attain for either idealism or relativism subscale is 40. a scale of between 28 and 40, i.e. 70% and above is considered high for both idealism and relativism while any score below 20, i.e. 50% is considered low for both subscales. respondents that scored high on idealism and on relativism were classified as situationists (n = 136). respondents that scored high on idealism and low on relativism were classified as absolutists (n = 40). table 1 presents the number of questionnaires administered and those returned. construction organisation population in research area questionnaire responses total administered returned unreturned percentage of population covered client 18* 200 102 98 100 consultancy 198 100 55 45 27 contracting 162 50 35 15 22 total 378 350 192 158 table 1 population and sample size of respondents in the three organisational groups notes: *represents the population of client organisations and other figures represent population of professionals. the variation in the number of administered questionnaire in the respective organisations is based on the population of respondents in consultancy and contracting organisations in the research areas. one hundred and ninety two questionnaires were received. this represents a response rate of 55%. hypothesis the hypothesis postulated for the study is: h0: there is no significant difference in ethical ideology of professional groups in the building industry h1: there is a significant difference in ethical ideology of professional groups in the building industry results and discussion from the biographical information of the respondents presented in table 2, the male respondents constitute 86% of the entire population while the female make up the remaining 14%. this agrees with the finding that construction is a male dominated profession. those between 21 and 30 years old are 13%, those between 31 and 40 years old are 34%, those between 41 and 50 years old are 42% and those above 50 years old are 11%. this implies that majority of the respondents (76%) are between 31 and 50 years old. in terms of educational qualification of the respondents, three percent of the respondents are ordinary national diploma (ond) holders, 20% are higher national diploma (hnd) holders, 26% are bachelors‘ degree holders, 39% are masters degree holders and two percent are doctorate degree holders. the implication is that majority of the respondents have adequate educational background. in terms of professionals‘ work experience in the industry, 10% have less than five years experience, 23% have between 6 and 10 years experience, 33% have 11-20 years experience, 27% have 31-40 years experience while a few have above 40 years experience in the industry. this suggests that respondents have adequate experience, australasian journal of construction economics and building ameh, j.o and odusami, k.t. (2010) ‘nigerian building professionals’ ethical ideology and perceived ethical judgement’, australasian journal of construction economics and building, 10 (3) 1-13 7 hence information provided by the respondents pertaining to ethical issues in the industry could be relied on. as regards the professional affiliation of respondents, 22% are architects, 25% are builders/ construction managers, 24% are structural engineers, 22% are quantity surveyors and seven percent are building services engineers. fifty three percent of the respondents are in client organisations, 29% are in consultancy organisations while the remaining 18% are in contractors‘ organisations. in terms of managerial positions of the respondents, 44% are in top managerial positions, 54% are in middle managerial positions and an insignificant proportion (2%) are in junior managerial positions. this implies that the majority of the respondents are involved in decision making with respect to project procurement. in terms of professional membership status, 31% are graduate members of their respective professional institutions while 54% are corporate members and few (5%) are fellows of their respective professional institutes. this means that an overwhelming majority of the surveyed respondents (85%) belong to their professional associations, which have codes of conduct that provide guidelines for business and professional behaviour and ethics. professional’s ethical ideology there is much empirical support for the notion that an individual‘s ethical belief, values or ideology influences their approach to ethical judgement and consequent behaviour. table 3 presents the ethical position of all respondents according to forsyth‘s taxonomy. the result indicates that overwhelming majority of the respondents (77%) were found to be situationists while only 23% were absolutists. situationists reason that people‘s situations, rather than their characters, are the explanatory powerful factors in determining why different people behave differently. a situationist is an individual who endorses an ideology related to moral philosophy known as ethical scepticism. a sceptical point of view recognises that there are many different ways to look at morality of an action. according to fletcher 1966 (in percentage gender male female 86 14 age 21-30 years 31-40 years 4150 years >50 years 13 34 42 11 educational qualification ond hnd bachelors pgd masters doctorate 3 20 26 10 39 2 organization type client organisation consultancy organisation contractor organisation 53 27 18 managerial position top middle junior 44 54 2 industry experience less than 5 years 610 years 11 – 20 years 21 –30 years 31 – 40 years over 40 years 10 23 33 27 05 01 professional affiliation architecture building/construction management civil/structural. engineering quantity surveying building services engineering 22 25 24 21 7 professional membership status non-member student graduate corporate fellow 6 4 31 54 5 table 2 profile of study sample australasian journal of construction economics and building ameh, j.o and odusami, k.t. (2010) ‘nigerian building professionals’ ethical ideology and perceived ethical judgement’, australasian journal of construction economics and building, 10 (3) 1-13 8 forsyth 1980), an idealistic sceptic focuses on ―a contextual appropriateness not the ‗good‘ or the ‗right‘ but the ‘fitting‘ with all actions based on ‘agape‘ or love of others‖. the absolutists, on the other hand, agree with statements that are consistent with a general approach to moral philosophy known as deontology. moral absolutists are of the belief that all of morality consists in inflexible axiomatic principles, which must be followed exactly. this ethical perspective implies that any professionals‘ proposed course of action (which adversely affects the project quality, cost and time) that is not widely acceptable or that cannot be seen as a universal law that applies to all professionals in all situations at all times, is unethical. idealism relativism ethical position profession n high low percentage high low percentage situationist n % absolutist n % architect 39 100 0 74 26 2 74 10 26 builder/ construction manager 42 100 0 79 21 3 79 9 21 quantity surveyor 38 100 0 82 18 3 82 7 18 structural engineers 44 100 0 73 27 32 73 12 27 services engineers 13 100 0 100 0 11 85 2 15 total 176 100 0 77 23 136 77 40 23 table 3 ethical ideology of professionals involved in the procurement of building projects a number of other studies have used forsyth‘s (1980) epq. in asia, singhapakdi et al. found thai managers to be high in moral idealism. rawwas (1996) applied epq to australian consumers. he found that australian consumers are mostly situationists (62%), 18% are absolutists, 10% are exceptionist and 10% are subjectivists. davis, et al. (1998) found that indonesian mba students scored high on relativism, while us respondents scored high on idealism. lee and sirgy (1999) found korean managers were higher on idealism than us managers; relativism was not significantly different between the two groups. redfern (2005) found chinese managers in highly industrialised regions to be high on both the idealism and relativism dimensions. a number of factors may influence the ethical decision making process. according to hunt and vitell (1986), the individual ethical perception of the situation is influenced by a sum of cultural, organisational and industrial environment along with personal experience. for trevino (1986), in organisational context both the individual and situational factors affect the decision making. trevino and nelson (1999) emphasised that ethical conduct depends to a large extent on external factors such as the expectations of the authority figures, one‘s position in the organisational hierarchy, what the colleagues are doing, the reward system and the role that an individual is asked to play. situational factors that can exert tremendous negative influence on building industry professionals‘ ethical behaviour in nigeria are many. these include: delay in paying professional fees as at when due by public and private clients, requests for a bribe from professionals by officials in public service before processing professionals‘ fees for payment, and or public office holders corruptly enriching themselves through inflated contract figures. australasian journal of construction economics and building ameh, j.o and odusami, k.t. (2010) ‘nigerian building professionals’ ethical ideology and perceived ethical judgement’, australasian journal of construction economics and building, 10 (3) 1-13 9 these negative tendencies may be a justification for building professionals to engage in unethical practices (ameh and odusami 2010). with respect to ethical impropriety in the procurement of building projects and its adverse effect on the society, economy and the environment, absolutist ethical ideology is preferable to situationist ethics. this is because, irrespective of the situational variables and or benefits derived by the agent performing the act, rules regarding honesty, probity and trustworthiness ought to be respected and upheld. test of hypothesis the result of descriptive statistics (table 4) and one way analysis of variance (anova) is presented in table 5. the data for building services was excluded from the anova analysis because of their small sample size. the final analysis indicates that there is no statistically significant difference (p<.05) in the ethical ideology of different categories of building professionals. hence the null hypothesis which states that ―there is no significant difference in ethical ideology of professional groups in the building industry‖ is accepted. this implies that similar moral philosophy influences the ethical behaviour of professionals in the nigerian building industry. building profession n mean std. deviation std. error architecture 39 1.51 0.885 0.142 building 42 1.43 0.831 0.128 structural engineering 44 1.55 0.901 0.136 quantity surveying 38 1.31 0.741 0.120 total 163 1.45 0.841 0.066 table 4 descriptive statistics of building professional groups ethical ideology sum of squares df mean square fstatistics pvalue level of significance decision between groups 1.298 3 0.433 0.607 .611 ns accepted h0 within groups 113.266 159 0.712 total 114.563 162 table 5 anova for professionals’ ethical ideology notes: ns= not significant at p<.05 conclusion an individual ethical ideology provides guidelines for evaluating ethically questionable behaviours and ultimately deciding to refrain or engage in them. given a well documented perception of nigerians as being corrupt, and since nigerian building industry professionals may not be immune from the perceived national trend in ethical erosion, it is relevant to investigate the ethical ideology held by nigerian building industry professionals. the results indicate that professionals in the nigerian building industry are high in both idealism and relativism. idealism and relativism have been extensively used in the business ethics literature. idealism and relativism have been shown to influence the perception of ethical problems (hunt and vitell 1986); the perceived importance of ethics and social responsibility (singhapakdi et al. 1995); ethical sensitivity (sparks and hunt 1998); ethical intention and perceived moral intensity (singhapakdi et al. 1999) and organizational deviance (henle et al. 2005). according to forsyth‘s (1980) taxonomy, nigerian building industry professionals‘ dominant ethical ideology can be regarded as situationism. situationism implies that people are much more susceptible to being corrupted than one might expect, which in turn means australasian journal of construction economics and building ameh, j.o and odusami, k.t. (2010) ‘nigerian building professionals’ ethical ideology and perceived ethical judgement’, australasian journal of construction economics and building, 10 (3) 1-13 10 that in order for their good behaviour to remain stable and consistent, they must also be put in the proper kind of situations as well. judging by the characteristics of situationists, the study therefore concludes that the behaviour of building industry professionals in professional practice could possibly be unethical. the identification of situationism as the dominant ethical ideology of the nigerian building industry professionals would be of interest to policy makers because it is a bold step and necessary benchmark for resolving ethical issues in the construction industry. this is because each individual will make ethical decisions based on the actual situation. the large potential for corrupt practice in the construction industry, such as public office holders corruptly enriching themselves through inflated contract figures, the influence of peers, organisational culture, and an unstable political climate, provides a set of explanatorily powerful factors influencing professional conduct. these findings also form the basis for intra-professional ethical comparison. to curb professionals‘ ethical impropriety in the procurement of building projects in nigeria, it is therefore recommended as follows: 1. since majority of the nigerian building industry professionals are situationists, such factors that will encourage unethical practices should be avoided. this may necessitate national ethical re-birth and massive enlightenment on ethical codes. 2. since knowledge improves the chances for ethical behaviour over ignorance, the professional institutes should organise periodic training sessions as part of continuous professional development (cpd). issues to be discussed at such meetings should include: i. content(s) analysis of professional codes of conduct ii. case studies and scenarios on ethical improprieties iii. emerging ethical issues of global and national significance. this can result in the attainment of a national ethical mind-set as well as value reorientation of all professionals that will ensure that building industry professionals react ―automatically‖ and intuitively to being virtuous and upholding high ethical standards. study limitation the value of cronbach‘s alpha coefficient for idealism scale was low in comparison to the values reported in other studies. this may be because the likert scale response format used in this study is below 5. another limitation in this study is the small sample of building services respondents. acknowledgement the researchers gratefully acknowledge the support of the university of lagos central research committee (crc) for its grant (crc/2004/27) which facilitated this research. references ameh, o. j. and odusami, k. t. 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(2010) ‘nigerian building professionals’ ethical ideology and perceived ethical judgement’, australasian journal of construction economics and building, 10 (3) 1-13 13 appendix s/no general statements strongly agree (4) agree (3) disagree (2) strongly disagree (1) 1 a person should make certain that his/her actions never intentionally harm another even to a small degree 2 risks to another should never be tolerated, irrespective of how small the risks might be 3 the existence of potential harm to others is always wrong, irrespective of the benefits to be gained 4 one should never psychologically or physically harm another person 5 one should not perform an action which might in any way threaten the dignity and welfare of another individual 6 if an action could harm an innocent person, then it should not be done 7 deciding whether or not to perform an act by balancing the positive consequences of the act against the negative consequences of the act is immoral 8 the dignity and welfare of people should be the most important concern in any society 9 it is never necessary to sacrifice the welfare of others 10 moral actions are those which closely match ideals of the most perfect action 11 there are no ethical principles that are so important that they should be a part of any code of ethics 12 what is ethical varies from one situation and society to another 13 moral standards should be seen as being individualistic; what one person considers to be moral may be judged to be immoral by another person 14 different types of morality cannot be compared as to ―rightness‖ 15 questions of what is ethical for everyone can never be resolved since what is moral or immoral is up to the individual 16 moral standards are simply personal rules which indicate how a person should behave and are not to be applied in making judgments of others 17 ethical considerations in interpersonal relations are so complex that individuals should be allowed to formulate their own individual rules 18 rigidly codifying an ethical position that prevents certain types of actions could stand in the way of better human relations and adjustment 19 no rule concerning lying can be formulated; whether a lie is permissible or not permissible totally depends upon the situation 20 whether a lie is judged to be moral or immoral depends upon the circumstances surrounding the action factors causing delay of building construction projects in ghana: the parties’ perspective delays in building construction projects in ghana frank d.k. fugar and adwoa b. agyakwah-baah, (department of building technology, kwame nkrumah university of science and technology, kumasi, ghana) abstract this study investigates the causes of delay of building construction projects in ghana to determine the most important according to the key project participants; clients, consultants, and contractors. thirty-two possible causes of delay were identified from the literature and semi-structured interviews of 15 key players in the implementation process. these delay factors were further categorised into nine major groups. the list of delay causes was subjected to a questionnaire survey for the identification of the most important causes of delay. the field survey included 130 respondents made up of 39 contractors, 37 clients and 54 consultants. the relative importance of the individual causes and the groups were calculated and ranked by their relative importance index. the overall results of the study indicate that the respondents generally agree that financial group factors ranked highest among the major factors causing delay in construction projects in ghana. the financial group factors were delay in honouring payment certificates, difficulty in accessing credit and fluctuation in prices. materials group factors are second followed by scheduling and controlling factors. keywords: building construction projects, delay causes, ghana introduction the literature is replete with studies of construction delays and their negative impact on project success and company performance (couto and teixeira, 2007). many of these studies, according to couto and teixeira, had the following objectives: • to analyse the reasons and factors of project delays • to classify and evaluate delays, claims and related issues • to understand, comparing and specifying their issues delays are insidious often resulting in time overrun, cost overrun, disputes, litigation, and complete abandonment of projects (sambasivan and soon, 2007). many projects are of such a nature that the client will suffer hardship, expense, or loss of revenue if the work is delayed beyond the time specified in the contract (clough, 1986). then again, delay has cost consequences for the contractor: standby costs of non-productive workers, supervisors, and equipment, expenses caused by disrupted construction and material delivery schedules and additional overhead costs (clough, 1986). construction delay is a major problem facing the ghanaian construction industry. it is endemic and its economic and social impact is often discussed. however, studies on the causes could not be found in the published literature except the study by frimpong and oluwoye (2003) which investigated the significant factors that cause delay and cost overruns in the construction of underground projects in ghana. they reported that to a large extent, australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   104 consultants, owners, and contractors agreed that project financing, economic and natural conditions and material supply were the four major categories of causes of delay and cost overrun factors. this important research leaves a gap which the current study sought to fill, namely to find the causes of delay in building construction projects. the construction industry is an important sector of the ghanaian economy. it contributes an average of 8.5% of the gross domestic product (ghana statistical service, 2007). it employed about 2.3 % of the economically active population in 2002 (amankwa, 2003). the industry provides means of production for other industries or commodities to be consumed. as ghana aspires to become a middle income nation by 2015, and with the recent discovery of oil in commercial quantities, the role of the construction industry is absolutely important. it is against this backdrop that investigating the factors responsible for delays in building construction and recommending measures to eradicate or minimize them assume tremendous importance. objective of the study the main objective of this study is to identify the major causes of delays of building construction projects in ghana using an opinion survey. the primary aim is to identify the perceptions of the three main parties regarding the causes of delays and to suggest possible ways of eradicating or minimising them. literature review sanders and eagles (2001) define delay as an event that causes extended time to complete all or part of a project. delay may also be defined as the time overrun, either beyond the date for completion specified by the contract or beyond the extended contract period where an extension of time has been granted. the type of delay we focus on in this study is the time overrun beyond the date for completion specified by the contract not considering whether an extension of time has been granted. delay in construction is a global phenomenon (sambasivan and soon, 2007) affecting not only the construction industry but the overall economy of countries as well (faradi and elsayegh, (2006). delay involves multiple complex issues all of which are invariably of critical importance to the parties to the construction contract. these issues concern entitlement to recover costs of delay or the necessity to prolong the project with the consequential entitlement to recovery costs for adjustments to the contract schedules. questions arise as to the causes of delay and the assigning of fault often evolves into disputes and litigation (bolton, 1990). today, many stakeholders in construction are becoming increasingly concerned about the duration of construction projects because of increasing interest rates, inflation, commercial pressures (nkado, 1995), and of course, it’s potential to result in disputes and claims leading to arbitration or litigation. classification of delay delays in construction are caused by several factors. ahmed et al. (2003) grouped delays into two categories – internal causes and external causes. internal causes arise from the parties to the contract (e.g. contractor, client, and consultant). external causes, on the other hand, arise from events beyond the control of the parties. these include the act of god, government action, and material suppliers. bolton (1990) classifies delay as follows: australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   105 • excusable but non-compensable delay -these are delays caused by occurrences which are not attributable to any of the parties. • compensable delay these delays result from acts or omissions of the owner or someone for whose acts an owner is liable. • inexcusable delay these delays result from a contractor's own fault or his subcontractors or material suppliers. related studies a number of studies have been carried out to determine the causes of delay in construction projects. sweis et al. (2008) studied the causes of delay in residential projects in jordan and concluded that financial difficulties faced by the contractor and too many change orders by the owner are the leading causes of construction delay. abd el-razek et al. (2008) in a similar study in egypt found that the most important causes of delay are financing by contractor during construction, delays in contractor’s payment by owner, design changes by owner or his agent during construction, partial payments during construction, and nonutilization of professional construction/contractual management. assaf and alhejji (2006) conducted a time performance survey of different types of construction projects in saudi arabia to determine the causes of delay and their importance according to each project participant (owner, consultant, and contractor). they identified seventy three (73) causes of delay during the research. the most common cause of delay identified by all three parties was “change order.” about a decade earlier, assaf et al. (1995) studied the causes of delay in large building projects in saudi arabia and their relative importance and reported that among the fifty-six (56) causes of delay included in the survey, the contractors, owners and architects/engineers interviewed all ranked financing group delay factors the highest. according to the contractors, the most important delay factors were preparation and approval of shop drawings, delays in contractors’ progress payment by owners, and design changes by owners. in the opinion of architects and engineers, the most important causes of delay were cash flow problems during construction, the relationship between different subcontractors’ schedules in the execution of the project, and the slowness of the owners’ decision-making process. owners, on the other hand, attributed delays in construction projects to design errors, excessive bureaucracy in project-owner organization, labour shortages, and inadequate labour skills. furthermore, assaf et al, in a review of the literature, reported that studies by chalabi and camp (1984) had established that in developing countries where workers are relatively unskilled, adequate planning at the very early stages of the project was important for minimizing delay and cost overruns in most projects. it is however, interesting to note that financial difficulty as a factor in the delay of projects in saudi arabia was not reported as a major factor again in the assaf et al. (2006) study. ayman (2000) investigated the causes of delays on 130 public projects in jordan. the projects included residential, office and administration buildings, school buildings, medical centres, and communication facilities. the results indicated that the main causes of delay in construction of public projects relate to designers, user changes, weather, site conditions, late deliveries, economic conditions, and increase in quantity. odeh and battaineth (2001) reported that among the top ten most important causes of delays in construction projects with traditional type contracts in jordan were, from the view point of contractors and consultants: owner interference, inadequate contractor experience, financing and payments, labour productivity, slow decision making, improper planning, and subcontractors. australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   106 sambasvian and soon (2007) identified the delay factors and their impact on project completion in the malaysian construction industry. the results indicated that the ten from a list of 28 different causes of delay were: (1) contractor’s improper planning, (2) contractor’s poor site management, (3) inadequate contractor experience, (4) client’s inadequate financial resources and payments for completed work, (5) problems with subcontractors, (6) shortage in material, (7) labour supply, (8) equipment availability and failure, (9) lack of communication between parties, and (10) mistakes during the construction stage. a similar study in malaysia by alaghbari et al. (2007) indicated that from a list of thirty-one (31) factors, clients, contractors and consultants agreed that financial problems were the main factors and coordination problems were the second most important factor causing delay in construction projects in malaysia. this review has underscored that the factors that cause delay in construction projects are many and vary from country to country and from one circumstance to another. however, in developing economies ogunlana et al. (1996) have reported that there are distinctive problems that cause delays in construction. they have classified them into three groups: (a) problems of shortage or inadequacies in industry infrastructure (mainly supply of resources), (b) problems caused by clients and consultants, and (c) problems caused by contractor incompetence/inadequacies. data collection the data collection process involved two stages. the first stage consisted of literature search for information on the causes of delay in other countries and non-structured interviews of 15 key players involved in the implementation process selected by a non-probabilistic snow ball technique. the purpose of interviewing the key players was essentially to validate a preliminary set of construction delay causes gleaned from the literature and to determine from their experience other factors which cause construction delay in ghana. to ensure a balanced view, the interviewees consisted of 5 each of contractors, client’s representatives and consultants. respondents questionnaire distributed responses returned percentage of responses client 55 37 67% contractors 55 39 71% consultants 55 54 98% total 165 130 79% table 1 percentage of questionnaire distributed and responses received this phase resulted in the identification of thirty-two (32) causes of delay. the second stage involved the development of questionnaire incorporating the 32 causes of delay identified and data collection. the questionnaire was organised in the form of an importance scale. respondents, were asked to indicate by ticking a column the relative importance of each of the causes of construction delay (in terms of 4 = ‘very important’, 3 = ‘important’, 2 = ‘somewhat important’, 1 = ‘not important’). a total of 165 questionnaires were distributed to respondents in the greater accra region of ghana where the concentration of contractors and consultants is highest. fifty-five (55) questionnaires were dispensed to each category of the respondents – clients, consultants and contractors. the convenience or availability sampling approach was used in the selection of respondents. gabor (1993) and baley (1994) describe this type of sampling as one where the researcher uses cases that are most australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   107 convenient and available. it is made up of whoever is willing to participate. the disadvantage of this approach is its tremendous potential for bias (frey et al., 1991). however, considering that this is a preliminary study, convenience sampling was considered appropriate. the questionnaires were personally delivered to the respondents by the researchers who also went back to collect them at appointed times. the collection of data took 4 weeks. at end of the period, 130 questionnaires (79%) were received for analysis out of which 54 were responses from consultants. this response rate by consultants is extremely high, higher than expected in any research. this group of respondents were most enthusiastic and cooperative. data analysis the survey data consisting of the 32 causes of delay were analysed and grouped into nine major areas according to a slightly modified version of assaf et al.’s (1995) classifications: materials, manpower, equipment, financing, environment, changes, government action, contractual relationships, and scheduling and controlling techniques. assaf et al.’s seventh major classification was ‘government relations’ which these researchers substituted with ‘government action.’ it was felt that the relevant causes of delay grouped under this heading could more appropriately be described as actions of government. 1. material • shortages of materials on site or market • late delivery of material 2. manpower • shortage of unskilled labour • shortage of skilled labour 3. equipment • equipment failure or breakdown • unskilled equipment operators 4. financing • delay in honouring payment certificates • difficulties in assessing credit • fluctuation of prices 5. environmental • bad weather conditions • unfavourable site conditions 6. changes • client initiated variations • necessary variations • mistakes in soil investigation • poor design • foundation conditions encountered on site 7. government action • delays in obtaining permit from municipality • public holidays • discrepancy between design specification and building code 8. contractual relations • legal disputes • insufficient communication between parties • poor professional management • delay in instructions from consultants • delay by subcontractors 9. scheduling and controlling techniques • poor site management • poor supervision • lack of programme of works • accidents during construction • construction methods • underestimation of costs of projects • underestimation of complexity of projects • underestimation of time of completion australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   108 relative importance index (rii) clients contractor consultant overall factors rii rank rii rank rii rank rank delay in honouring payment certificates 0.831 1 0.932 1 0.852 1 1 underestimation of cost of projects 0.824 2 0.845 5 0.792 3 2 underestimation of complexity of projects 0.784 6 0.824 8 0.792 3 3 difficulty in accessing bank credit 0.797 4 0.858 2 0.755 9 4 poor supervision 0.743 10 0.858 2 0.773 5 4 underestimation of time for completion by contractors 0.757 8 0.764 12 0.801 2 6 shortage of materials 0.696 17 0.851 4 0.759 8 7 poor professional management 0.804 3 0.73 17 0.764 7 8 fluctuation of prices 0.757 8 0.811 9 0.736 11 8 poor site management 0.797 4 0.743 15 0.750 10 10 construction methods 0.743 10 0.791 10 0.736 11 10 delay in instructions from consultants 0.709 16 0.831 7 0.708 17 12 late deliveries of materials 0.655 25 0.838 6 0.731 13 12 lack of programme of works 0.730 12 0.709 20 0.769 6 14 delay by sub-contractors 0.696 17 0.791 10 0.731 13 14 poor design 0.730 12 0.757 14 0.727 15 16 breakdown of equipments 0.764 7 0.743 15 0.704 20 17 client initiated variations 0.716 14 0.764 12 0.708 17 17 obtaining permit from municipality 0.689 21 0.723 19 0.676 22 17 insufficient communication between parties 0.662 23 0.730 17 0.681 21 17 necessary variations 0.696 17 0.689 22 0.667 23 21 shortage of skilled labour 0.689 17 0.581 28 0.718 16 21 legal disputes 0.716 14 0.628 26 0.653 25 23 unfavourable site conditions 0.696 17 0.669 23 0.639 27 23 foundation conditions encountered on site 0.655 25 0.608 27 0.708 17 25 discrepancy between design specification and building code 0.642 27 0.649 24 0.662 24 25 bad weather conditions 0.635 28 0.709 20 0.597 28 27 mistakes with soil investigations 0.662 23 0.579 29 0.648 26 28 unskilled equipment operators 0.601 29 0.635 25 0.588 29 29 accidents during construction 0.554 30 0.486 30 0.565 30 30 shortage of unskilled labour 0.473 31 0.446 31 0.468 31 31 public holidays 0.432 32 0.412 32 0.403 32 32 table 2 relative importance index and rank of delay factors according to clients, contractors and consultants australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   109 importance indeces groups cont. rank client rank cons. rank all rank financing 0.867 1 0.795 1 0.781 1 2.802 1 delay in honouring payment certificates 0.932 0.831 0.852 3.007 difficulty in accessing bank credit 0.858 0.797 0.755 2.757 fluctuation of prices 0.811 0.757 0.736 2.642 materials 0.845 2 0.676 6 0.745 3 2.608 2 shortage of materials 0.851 0.696 0.759 2.655 late deliveries of materials 0.838 0.655 0.731 2.561 scheduling and controlling 0.753 3 0.742 2 0.747 2 2.585 3 poor supervision 0.858 0.743 0.773 2.730 accidents during construction 0.486 0.554 0.565 1.865 poor site management 0.743 0.797 0.750 2.635 lack of programme of works 0.709 0.730 0.769 2.561 construction methods 0.791 0.743 0.736 2.608 underestimation of costs of projects 0.845 0.824 0.792 2.824 underestimation of complexity of projects 0.824 0.784 0.792 2.764 underestimation of time of completion 0.764 0.757 0.801 2.689 contractual relationship 0.742 4 0.718 3 0.707 4 2.492 4 poor professional management 0.730 0.804 0.764 2.649 legal disputes 0.628 0.716 0.653 2.297 insufficient communication between parties 0.730 0.662 0.681 2.385 delay in instructions from consultants 0.831 0.709 0.708 2.574 delay by subcontractors 0.791 0.696 0.731 2.554 changes 0.678 7 0.701 4 0.692 5 2.380 5 client initiated variations 0.764 0.761 0.708 2.514 necessary variations 0.689 0.696 0.667 2.358 mistakes with soil investigations 0.574 0.662 0.648 2.182 foundation conditions encountered on site 0.608 0.655 0.708 2.297 poor design 0.757 0.730 0.727 2.547 equipment 0.690 5 0.683 5 0.646 6 2.315 6 unskilled equipment operators 0.635 0.601 0.588 2.095 breakdown of equipments 0.745 0.764 0.704 2.534 environment 0.689 6 0.666 7 0.618 7 2.257 7 bad weather conditions 0.709 0.635 0.597 2.216 unfavourable site conditions 0.669 0.696 0.639 2.297 government action 0.595 8 0.588 8 0.580 9 2.029 8 obtaining permit from municipality 0.723 0.689 0.676 2.399 discrepancy between design specification and building code 0.649 0.642 0.662 2.257 public holidays 0.412 0.432 0.403 1.432 manpower 0.514 9 0.581 9 0.593 8 1.960 9 shortage of skilled labour 0.581 0.689 0.718 2.318 shortage of unskilled labour 0.446 0.473 0.468 1.601 table 3 index and rank of causes of groups of delay factors australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   110 the aim of the analysis was to establish the relative importance of the various factors identified as responsible for construction delay. the score for each factor is calculated by summing up the scores given to it by the respondents. the relative importance index (rii) was calculated using the following formula (fagbenle et al., 2004): rii = ∑piui ………………………… (1) n (n) where, rii = relative importance index pi = respondent’s rating of cause of delay ui = number of respondents placing identical weighting/rating on cause of delay n = sample size n = the highest attainable score on cause of delay the relative importance index for all the delay factors and groups was calculated using the equation (1) above. the indexes were ranked for clients, contractors and consultants. the group index is the average of relative importance index of the delay factors in each group. agreement analysis the spearman’s rank correlation coefficient (ρ) was used to show the degree of agreement between the rankings of any two parties. the spearman’s rank correlation is a nonparametric test. non-parametric tests are also referred to as distribution-free tests. these tests do not require the assumption of normality or the assumption of homogeneity of variance. they compare medians rather than means and, as a result, if the data include one or two outliers, their influence is excluded. the spearman’s rank correlation coefficient (ρ) was calculated as follows: ρ = 1 6∑d2 n (n2-1) ………………………….(2) where: d = the difference between the ranks given by any two respondents for an individual cause and n = the number of causes or groups, which in this case is 32 causes or 9 groups. the rank correlation coefficients for the delay factors are 0.69, 0.82, and 0.70 for clients and contractors, clients and consultants and contractors and consultants respectively. this shows high agreement between rankings. significance test to determine whether the parties displayed significant agreement in their rankings, the null hypothesis that “clients and contractors, clients and consultants, and contractors and consultants do not agree on ranking of important delay factors” was tested using a t-test at a 95% confidence level. the null hypothesis was rejected in all three cases. the alternate hypothesis that all three parties generally agreed on the ranks was accepted. the rank correlation coefficients calculated for the nine groups of delay factors were 0.76, 0.88 and 0.92 for clients and contractors, clients and consultants and contractors and consultants respectively. again utilising a t-test at a 95% confidence level of the same null hypothesis for the group delay factors resulted in the rejection of the null hypothesis in all three cases. therefore, all the three parties generally agree on the ranking of the group factors of delays. australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   111 results and discussion the perspectives of clients, consultants and contractors of the 32 delay factors were analysed based on the relative importance index. the results are shown in tables 2 and 3 above. the relative importance index and ranks of delay factors by all the respondents are presented in table 2. table 3 illustrates the relative importance index and ranks of groups of delay factors by all respondents. generally, all major stake holders agreed that the top ten most important factors causing delay in ghana are: • delay in honouring certificates • underestimation of the cost of project • underestimation of complexity of project • difficulty in accessing bank credit • poor supervision • underestimation of time for completion of projects by contractors • shortage of materials • poor professional management • fluctuation of prices/rising cost of materials • poor site management • based on the different groups of delay, the respondents generally agreed that the top three groups of delay are: • financial • materials • scheduling and control. the following brief discussion is focused on the nine groups of delays in descending order of their ranking. financial the financial group of delay was ranked highest by all the respondents put together. this result agrees with frimpong and oluwoye (2003) who found that financial problems are the main factors that cause delay in the construction of groundwater projects in ghana. financial difficulties have also been identified as the first major factor causing delay in construction projects in malaysia (alaghbari et al. 2007, assaf et al. 1995). the inability of clients (building owners) to honour payments on time was determined by all respondents under the financial group of delays as the first major factor that causes delays in building construction projects in ghana. it is encouraging to note that clients interviewed also admitted that their inability to provide the needed funds on time is the most important delay factor. in ghana, the long and bureaucratic processes involved in honouring payments to contractors, especially those working on government projects have been well documented. failure to pay contractors regularly for work done impedes progress and causes delay. and failure to provide adequate funding resources to contractors will make it impossible for contractors to meet project of objectives (oglesby, parker, howell, 1989). material shortage the material group delay factors were ranked the second most important factors responsible for construction delay. this is not surprising because barring the shortage of material on the market, the availability of materials on site at the right time and in the right quantities is australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   112 directly related to the ability of the client to honour certificates as and when they are due. liquidity problems make it difficult for contractors to procure materials. again, materials suppliers are reluctant to supply materials on credit because contractors will normally pay suppliers only when they themselves are paid. scheduling and controlling contractors, clients, and consultants together ranked scheduling and controlling of work as the third most crucial factor in the delay of building construction projects with the relative importance index of 0.753, 0.742, and 0.747 respectively. within this group, contractors ranked occurrence of accidents on site the most important factor in the delay of construction projects. clients on the other hand ranked underestimation of construction costs by contractors the most important. yet still, consultants ranked underestimation of time of completion by contractors as the most important delay factor. put together, this may be due to the lack of personnel with management and estimating skills within the contractors’ organization. there is abundant anecdotal evidence to support the assertion that many local contractors are reluctant to employ high level skilled staff, such as university graduates. indeed, many contractors in developing countries are entrepreneurs who are in the business to make more profit (ogulana and olomolaiye ,1989; wahab, 1997) and therefore, may not be willing to pay highly skilled staff. contractual relationship contractual relationship as a delay group was ranked fourth. within this group, clients and consultants agreed that poor professional management was the most important factor in the delay of building projects. on the other hand, contractors ranked delay in the receipt of instructions from consultants the most important factor. the purpose of conditions of contract which are incorporated in construction contracts is to amplify and explain the basic obligations of parties to the contract. the conditions also provide the administrative mechanisms for ensuring that the correct procedures are observed (murdoch and hughes, 1992). unfortunately, there is the perception that some parties are not very familiar with the conditions of contract resulting in breaches causing delay. changes this delay group factor was ranked fifth. contractors and clients agreed that within this group, client initiated variations is the most important delay factor in causing construction delay. however, consultants ranked poor design highest. equipment the equipment group of delays factor was ranked sixth. it is not surprising that equipment group factors were ranked among the least important. construction is ghana is labour intensive with basic hand tools and equipment. the extensive use of major equipment is rare on many projects. where equipment is required, the contractors have the option to hire. in the rare cases where some plant and equipment are owned by a contractor, breakdown is a major delay factor perhaps owing to old age or lack of planned maintenance. environment clients and consultants both agreed that within the environment group of delay factors, an unfavourable site condition was a major delay factor. on the other hand, contractors ranked bad weather conditions as the most important factor. relatively, environmental conditions as a delay factor is ranked low. bad weather conditions are natural events which cannot be controlled by the parties. in ghana, the effect of inclement weather on progress may not be significant but needs to be taken into account. the climate is tropical with wet and dry australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   113 seasons. during the rainy season construction work may be disrupted especially outdoor activities. during the rainy season temperatures range from 21°c to 32°c and the humidity is relatively high. the rest of the year is hot and dry with temperatures reaching 38°c. the high temperatures and high humidity ranging from 25 to 80% certainly affect the productivity of construction workers as a result of dullness of their senses, poor coordination and discomfort from body heat (frimpong, oluwoye, and crawford, 2003). government action government action as a delay group was ranked relatively low. all parties agreed that obtaining approval from the municipality was the most important factor in this category causing construction delay. manpower all parties ranked the manpower group factor the lowest. regarding all the factors in the group, all three parties ranked shortage of skilled labour high. as indicated by the respondents, shortage of labour is not a problem in ghana currently, but there is anecdotal evidence that skilled labour in construction trades is becoming rarer. this challenge requires construction companies and other stakeholders to take steps to entice and train youth in carpentry, masonry, and other trades. summary and conclusion this study focused on delay of construction of building projects in ghana. the study sought the views of clients, consultants, and contractors on the relative importance of the factors that cause delays in building construction projects in ghana. the study showed that all the three groups of respondents generally agreed that out of a total of 32 factors the top ten influencing factors in causing delay arranged in descending order of importance are: • delay in honouring certificates • underestimation of the costs of projects • underestimation of the complexity of projects • difficulty in accessing bank credit • poor supervision • underestimation of time for completion of projects by contractors • shortage of materials • poor professional management • fluctuation of prices/rising cost of materials • poor site management. the 32 factors were categorised into nine major groups and were ranked. the results show that clients, consultants, and contractors all agreed that the financing group of delay factors was the most influential factor. material factors were considered the second most important factor causing delay in construction projects followed by scheduling and controlling factors. recommended remedies for delay the importance of adequate and timely provision of financial resources in building construction project management cannot be over emphasised. adequate finance is the hub around which everything else revolves. everybody and everything connected with construction is adversely affected by lack of sufficient cash flow. the project is not only delayed but the morale of workers plummet because of non-payment or irregular payment of australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   114 wages. subcontractors and suppliers of materials and components and their employees are likewise affected. the challenge to construction managers and of course, clients, is to identify ways to eliminate or at least reduce the occurrence of financial crisis during the construction process. in that regard, the following recommendations are made. • construction clients must ensure that funds are available or adequate arrangements for funds are made before projects are started. • the long and bureaucratic processes involved in honouring payments to contractors in ghana must be shortened for efficiency and contractors’ payments must be honoured as and when they due in strict compliance with the provisions of the contract. • contract provisions which allow contractors to claim interest on delayed payments must be strictly enforced to serve as deterrent to clients. • the idea of establishing a commercial bank for building and construction is worth revisiting so that contractors can have access to credit in times of liquidity difficulties. again, to overcome some contractors’ ineptitude which correlates directly with delay factors such as underestimation of cost, time of completion and complexity of projects, poor scheduling and control and poor site management, the researchers recommend the following actions. • the civil engineering and building contractors association of ghana must institute measures to ensure that its members go through continual education so that the technical and managerial competences of contractors who belong to it can be improved. the acquisition of a certain number of credit hours in continual education should be a criterion for membership renewal. • the ministry of works and water resources, the body responsible for the registration and classification of contractors wishing to execute public projects, must insist on its requirement that contractors must have in their employment certain key technical staff as a condition for registration. above all, effective ways must be designed to verify the list of staff produced by contractors in support of their application and to ensure also that these key staff positions are continually filled by technically competent individuals. references abd el-razek, m.e., bassioni, h.a.and mobarak, a.m. (2008) ‘causes of delays in building construction projects in egypt’, journal of construction engineering and management, 134 (11) 831-841 ahmed, s.m., azhar, s., kappagntula, p., gollapudil, d. (2003) ‘delays in construction: a brief study of florida construction industry’, proceedings of the 39th annual asc conference, clemson university, clemson, sc, 257-66 alaghbari, w., kadir, m.r.a., salim, a., and ernawati (2007) ‘the significant factors causing delay of building construction projects in malaysia’, engineering, construction and architectural management, 14 (2), 192-206 amankwa, o.p.j. (2003) ghana: a human geography for secondary schools, st. francis press, ghana assaf, s.a. alhejji s. (2006) ’causes of delay in large construction projects’, international journal of project management, 24 (4), 349-357 http://cedb.asce.org/cgi/wwwdisplay.cgi?0880010 australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   115 assaf, s.a., alkhail, m., and al-hazmi m. (1995) ‘causes of delay in large building construction projects’, journal of management in engineering, asce, 11 (2), 45-40 ayman, h. (al-momani) (2000) ‘construction delay: a quantitative analysis’, international journal of project management, 18 (1), 51-59 bailey, k.d. (1994) methods of social research, 4th ed, free press, new york bolton, j. (1990) ‘type of claims’, construction and disruption claims, course manual, portman inter-continental, london chalabi, f.a., and camp, d. (1984) ‘causes of delays and overruns of construction projects in developing countries’, cib proc., w-65, vol. 2, 723-734 clough, r.h. (1986) construction contracting, john wiley and sons, new york fagbenle, o.i., adeyemi, a.y., and adesanya, d.a. (2004) ‘the impact of non-financial incentives on briclayers’ productivity in nigeria’, construction management and economics, 22, 899-911 faradi, a.s. and el-sayegh, s.m. (2006) ‘significant factors causing delay in the uae construction industry’, construction management and economics, 24 (11), 1167-1176 frey, l.r., botan, c.h., friedman, p.g., and kreps, g.l. (1991) investigating communication: an introduction to research methods, prentice hall, engle woods cliffs frimpong, y., oluwoye, j., crawford, l (2003) ‘causes of delay and cost overruns in construction of ground water projects in developing countries: ghana as a case study’, international journal of project management, 21, 321-326 frimpong, y. and oluwoye, j. (2003) ‘significant factors causing delay and cost overruns in construction of groundwater projects in ghana’, journal of construction research, 1 (2), 17587 gabor, p. (1993) ‘sampling’. in r.m grinnell, (ed), social work research and evaluation, 4th ed, peacock, itasca, ill, 154-170 murdoch, j. and hughes, w. (1992) construction contracts: law and management, e & fn spon, london nkado, r.n. (1995) construction timeinfluencing factors: the contractors’ perspective, viewed 18 dec 2006, http://www.misronet.com/articles.htm odeh, a.m. and battaineh h (2002) ‘causes of construction delay: traditional contracts’, international journal of project management, 20 (1), 67-73 oglesby, c, parker, h and howel, g (1989) productivity improvement in construction, mcgraw-hill, new york ogunlana, so, olomolaiye, po (1989) ‘a survey of site management practice on some selected sites in nigeria’, building environ 24 (2), 191–6 ogunlana, s.o., promkuntong, k., and jearkjirm, v. (1996) ‘construction delays in a fastgrowing economy: comparing thailand with other economies’, international journal of project management, 14 (1), 37-45 sambasivan, m. and soon, y.w. (2007) ‘causes and effects of delays in malaysian construction industry’, international journal of project management, 25 (5), 517-526 sweis, g., sweis, r., abu hammad, a. and shboul, a. (2008) ‘delays in construction projects: the case of jordan’, international journal of project management 26 (6) 665-74 wahab ka (1997) ‘improving efficiency in the building sector’, west africa tech rev, 81–9 australasian journal of construction economics and building fugar, f d k and agyakwah‐baah, a b  (2010) ‘delays in building construction projects in ghana’, australasian journal  of construction economics and building, 10 (1/2) 103‐116   116 appendix please indicate by ticking the appropriate column the relative importance of each of the following causes of building construction delay no factor of delay very important important somewhat important not important 1 delay in honouring payment certificates 2 underestimation of cost of projects 3 underestimation of complexity of projects 4 difficulty in accessing bank credit 5 poor supervision 6 underestimation of time for completion by contractors 7 shortage of materials 8 poor professional management 9 fluctuation of prices 10 poor site management 11 construction methods 12 delay in instructions from consultants 13 late deliveries of materials 14 lack of programme of works 15 delay by sub-contractors 16 poor design 17 breakdown of equipments 18 client initiated variations 19 obtaining permit from municipality 20 insufficient communication between parties 21 necessary variations 22 shortage of skilled labour 23 legal disputes 24 unfavourable site conditions 25 foundation conditions encountered on site 26 discrepancy between design specification and building code 27 bad weather conditions 28 mistakes with soil investigations 29 unskilled equipment operators 30 accidents during construction 31 shortage of unskilled labour 32 public holidays figure 1 questionnaire to rate level of importance of delay factors for building construction projects delays in building construction projects in ghana abstract introduction objective of the study literature review classification of delay related studies data collection data analysis relative importance index (rii) the aim of the analysis was to establish the relative importance of the various factors identified as responsible for construction delay. the score for each factor is calculated by summing up the scores given to it by the respondents. the relative importance index (rii) was calculated using the following formula (fagbenle et al., 2004): agreement analysis significance test results and discussion financial scheduling and controlling contractual relationship changes equipment environment government action manpower summary and conclusion recommended remedies for delay references perceptions of women and men professionals about women engineer in non-traditional occupations in thailand construction indust construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria henry ndubuisi onukwube and reuben iyagba (department of building, university of lagos, nigeria) abstract job performance is considered one of the most important constructs in human resources management because it helps to explain the value and utility that each employee adds to the organisation. this study examined the relationship between job characteristics and task performance for overall as well as facets of job characteristics. in carrying out this investigation, construction professionals (architects, builders, civil engineers, quantity surveyors and services engineers) were asked to respond to job characteristics questionnaire (jcq) and their immediate supervisors were asked to respond to task performance questionnaire (tpq). data collected were analysed using pearson correlation, correlation matrix and independent sample ttest where appropriate. results indicate that there is positive significant relationship between overall job characteristics and overall task performance. however, when the facets of job characteristics were considered, different relationship emerged. there were stronger positive and significant relationships between facets of job characteristics and subjective task performance than objective task performance. there were significant differences in the figure of task performance score between construction professionals in indigenous and expatriate construction companies. results indicated the importance of considering different facets with the job characteristics and task performance relationship. keyword: construction companies, construction professionals, job characteristics, job performance, nigeria introduction job performance is an extremely important criterion that relates to organizational outcomes and success. therefore, organizations design jobs to simplify employee activities at works, manage social-interpersonal daily work, and help to achieve the goal of work efficiently. hence, the success of work design hinges on positively influencing employees behaviour and attitudes such as job performance. task performance refers to behaviours that are role prescribed, distinguish one job from another, and contribute to the technical core of the organization (borman & motowidlo, 1993; campbell, mccloy, oppler, & sager, 1993). task performance involves patterns of behaviours that are directly involved in producing goods or services. the relationship between job performance and job characteristics has fascinated researchers for decades and several theoretical explanations have been posited to explain this relationship (watt & greguras, 2004).despite the intuitive and theoretical appeal of the hypothesized relationship between job characteristics and job performance, the empirical support for this relationship has been mixed. meta-analyses of the relationship between job characteristics and job performance have reported a wide range of results between overall job characteristics and overall job performance. previous empirical studies found that job characteristics has an effect on job performance (morgeson et al, 2006, 2008; humphrey, 2007; hollman, 2009; indartono et al, 2010). australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 72 however, the empirical findings on the relationship between job characteristics and job performance are varying. for example, fried and ferris (1987) indicated that dimensions of job characteristics have weak relationships to job performance while humphrey et al, (2007) found that job characteristics are related to high job performance achievement. moreover, humprey et al (2007) suggest the need to clarify previous findings and to investigate actively how the work change influences the relationship between job characteristics and job performance. the divergent results of these meta-analyses of ostensibly the same content domain have been attributed to several factors such as differences in judgment calls and decision rules related to study inclusion criteria, coding of studies, inaccurate corrections for unreliability, and combining multiple, distinct facets of job performance to define overall job performance (judge et al., 2001). another plausible explanation for the variability in reported relationships between job characteristics and job performance is the effect of different conceptualisations and operationalisations of both job characteristics and job performance. for example, it has been suggested that the relationship between job characteristics and job performance varies depending on whether performance is defined in terms of task or contextual performance (organ, 1988). however, direct comparisons of the relationships between job characteristics and objective job performance and job characteristics and subjective job performance have been limited (judge et al., 2001). because of these issues, we considered an empirical examination of the job characteristics and job performance relationship to be a meaningful contribution to the extant literature. ajzen (2005) have suggested that the strongest attitude and behaviour relationships are obtained when the constructs are matched by level of specificity. the strongest attitude–behaviour connections are likely to result from matching specific facet-level job characteristics to specific facets of job performance, thereby enhancing compatibility. thus, it is important to study the job characteristics–job performance relationship at the facet level because it is plausible that due to the multidimensional nature of job characteristics and job performance, there are differential relationships between facets of job characteristics and dimensions of performance. in summary, to better understand the nature of the job characteristics and job performance relationship, our objectives were to (a) conduct a direct, empirical comparison of the magnitude of the relationships between overall job characteristics (skill variety, task identity, task significance, autonomy and feedback) and task performance (objective and subjective), (b) examine the job characteristics and task performance relationship at the facet level of job characteristics and task performance, (c) to compare the figure of job performance rate of construction professionals in indigenous construction companies with those in expatriate construction companies and (d) to compare the figure of job characteristics rate of construction professionals in indigenous construction companies with those in expatriate construction companies. job characteristics and job performance the essence of work design is to produce work quality effects on employee well-being and job performance (hollman, 2009). a job is defined as a collection of related positions that are similar in terms of the work performed or goals served by the organization (brannick, levine, & morgeson, 2007). work design thus refers to the content and structure of jobs that is performed by employees (oldham, 1996). the focus of work design research tends to be on the tasks and activities that job incumbents perform on a day-to-day basis. job characteristics are primarily attributable to the traditional focus on job design of the work itself. recent research demonstrated the importance of job characteristics (humphrey et al., 2007; morgeson & humphrey, 2006). conceptually, morgeson and humphrey (2008) developed job characteristics into five dimensions that make jobs more satisfying for workers. it included autonomy, skill variety, task identity, task significance, and feedback from the job. autonomy is defined as the australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 73 freedom an individual should have in carrying out work. whereas, skill variety is reflected as the extent to which various skills are needed for job performance. task identity is shown as the extent to which an individual completes an entire piece of work. task significance reflects the degree to which a job influences the lives of others, both inside and outside the organization. the last characteristic dimension of task is feedback from the job. it is the extent to which a job imparts information about an individual‟s performance. empirically fried and ferris (1987) indicated that dimensions of job characteristics are strongly related to job satisfaction, growth satisfaction, and internal work motivation, with weaker relationships to job performance and absenteeism. recently, the study by humphrey et al (2007) found that all five motivational characteristics are positively related to job satisfaction, growth satisfaction, and internal work motivation. autonomy is related to objective performance. in contrast, autonomy, task identity, task significance, and feedback from the job had non-zero correlations with subjective performance. in order to support performance, humphrey et al, (2007) indicated that all dimensions of job characteristics are related to high performance achievement. recent empirical test of morgeson et al, (2008) concluded that overall, the five job characteristics have effect on performance. job characteristics and job performance relationship at facet level researchers interested in diagnosing the psychological impact of work have also identified autonomy (at the individual level) as a primary contributor to job performance. for example, self-determination theory identifies the provision of opportunities for self-regulation as one of the environmental supports necessary for the realisation of innate intrinsic motivation tendencies in human beings (ryan & deci, 2000). within the job characteristics tradition of work design, employee autonomy in respect of job-related decisions has long been seen as causative in intrinsic work motivation and subsequent job performance (morgeson & humphrey, 2008) more recently, autonomy has been cast as a central contributor to feelings of psychological empowerment, a collective motivational state linked to job performance (kirkman & rosen, 1999, 2000). beyond perceived significance, job autonomy may also enhance effort and job performance. autonomy is intrinsically motivating, tapping an employee‟s desire for a sense of control, responsibility, and constructive change (fuller, marler, & hester, 2006), resulting in greater effort and persistence (morgeson & campion, 2003). further, job autonomy allows employees to broaden the scope of responsibility and expand the view of their own work roles (i.e., role breadth), leading to extra effort, stronger identity with the job, and better performance (morgeson, delaney-klinger, & hemingway, 2005; wrzesniewski et al., 2003). despite the persistence of these various theoretical traditions linking autonomy to job performance empirical evidence in support of such assertions is surprisingly inconclusive. reviewers of research in this area have, over a number of decades, typically reported only modest and inconsistent relationships between autonomy and job performance (guzzo & dickson, 1996). conceptually, supervisory feedback seeking and relationship development should affect employees‟ task effectiveness because the resulting information helps them do their jobs better. specifically, these proactive behaviours help employees understand their organizations‟ needs and their supervisors‟ expectations, prioritize their tasks appropriately, and improve organizational performance through their job contributions. in support of this logic, morrison (1993) demonstrated a positive linkage between feedback seeking and task mastery and role clarity, while ashford and black (1996) found that feedback supervisory relationship development positively influenced task performance. feedback interventions are actions taken by an external agent to provide information regarding some aspect of an individual‟s task performance (kluger & denisi, 1996). the acceptance of feedback has been noted as a core australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 74 psychological process underlying feedback in organizations (ilgen, fisher, & taylor, 1979). ilgen et al. (1979) defined feedback acceptance as the recipient‟s belief that the feedback is an accurate portrayal of his or her performance. researchers agree that before feedback can be used it must be accepted and internalized (ashford, 1986), and as result of its theoretical importance, feedback acceptance has received extensive empirical attention (e.g., brett & atwater, 2001; ryan, brutus, greguras, & hakel, 2000). researchers has suggested that feedback environment may have important effects on employees‟ task performance and organizational citizenship behaviour (ocb) (e.g., kluger & denisi, 1996; norris-watts & levy, 2004; rosen, levy, &hall, 2006; steelman et al., 2004; whitaker, dahling, & levy, 2007). the task significance and autonomy aspects of the job characteristics model account for meaningful variance in job satisfaction, motivation, and both objective and subjective measures of performance (e.g., humphrey et al., 2007). when employees know that their job assignments have a positive and meaningful impact on the lives of other people, these employees are more likely to exert effort for the successful and timely completion of job assignments (morgeson & humphrey, 2006). as grant (2008) proposed, „„the experience of meaningfulness [increases] job performance by motivating employees to invest additional time and energy in completing their assigned tasks‟‟ these previous findings indicated that job characteristics have the effects of increasing task performance. therefore, based on the previous discussion, the following hypotheses are proposed: hoa: overall job characteristics are not positively related to overall task performance h1a: overall job characteristics are positively related to overall task performance hob: job characteristics (autonomy, skill variety, task identity, task significance, and feedback from the job) are not positively related to task performance (objective and subjective) h1b: job characteristics (autonomy, skill variety, task identity, task significance, and feedback from the job) are positively related to task performance (objective and subjective) hoc: there is no significant difference in the figure of task performance rate of construction professionals in indigenous and expatriate construction companies. h1c: there is significant difference in the figure of task performance rate of construction professionals in indigenous and expatriate construction companies. hod: there is no significant difference in job characteristics design of construction professionals in indigenous and expatriate construction companies. h1d: there is significant difference in job characteristics design of construction professionals in indigenous and expatriate construction companies. research method the research area comprised ten nigerian states and federal capital territory: kano, lagos, oyo, ogun, kwara, anambra, kaduna, delta, rivers, sokoto states and abuja. these states were selected because construction companies selected through the federation of construction industry directory were domiciled in these states. the target population for this study comprised core building industry professionals involved in the procurement of building projects. these australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 75 include architects, builders/construction managers, structural engineers, quantity surveyors, and services engineers (electrical and mechanical). other built -environment professionals such as estate surveyors and town planners were excluded because of the insignificant role they play in the procurement process of building projects. the population sample was drawn from professionals in 49 indigenous construction companies and 32 expatriate construction companies, making 81 construction companies (see table 1 for details) a simple random sampling technique was adopted for construction companies. the construction firms were sampled from the list of contracting firms accredited and registered with the federation of construction industry. the population was stratified according to their operational base within the research areas and a simple random sampling of the population within each state in the research area was carried out using tables of random numbers. job performance measures when researchers study dimensions of job performance, they often measure job performance using subjective supervisor ratings. given that individual job performance is a multifaceted and complex construct that may not be captured with subjective assessments, we included objective indicators of performance for the following reasons: first, compensation research highlights the effectiveness of an organizations objective performance measures in guiding employee behaviour as the role expectations are clearly defined (spreitzer, 1995). second, objective job performance measures limit both intentional and unintentional biases that occur in performance evaluation processes. in this study, modified mustapha and naoum (1998) and igbaria (1991) performance evaluation questionnaire (peq), which contains 24 attitude statements was used by supervisors to measure the performance of professionals who work directly under them. job performance is a multifaceted term. it is not able to measure job performance by a single criterion. a set of criteria has to be employed. the study employed a more practical approach that was to select key job performance criteria from prior empirical studies. after a review of the relevant literature, two studies that had tested different sets of job performance criteria were identified. 1. mustapha & naoum (1998) studied factors influencing the effectiveness of construction site managers. thirty sites were used for their study. part of the research was to ascertain the multiitem measure of job performance. supervisors were required to rate each of their site managers‟ employees on 11 items on a ten-point scale. 2. igbaria (1991) studied the antecedents and consequences of job performance of management information systems mis professionals. one hundred four supervisors and 94 mis employees participated in the research. part of the research was to ascertain the multi-item measure of job performance. supervisors were required to rate each of their mis employees on 17 items on a seven-point scale. the response format originally designed by mustapha and naoum (1998) and igbaria (1991) was altered. in this study, instead of the 10-point likert scale used in mustapha and naoum (1998) study, and 7point likert scale used by igbaria(1991), a 5-point likert scale was used for measurement in this study, with 5 indicating strongly agree„„ and 1 indicating strongly disagree. cronbach„s alpha is a measure of internal reliability. this is bounded by 0 and 1, with measures closer to 1 representing strong reliability for the items in the research instrument. the job performance instrument in this study recorded a cronbach„s alpha value of 0.80. this research measured job performance objectively by calculating the percentage increase or decrease on the estimated program in weeks (%+ or % time) and percentage cost overrun australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 76 (%+ or % cost). this was calculated after the + or – authorized value of variations by the client was taken into account. job performance score: the maximum score that can be given to the respondents by their respective supervisors is 5 x 24 = 120, this was computed and recorded for each of the respondents and the aggregate scores were divided by total number of the respondents to arrive at the subjective job performance score. job characteristics measures we measured job characteristics using hackman and oldham‟s (1975) scale. there were 11 items representing the five dimensions of job characteristics: skill variety, task identity, task significance, autonomy, and feedback. sample items include the following: “my job requires me to use a number of complex, high-level skills”; “from start to finish, my tasks are very complete and my contribution can be seen in the final results”; “the results of my work have a significant effect on other people‟s lives and well-being”; “my job gives me the chance to use my personal initiative or judgment in carrying out the work”; and “my supervisor frequently discusses matters related to my job performance.” the response options ranged on a 5-point likert-type scale from 1 (strongly disagree) to 5 (strongly agree). the cronbach‟s alpha for each of the five job characteristic dimensions was .72, .56, .68, .63, and .79, respectively. results and discussion from the biographical information of the respondents presented in table 1, civil engineers constitute the largest majority of the respondents with 20.8% and 29.1% respectively in indigenous and expatriate construction companies. others are: architects 19.4% and 12.1%, builders 18.5% and 18.2%, quantity surveyors 17.7% and 21.3%, electrical engineers 13% and 10.3%, mechanical engineers 10.6% and 9%.this results is in agreement with the employment structure of most construction companies in the area of study. as regards the working experience of the respondents in the construction industry, 45% and 47% of the study samples in indigenous and expatriate construction companies have less than 10years working experience in the industry, 30% and 31% 0f the respondents were in the age range of 1019years, 19% and 15% were between 20 and 29 years, 4% and 4%were in the age range of 3039years, while 2% and 3% respectively have more than 40years working experience in the construction industry. this means that most of the respondents have relevant experience to make contribution to this study. in terms of the age distribution of the respondents, majority of the respondents in indigenous construction companies 34.7% are within the age range of (31-40) years while in expatriate construction companies, majority of the respondents are within the age range of (41-50) years. the results on age distribution of respondents indicates that expatriate construction companies had in their employment older construction professionals than indigenous construction companies, this difference may explain why the rate of turnover is more pronounced in indigenous construction companies than expatriate construction companies. as regards the academic qualification of respondents, the majority of respondents, 38.9% and 36.4% had masters degree in indigenous and expatriate construction companies. others are: higher national diploma 28.7% and 30.3%, bachelors degree 25.5% and 27.9%, doctor of philosophy 4.1 % and 2.4%, ordinary national diploma 2.8% and 3% respectively. the result shows that most of the respondents are well educated and are competent to answer the questions in the research instrument. in terms of professional qualification of respondents, the majority of respondents are yet to be professionally qualified, this class of the respondents represents 66.2% and 53.4% in indigenous and expatriate construction companies. others are: australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 77 personal variables i.c.c e.c.c 1. professional group freq per (%) cum. per (%) freq per (%) cum. per (%) architects 42 19.4 19.4 20 12.1 12.1 builders 40 18.5 37.9 30 18.2 30.3 civil engineers 45 20.8 58.7 48 29.1 59.4 mechanical engineers 23 10.6 69.3 15 9.0 68.4 electrical engineers 28 13.0 82.3 17 10.3 78.7 quantity surveyors 38 17.7 100.0 35 21.3 100.0 total 216 100.0 165 100.0 2. industrial experience less than 10 years 98 45.4 45.4 78 47.3 47.3 10-19 years 65 30.0 75.4 51 30.9 78.2 20-29 years 40 18.5 93.9 24 14.5 92.7 30-39 years 9 4.2 98.1 7 4.2 96.9 40 years and above 4 1.9 100.0 5 3.1 100.0 total 216 100.0 165 100.0 3. age ( in years) less than 20 years 17 7.9 7.9 23 13.9 13.9 21-30 years 54 25.0 32.9 34 20.6 34.5 31-40 years 75 34.7 67.6 38 23.0 57.5 41-50 years 56 25.9 93.5 53 24.5 82.0 above 50 years 14 6.5 100.0 17 18.0 100.0 total 216 100.0 165 100.0 4. academic qualification ond 6 2.8 2.8 5 3.0 3.0 hnd 62 28.7 31.5 50 30.3 33.3 b.sc 55 25.5 57.0 46 27.9 61.2 m.sc 84 38.9 95.9 60 36.4 97.6 ph.d 9 4.1 100.0 4 2.4 100.0 total 216 100.0 165 100.0 5. professional qualification nse/coren 29 13.4 13.4 44 26.7 26.7 mniqs/rqs/rics 22 10.2 23.6 8 4.8 31.5 mnia 10 4.6 28.2 14 8.5 40.0 mniob 12 5.6 33.8 11 6.6 46.6 non qualified members 143 66.2 100.0 88 53.4 100.0 total 216 100.0 165 100.0 table 1 profile of study sample freg. =frequency, per. =percentage, i.c.c =indigenous construction companies, e.c.c =expatriate construction companies australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 78 nse/coren, 13.4% and 26.7%, mniqs/rqs/rics, 10.2% and 4.8%, mnia, 4.6% and 8.5%, mniob, 5.6% and 6.6%. this results may be a reflection of low salaries and incentives prevalent with most construction companies in the area of study, in the sense that qualified professionals seek employment where the pay is good. association between overall job characteristics and task performance the results presented in table 2 indicate that overall job characteristics are positively and significantly related to overall task performance. these results provide support for hypothesis h1a: overall job characteristics are positively related to overall task performance. this result is consistent with the work done by (humphrey et al, 2007; morgeson et al 2008). in order to support performance, humphrey et al, (2007) indicated that all dimensions of job characteristics are related to high performance achievement. recent empirical test of morgeson et al (2008) concluded that overall, the five job characteristics have effect on performance. pearson correlation m sd task performance job characteristics task performance 60.71 13.35 1 0.205** (sig = 0.000) job characteristics 36.40 3.77 0.205** (sig. = 0.000) 1 table 2 association between overall job characteristics and overall task performance ** correlation is significant at 0.01 level (2 tailed), m = mean, sd = standard deviation table 3 reveals descriptive statistics (means and standard deviations) and pearson correlation coefficients of the variables. there are several interesting findings that should be noted. the correlation coefficient indicates that all the five facets of job characteristics are positively related with objective and subjective task performance. all the five facets of job characteristics are significantly correlated with subjective task performance. with the exception of autonomy and task significance, all the five facets of job characteristics are significantly related to objective task performance .hypothesis h1b: job characteristics (autonomy, skill variety, task identity, task significance, and feedback from the job) are positively related to task performance (objective and subjective) is strongly supported by this result. autonomy and objective/subjective task performance subjective task performance was significantly and positively predicted by autonomy (r= 0.133, p<0.01). there were weak but positive correlation between autonomy and objective task performance (r=0.060, p<0.01).there were significant positive correlations between autonomy and other studied variables. this finding is supportive of result of previous studies (humphrey et al, 2007; morgeson et al., 2008). these studies established modest relationship between autonomy and subjective task performance as well as objective task performance. task identity and objective/subjective task performance task identity was significantly correlated with subjective task performance (r= 0.176, p<0.01) and objective task performance (r=0.252, p< 0.01). there were significant positive correlations between task identity and other studied variables. this finding supports result of previous studies (humphrey et al., 2007; morgeson et al., 2008). these studies established modest australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 79 relationship between autonomy and subjective task performance as well as objective task performance. skill variety and objective/subjective task performance skill variety was significantly correlated with subjective task performance (r=0.217, p< 0.01). objective task performance was significantly and positively predicted by skill variety(r = 0.162, p< 0.01). there were significant positive correlations between skill variety and other studied variables. this finding is in agreement with the result of previous studies (kirkman & rosen, 1999, 2000; morgeson et al., 2008). these studies established modest relationships between skill variety and subjective task performance as well as objective task performance. task significance and objective/subjective job performance task significance significantly correlated with subjective task performance (r= 0.264, p< 0.01). there were weak but positive correlation between task significance and objective task performance (r= 0.138, p<0.01). there were significant positive correlations between task significance and other studied variables. this finding supports results from previous studies (humphrey et al., 2007; morgeson et al., 2008). these studies established modest relationships between task significance and subjective task performance as well as objective task performance. feedback and objective/subjective job performance feedback was significantly correlated with subjective task performance (r=0.219, p<0.01) and objective task performance (r=0.119, p<0.01). there were significant positive correlations between feedback and other studied variables. this result is consistent with previous findings (morrison, 1993; rosen et al., 2006 ;dahling&levy,2007).these studies found that feedback supervisory relationship development positively influenced task performance. variables 1 2 3 4 5 6 7 1. autonomy 2. task identity .261** 3. skill variety .250** .220** 4. task significance .232** .230** .312** 5. feedback .246** .240** .239** .243** 6. objective performance .060 .252** .162** .138 .119* 7. subjective performance .133** .176** .217** .264** .219** .379** m 3.62 3.70 3.80 4.14 4.10 12.63 47.89 sd 1.04 1.10 1.08 0.91 1.05 2.70 6.85 table 3 means, standard deviations, and bivariate correlations among study variables m = mean, sd = standard deviation task performance rate in indigenous and expatriate construction companies table 4 shows at a glance the descriptive statistics of task performance of construction professionals in indigenous and expatriate construction companies. what can be inferred from table 4 is that the average task performance score for construction professionals in indigenous construction companies is (53.16) which means that their performance is average while for australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 80 construction professionals in expatriate construction companies with task performance score of (70.60), their performance is good. variables n mean std. dev. std. error task performance indigenous expatriate 216 165 53.16 70.60 8.84 11.71 0.60 0.91 table 4 descriptives of independent samples t-test of task performance of construction professionals in indigenous and expatriate construction companies std. dev. = standard deviation std. error = standard error table 5 indicates independent samples t-test of job performance of construction professionals in indigenous and expatriate construction companies. the value of t (df =379) is 16.571, p < 0.05 with a two-tail p value, sig. (2 tailed) of 0.000, t is significant at the 5% level. this result supports the hypothesis h1c: that there is significant difference in the figure of task performance rate of construction professionals in indigenous and expatriate construction companies. variables t df sig. (2 tailed) mean difference std. error decision task performance t-test for equality of means 16.571 379 0.000 17.44 0.80 accept h1c table 5 independent samples t-test of task performance of construction professionals in indigenous and expatriate construction companies df = degree of freedom sig. = significance std. error = standard error job characteristics design in indigenous and expatriate construction companies table 6 shows at a glance the descriptive statistics of job characteristics design of construction professionals in indigenous and expatriate construction companies. what can be inferred from table 6 is that the design of core dimensions of job characteristics is poor in indigenous and expatriate construction companies and there is no significant difference in job characteristics design in indigenous and expatriate construction companies. variables n mean std. dev. std. error job characteristics indigenous expatriate 216 165 36.40 36.40 3.78 3.77 0.26 0.29 table 6 descriptives of independent samples t-test of job characteristics of construction professionals in indigenous and expatriate construction companies std. dev. = standard deviation std. error = standard error australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 81 the value of t (df =379) is -0.005, p < 0.05 with a two-tail p value, sig. (2 tailed) of 0.996, t is not significant at the 5% level. this result supports hypothesis hod: that there is no significant difference in job characteristics design of construction professionals in indigenous and expatriate construction companies. variables t df sig. (2 tailed) mean difference std. error decision job characteristics t-test for equality of means -0.005 379 0.996 -0.002 0.39 accept hod table 7 independent samples t-test of job characteristics of construction professionals in indigenous and expatriate construction companies df = degree of freedom sig. = significance std. error = standard error conclusion the purpose of our study was to examine the relationship between overall job characteristics and task performance. we contribute to extant literature by (a) concluding a direct, empirical comparison of the magnitude of the relationship between overall job characteristics and task performance, and (b) examining the job characteristics and task performance relationship at the facet level of job characteristics and task performance. in support of hypothesis h1a, there was a significant, positive relationship between overall job characteristics and overall task performance. our results were consistent with (morgeson et al., 2006; morgeson et al, 2008; humphrey et al, 2007; hollman, 2009 and indartono et al, 2010). these findings extend humphrey (2007) study that five dimensions of task characteristic are related to performance directly and strengthen morgeson et al (2008) finding that concluded that overall five task characteristics have effect on performance. in contrast to overall job characteristics, operationalizing job characteristics at the facet level showed differential relationships with objective and subjective task performance in the predicted direction for the five core dimensions of job characteristics. three of the five facets of job characteristics were significantly related to objective task performance, but all the five facets were significantly related to subjective task performance. in addition, the figure of task performance score for construction professionals in expatriate construction companies is higher than their indigenous construction companies while there was no significant difference in their job design approach. a major contribution of the present study is that we examined the job characteristics and task performance relationship at the facet level of job characteristics and task performance. this is important for several reasons. first, both job characteristics and performance are multifaceted (e.g. kinicki, et al., 2002). so examinations of the relationship between overall job characteristics and overall task performance may confuse the true nature of this relationship. thus, our results indicated that the relationship between job characteristics and task performance may best be assessed at the facet level and the failure to do so may explain the wide range of effect sizes reported in the literature (hollman, 2009 and indartono, et al., 2010). second, there are compelling relationships between job characteristics and task performance at the facet level. as our data suggested, certain facets of job characteristics may be more related to task performance than others which may in turn depend on the specific dimension of task performance measured. third, an examination of the job characteristics and task performance at the facet level provides a richer and more complete picture of this relationship. finally, we improved upon designs of previous research and collected job characteristics data from employees and performance data from supervisors, thus eliminating the impact of common method variance which has plague australasian journal of construction economics and building onukwube, h n and iyagba, r (2011) ‘construction professionals job performance and characteristics: a comparison of indigenous and expatriate construction companies in nigeria’, australasian journal of construction economics and building, 11 (2) 71-83 82 previous studies of the job characteristics – task performance relationship in which data were collected from the same source (hollman, 2009; indartono et al., 2010). future research directions this study used role performance to represent the performance explored. extra role performance such as organizational citizenship behaviour (ocb) may enrich further our understanding of total performance related to job characteristics of job design. we measured employees‟ task performance solely from the perspective of their supervisors. it would be useful for future research to complement supervisory judgment with perceptions of peers. references ajzen, i. 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(2003) „interpersonal sensemaking and the meaning of work,‟ research in organizational behaviour, 25, 93–135 book review book review practical guide to engineering and construction contracts philip loots and donald charrett, cch australia limited, sydney 2009, 439 pages plus index, isbn 9781921593529 (hardback) aud 95 philip loots is an international construction lawyer who has been closely involved with the development and application of fidic contracts. he is a registered statutory adjudicator in western australia and the northern territory. dr donald charrett is an engineer, barrister, arbitrator and mediator practising in building and engineering disputes. although called a „practical guide‟ this book is more like an encyclopaedia. it covers an enormous range of topics and includes references to hundreds of valuable sources of information. it includes a glossary of terms. the book is concerned with australian contracts but uses some terms not commonly found in australian contracts. for example, „employer‟, „engineer‟ and „performance bond‟ are used instead of „principal‟, „superintendent‟ and „bank guarantee‟. the book focuses on commercial contracts. it does not attempt to address the particular features of contracts for domestic building work. the authors assume that readers will have no formal knowledge of the law. nevertheless lawyers will find much of value in the book. under the heading „objectives of this book‟ the authors say, „this book is intended to provide a concise but accurate guide to the law relating to construction contracts in australia as at 2009. it is intended for the use of engineers (and others) who are involved in the negotiation and administration of construction contracts to enable them to understand the risks involved, and how to minimise them‟. the book is neither concise nor always accurate but nevertheless it is a magnificent work and an excellent guide to engineering and construction contracts. at the front of the book is an important disclaimer, „no person should rely on the contents of this publication without first obtaining advice from a qualified professional person‟. the book covers such an enormous range of topics that it cannot be expected to deal in depth with the law on particular topics. in a few places, the authors make a statement as to the law that is unsupported by any authority and which, in the reviewer‟s opinion, is not accurate. for example, at p 78 the authors say: a common definition of the role of the engineer (superintendent) is that given in cl 23 of as2124-1992: “the principal shall ensure that at all times there is a superintendent and that in the exercise of the function of the superintendent under the contract, the superintendent – (a) acts honestly and fairly; (b) acts within the time prescribed under the contract or where no time is prescribed, within a reasonable time; and (c) arrives at a reasonable measure or value of work, quantities or time.” this definition is consistent with the terms that would be implied by law in a construction contract if there was no explicit provision governing the role of the engineer. with respect, this is not true. i drafted the clause for inclusion in as2124-1986 to provide a protection for the superintendent and the contractor that was not provided in then current construction contracts or the law. at p 56 the author‟s say: australasian journal of construction economics and building davenport, p (2010) book review, australasian journal of construction economics and building, 10 (4) 75-78 76 there may also be contractual requirements that defined types of communications such as approvals, certificates, consents and communications shall not be unreasonably withheld or delayed. it is good practice to have default or deeming provisions to ensure that failure to issue a communication will not have adverse implications for the innocent party. for example, if the certificate of the engineer is a condition of the liability of the employer, the absence of the certificate will prevent the contractor from recovering payment due to it, even if the engineer‟s conduct is unreasonable. at p 166 they say that where the engineer has not dealt with an extension of time claim within time or has wrongly refused an extension of time and the employer has deducted liquidated damages, the contractor may have an action against the engineer in tort to recover damages. there is no authority for such an extraordinary claim. at p 83 the authors concede that attempts by contractors both in england and australia to seek damages for the engineer‟s negligent certification have been unsuccessful. that is why clause 23 is so important. the effect of clause 23 is that if the superintendent fails to issue or delays in the issue of a certificate or fails certify a reasonable amount or a reasonable extension of time, the contractor has an entitlement against the principal for damages. the entitlement is to the amount necessary to put the contractor in the position in which the contractor would be had the superintendent done what the principal promised to ensure that the superintendent did. no similar entitlement would be implied by law in the absence of clause 23. the consequence clause 23 is that the contractor is not financially disadvantaged by the superintendent‟s failure to certify correctly. the contractor has an entitlement under the contract against the principal. the contractor has no claim against the superintendent because the superintendent‟s conduct has not diminished the contractor‟s entitlement. at p 78 the authors say: a more modern australian standard definition of the superintendent‟s role is the concise requirement in clause 20 of as4000-1997: “the principal shall ensure that at all times there is a superintendent and that the superintendent fulfils all aspects of the role and functions reasonably and in good faith.” this is not more modern. clause 23.1 of as2124-1981 included, “the superintendent shall exercise in a reasonable and equitable manner the powers conferred on him by the contract.” i was able to convince the standard‟s association‟s contracts committee to omit this clause from the 1986 edition. the obligation to act reasonably invites problems. it might be reasonable to let the contractor depart from aspects of the drawings and specifications but the principal should be entitled to require strict compliance. what is the superintendent to do when the principal will not agree to a departure from the specification but the contractor insists that it would be reasonable for the superintendent to allow a departure? at p 89 the authors say that generally the arbitrator has power to open up, review and revise the decision of the engineer. that right is not as valuable as the right to damages provided by clause 23. for example, if the superintendent refuses an extension of time, the contractor may decide to accelerate the work. acceleration costs could be damages for breach of clause 23. the granting by the arbitrator of an extension of time would give no entitlement to damages. similarly, with value of work, the arbitrator may revalue work but that does not give the claimant the right to damages. for breach of clause 23, the contractor might recover hungerford‟s damages but the revision of a decision of the engineer would not give that right. australasian journal of construction economics and building davenport, p (2010) book review, australasian journal of construction economics and building, 10 (4) 75-78 77 the superintendent performs two roles. one is a certifying role. in that role the superintendent should certify a reasonable amount or a reasonable extension of time. the superintendent‟s other role is that of agent for the principal. the principal should be able to insist upon strict performance of the contract and should not be bound to act reasonably. when advising on the selection of a construction contract, the superintendent should look for a form of contract that includes the version of clause 23 which is in as2124-1992. at p 190 the authors say: the final payment certificate is a written confirmation to the employer and the contractor that the engineer is satisfied that: (a) the defects liability period for the works (or the relevant part of it) has expired; and (b) the contractor has fulfilled all its obligations under the contract, including in respect of rectification of all known defects in the works (or the relevant part). when advising on the selection of a construction contract, the superintendent should look for a form of contract that does not require the superintendent to certify that the contractor has fulfilled all its obligations under the contract or rectified of all known defects. the contractor may appear to have fulfilled all obligations and appear to have rectified all known defects but the superintendent can never be certain. the authors do not distinguish between a „final certificate‟ and a „final payment certificate‟. the two most commonly used forms of construction contract in use in the early 1980s were as2124-1981 and npwc3-1981. both provided that the superintendent must issue a final certificate. both included: when all work under the contract has been finally and satisfactorily executed and the contractor has fulfilled all his other obligations under the contract, the superintendent shall issue to the principal and the contractor a final certificate. this provision caused considerable concern to superintendents. some refused to issue the certificate because they considered it placed too great an onus and risk on the superintendent. the clause was of major concern to principals. once it was issued, it seemed that the contractor was no longer liable for defective work or other breach of contract. consequently, when drafting as2124-1986 i removed the provision for a final certificate and coined the term „final payment certificate‟ and provided in clause 42.8, „in the certificate the superintendent shall certify the amount which in the superintendent‟s opinion is finally due from the principal to the contractor or from the contractor to the principal under or arising out of the contract or any alleged breach thereof.‟ the final payment certificate was no more than the superintendent‟s opinion. it did not certify that work had been satisfactorily executed or that the contractor‟s other obligations had been fulfilled. it did not act as a bar to any claim by the principal for defective work that might later be discovered. it is important for the protection of the superintendent and the principal that the final payment certificate is not a certification by the superintendent that the contractor has fulfilled all its obligations under the contract or rectified of all known defects. in chapter 19.15 the authors briefly refer to security of payment legislation. since the book was published, tasmania and the act have enacted and commenced security of payment legislation based upon the nsw act. south australia has enacted legislation but at the end of november 2010 it has not commenced. at p 239 the authors say: because of the far reaching nature of the provisions of such legislation for both contractors and employers, it is vital, when drafting and administering construction australasian journal of construction economics and building davenport, p (2010) book review, australasian journal of construction economics and building, 10 (4) 75-78 78 contracts in australia, to determine whether and how it applies in the particular contract circumstances. security of payment legislation has made such profound changes to the risk allocation in construction contracts that to read the book without at the same time studying any applicable security of payment legislation would be a grave mistake. the book does not cover the implications of the legislation or give guidance on the risks involved or how to minimise them. in those states with security of payment legislation based upon the building and construction industry security of payment act 1999 nsw [now nsw, victoria, queensland, tasmania and the act], it is vital for the superintendent to determine whether his or her role is to issue progress certificates under the contract or issue payment schedules [for the principal] under the security of payment legislation or both. at p 241 the authors describe the security of payment legislation in nsw, victoria and queensland as the „east cost legislation‟ to distinguish it from the security of payment legislation in wa and the nt which is quite different. the authors refer readers to the second edition of my book adjudication in the building industry [federation press]. the third edition was published in 2010. generally speaking, forms of contract in use in australia have not been redrafted to provide the protection available to respondents to payment claims under the security of payment legislation. the result is that sometimes contractors can recover large payments on account of damages and delay costs. examples are walter construction group v cpl (surry hills) [2003] nswsc 266 and coordinated construction v climatech [2005] nswca 229. when drafting a construction contract for use in jurisdictions with the „east cost legislation‟ the best advice a superintendent could give a principal is to do away with progress certificates and appoint the superintendent as the principal‟s agent to issue payment schedules for the principal. philip davenport solicitor the nature of payment problems in the new zealand construction industry the nature of payment problems in the new zealand construction industry thanuja ramachandra and james olabode rotimi (construction management programme, auckland university of technology, new zealand) abstract delay and loss of payment is a serious problem in the construction industry of many countries. these affect the cash flow of contractors which is critical to meeting their financial obligations. payment defaults by the principal leads to insolvency of contractors and in turn other parts of the project chain. in recognition of some of these problems, most countries have established payment-specific construction industry legislation and other contractual measures to mitigate the problems, but nevertheless the problem persists. in this context, the paper examines the nature of payment problems in the construction industry in new zealand. it is part of a larger study, that seeks solutions to payment losses in the construction industry.the study uses two approaches; an analysis of liquidators’ reports, and an analysis of court cases involving payment disputes to determine the magnitude of payment problems on construction parties. the findings are presented using simple descriptive and interpretive analyses. the study finds that trade creditors are impacted negatively (payment delays and losses) by the liquidation of property developers, general construction and construction trade companies. 75% of trade creditors are unable to be paid fully by these categories of construction companies after liquidation proceedings. liquidation proceedings take an average 18 months before they are finalised. the analysis of court cases found that 80% of payment disputes are between principals and contractors; with considerably significant percentage of disputes resulting in outright loss of payments. only 40% of the cases are successful, in which case claimants are able to fully recover the amount in dispute. payment losses are more prevalent in liquidation than delays and unlike in legal disputes, there is no security for those losses. the study finds that construction parties use remedies contained in the security of payment provisions within standard conditions of contract, and legislative documents. keywords: payment loss, payment disputes, liquidation,construction industry, new zealand. introduction traditionally construction project participants work first and then get paid in stages as the project work progresses. it is therefore not surprising that delayed and non-payment of invoices have become prevalent as a result of the abuse of these deferred payment privileges. there are occasional instances where project owners have made unnecessary deductions on their contractor’s invoices thus causing delays to project execution and associated financial difficulties. the prevalence of this financial inappropriateness has been widely reported in notable studies that have spanned the last four decades (banwell, 1964; latham, 1994; egan, 1998). generally the construction industry has a delayed payment culture (johnston, 1999) with payment delays becoming the major cause of disputes within the industry (kenndy, 2005; conlin, 1996; heath et al., 1994; and watts and scrivener, 1993). contractors and subcontractors are at the receiving end of these practices and in the ukconstruction industry for example, these group of project participants have continuously expressed their dissatisfaction towards the time lag between the receipt of their invoices to their final settlement (odeyinka and kaka, 2005). in new zealand also, deferred and delayed payment of contractors’ invoices are not uncommon (gibson, 2009; gibson, 2004). australasian journal of construction economics and building ramachandra, t and rotimi, j o (2011) ‘the nature of payment problems in the new zealand construction industry’, australasian journal of construction economics and building, 11 (2) 22-33 23 failure to pay complete invoices and on time, both have many negative effects on parties to a construction contract. payment delays and losses primarily affect the cash flow of contractors which is crucial to the success of construction projects and the survival of the industry (ang, 2006; singh and lakanathan, 1992; and peer, 1982). frequent payment delays could lead to additional financing and transaction costs and eventually place parties down the chain in insolvency situations (euginie, 2006).conversely, prompt payment for completed work could be seen as a strong incentive to contractors and subcontractors to deliver quality services and to complete projects successfully (cheng, et al., 2008).timely and precise payment helps to develop trust and collaborative working, thereby achieving value for money for construction clients (office of government commerce, 2007). unfortunately deferment and delay of invoices are often deliberate, as deferred payment is used as a project funding mechanism by the upper tiers in a contract (uher and brand, 2005; odeyinka et al., 2003). the recognition of the nature and consequences of payment delays and losses is a key driver to the development of various legal and contractual solutions. for example there are payment provisions in standard form of contracts, bonds and guarantees, and insurance etc. also there are enactments of construction payment specific acts which are reviewed later. in new zealand the construction contracts act was promulgated in april 2003 to curb bad payment practices within the construction industry. this followed the repeal of the wages protection and contractors liens act (1939) in 1987 and the ‘pay when/if paid’ clauses in subcontracts in 1990 (degerholm, 2001). cheng et al., (2008) explains that legislation is being enacted in many jurisdictions around the world, to provide security of payment to construction parties. nevertheless, the payment problem remains widespread within the construction industry and there are suggestions that the problem persists because of inadequacies in solutions or that the nature of the industry (many participants hence conflict of interests and disputes) promotes these sharp practices. in view of the foregoing, this paper analyses liquidator’s reports and cases of construction disputes in new zealand, to show the prevalence of payment delays and losses. it is hoped that this will indicate what remedies could be put in place to deal with the problem. brief literature review the chain payment culture within the construction industry where payment flows from the upper to lower tiers makes the payment to lower tiers dependent on the upper tiers. payment default or insolvency of any party affects payments to others down the chain. even if there are no such obstacles there is often a considerable delay for those at the lower tier in receiving their payments (khosrowshahi, 2000). delay and losses of this nature should have reduced with the elimination or in-effectiveness of conditional payment provisions (pay-ifpaid and pay-when-paid) from most legislation. for example the construction contracts act 2002 in new zealand excluded this provision (pay-if-paid and pay-when-paid), while the united kingdom’s housing grants, construction and regeneration act 1996 made the condition in-effective unless there is no insolvency in the contractual chain. despite these steps, the payment problem persists (sushani, 2005). sushani’s (2005) study found that about 16,000 contractors became nearly bankrupt because several umbrella contractors failed to honour their payment claims, even though government (project owner) had paid the umbrella contractors in full. other literature in the uk (reilly, 2008), australia (barry, 2010) and in new zealand (the dominion post, 2008) present similar occurrences and recount the effects that liquidation could have on trade creditors when there is delayed payment. as explained earlier, the recognition of the nature and consequences of payment delays and losses within the construction industry, led to the development of legal and contractual solutions in many countries. payment provisions exist in standard form of contracts to check payment deferment and delays. bonds and guarantees, and insurance provisions also exist australasian journal of construction economics and building ramachandra, t and rotimi, j o (2011) ‘the nature of payment problems in the new zealand construction industry’, australasian journal of construction economics and building, 11 (2) 22-33 24 to provide protection against the risk of non-payment in construction contracts. a major development in recent times are the enactments of construction payment specific acts to address the payment problems in many countries (cheng et al., 2008). one of such enactments is the building and construction industry security of payment act in new south wales, australia. the act has helped to reduce the frequency of late payments (brand and uher, 2008). in new zealand, the construction contracts act (cca) was promulgated to curb bad payment practices within the construction industry, especially following the liquidation of some large companies because of non-payment by their clients and developers (degerholm, 2003). prior to the cca in new zealand, the wages protection and contractors’ liens 1939 act was in effect and provided security to head contractors, subcontractors and workmen who perform work upon or in respect of any land by claiming a lien over the estate or interest of the owner in the land (s.21). workmen and subcontractors were entitled to a charge over money payable under any superior contract for the work (s.21). however the repeal of the act in 1989 left contractors and subcontractors unsecured. the removal of conditional payment provision (pay-if-paid and pay-when-paid) with the repeal of the 1939 act, enabled subcontractors to get paid on time whether or not lead contractors are paid by the client. this protects contractors also as they may be in better position to understand the client’s financial status and procure necessary security, which may be required in the event of insolvency. in spite of these enactments, there are anecdotal evidences to suggest that the payment problem persists, albeit in different forms. davenport (2005) commenting on the building and construction industry security of payment act in new south wales, explains that the payment mechanism in that act could lead to disputes. the disputes may derive from payment schedules such as non-issuance of payment schedules, and differences between claimed and schedule amounts. ultimately such disputes lead to payment delays and in some cases losses to the claimants. with reference to the cca, new zealand, the default provisions set out in sections 16 to 18 of the cca only apply when a party fails to agree on the provisions of the standard forms of contract. also the statutory payment right given in the cca is not applicable when there is no contractual right specifying the payment. thus the provisions in most of the standard form of contracts such as nzs3910:2003 and nzs3915:2005 supersede the provisions of the act with regards to progress payments. both standards provide contractors contractual rights to claim for progress and final payments. the payment procedures differ slightly. in case of progress payment, the nzs3910 requires payment to be made 17 working days after a progress payment claim (ppc) is served while nzs3915 requires the payment to be received between 10 and 15 working days respectively. the nzs3915 provision depends on whether or not there is dispute on the proposed progress payment schedule (ppps). if no ppps or progress payment schedule (pps) is given, the ppc becomes pps and the payment is made within 17 working days of the claim served. similarly, both standards require the claimant to claim final payment within 2 months of the expiry of any defects liability period. the payment becomes due in 25 working days of receipt of a claim in nzs3910. in nzs3915 the claimant receives the payment within 22, 32, and 34 working days of payment receipt, if no disputes on proposed final payment schedule (pfps), dispute on pfps, and no pfps/fps is issued, respectively. the cca was implemented after the housing grants construction and regeneration act 1996 (uk) and building industry security of payments act 1999 (new south wales, australia). unlike the acts of the uk and nsw which introduced adjudication as statutory dispute-resolving mechanism and statutory payment rights respectively, the cca considers both statutory payment rights and adjudication as the solution to disputes arising out from contracts. sections 14 to 22 of the cca provide payment provisions followed by the consequences of not making the payment as per the previous sections, in sections 23 to 24. the act requires the payer to respond to the claim by providing a payment schedule within http://www.buildingdisputestribunal.co.nz/site/building/files/legislation/construction%20contracts%20act%202002.pdf australasian journal of construction economics and building ramachandra, t and rotimi, j o (2011) ‘the nature of payment problems in the new zealand construction industry’, australasian journal of construction economics and building, 11 (2) 22-33 25 20 working days of receipt of the payment claim. if no payment schedule is received, the payer is deemed to accept that the full amount is due and payable and must pay it forthwith. if payment is not made, the payee can claim the amount as debt due in any court. section 25 and 72 of the cca provides any party to a construction contract the right to refer a dispute to adjudication and enables a party to use work suspension as a measure to secure payment. it is apparent from the foregoing that some of these enactments are not flawless and that payment problems could be experienced within the construction industry. the current paper therefore investigates the issue by studying liquidators’ reports and high court cases. information obtained would give an indication of the nature of the payment problem so that remedial measures could be explored for future construction projects. research method this study is part of a wider research programme that is undertaken in new zealand to provide solutions to payment losses in the construction industry. the study uses two approaches; an analysis of liquidators’ reports, and an analysis of court cases involving payment disputes to determine the existence and magnitude of payment problems on construction parties. the first data set involved liquidators’ reports for three categories of construction companies for which the liquidation proceedings were completed during the 2007 to 2010 period. information on a total of 80 liquidated companies were obtained, but the analysis is based on 65 companies with the dataset required for this study. a primary focus is information on payment delays and losses to trade creditors as these could be used as proxies to construction parties. other information such as the time taken to complete the liquidation process; amount paid/not paid to trade creditors are also used to determine the magnitude of payment delays and losses. the second data set involved reports of construction disputes filed in the high court from 2008 to 2010. thus a total of 40 payment-related cases filed in the high court during the period were used for the analyses. the cases were analysed to ascertain the status of payment delays and losses as determined from the courts’ final judgements. for example if the plaintiff/claimant is a contractor and the judgement is in favour of the claimant, this paper assumes that the proceedings would still have resulted in delays and in some situations a loss to the claimant. it is hoped that these data sources would yield clarity into the status of the payment delays and losses experienced by construction industry participants. a document review on the data set was also undertaken to determine how some of these payment problems were resolved. the findings are presented using simple descriptive and interpretive analyses for clarity and ease of undestanding. research findings analyses of construction liquidation reports the following paragraphs discuss the result of the information extracted from liquidators’ reports for the period 2005 to 2009. information collated from the liquidators reports included: the category of construction companies in liquidation, the amount owed by the companies and the time it took to finalise the liquidation proceedings. the resulting analysis was based on simple frequency counts of these set of information. the liquidators’ reports show that there are three main categories of construction companies that go into liquidation (general construction, property development and construction trade services) in new zealand. table 1 gives a breakdown of the number and percentage of the australasian journal of construction economics and building ramachandra, t and rotimi, j o (2011) ‘the nature of payment problems in the new zealand construction industry’, australasian journal of construction economics and building, 11 (2) 22-33 26 three construction categories which were used for the analyses. each of these categories owes secured, preferential, and unsecured trade creditors. the study found that secured creditors are protected with the retention of title claims or their secured interest over the goods or equipment supplied to the company in liquidation; while preferential creditors get paid out of liquidation proceeds as they rank the highest amongst all creditors. it is the unsecured creditors that are mostly left with little or nothing after liquidation proceedings. table 1 also gives a breakdown of the amounts owed to trade creditors (and the corresponding amount owed within each category) by the three categories of companies in liquidation within the period. the sums of money owed to trade creditors are classified, and range from below $10,000 to above $1,000,000. the classification of the amounts owed was done for ease of representation. construction category number in each category percentage % amount owed (nz$) frequency percentage % general construction companies 27 42 above 1,000,000 4 15 500,000 – 1,000,000 5 18 100,000 – 500,000 10 37 below 100,000 8 30 property developers 22 34 above 200,000 2 9 100,000 – 200,000 4 18 50,000 – 100,000 1 4 10,000 – 50,000 3 14 below 10,000 12 55 construction trade services 16 24 above 200,000 3 19 100,000 – 200,000 4 25 below 100,000 9 56 totals 65 100 table 1 amount owed by construction companies in liquidation from the table 1, it is observed that the value of the amount owed to trade creditors by general construction companies is the largest of the three categories. this is obvious considering that this group includes small to fairly medium scale construction firms with a higher level of turnover than the other two categories. the largest percentage (37%) of companies in the general construction business owed their trade creditors between $100,000 and $500,000 when they went into liquidation. followed by another 30% owing less than $100,000. further examination of the liquidators’ reports reveal that on average the amount owed to trade creditors by this category of construction companies were about 78% of the total sum owed to unsecured creditors.this value is indicative of the negative impact that liquidation of this category of construction companies can have on other parties in the chain. on the other hand, property developers that went into liquidation largely (55%) owed their creditors less than $10,000 during the period. comparatively the value owed is less than general construction companies because these property developers were mostly involved in residential construction works. further analyses reveal that of the property developers that owed less than $10,000, 60% owed between s1,000 and $,5000. on overage the amount australasian journal of construction economics and building ramachandra, t and rotimi, j o (2011) ‘the nature of payment problems in the new zealand construction industry’, australasian journal of construction economics and building, 11 (2) 22-33 27 owed to trade creditors by this category of construction company is 20% of the total owed to their unsecured credtiors. compared to other construction categories this amount seem insignificant. finally table 1 presents information on the amount owed to trade creditors by companies in the construction trade services category. the breakdown shows that the amount owed ranges from below $100,000 to above $200,000. the largest percentage (56%) of companies owed less than $100,000. a further analysis of the 56% that owed below $100,000 shows that 67% owed between $50,000 to $100,000. upon further examination of the reports, it was observed that on average, the amount owed to trade creditors were 70% of amount owed to total unsecured creditors by this category. this is considerably significant, although lower when compared to companies in general construction. there was further investigation into the liquidators’ reports to determine how well these categories of companies honour payment obligations after liquidation proceedings. the reports show that all the companies in the general construction category were unable to pay their trade creditors after the liquidation proceedings. liquidated property development companies fared slightly better but with one company (out of 22) that partly paid (11.89 cents per dollar) to its creditors. 17 (77%) of the property developers could not pay their creditors and the remaining had either no trade creditors or did not disclose the amount they owe their trade creditors. of note is that the only property development company that made partial payment to its creditors took 6 months to pay after the liquidation proceedings. evidently the time lag between the liquidation proceeding and final settlement is an unnecessary delay that could not augur well for the creditors. in the construction trade services category, one (out of 16) company paid its trade creditors fully, about 20% paid pro rata (20 cents per dollar), and 75% (12 out of 16) could not pay their creditors at all. further investigation show that settlement of trade creditors took an average of 18 months since the commencement of liquidation proceedings to be finalised. the foregoing provides evidence of both payment delays and losses when construction companies are liquidated. although there is no clear indication of the delays and losses experienced by individual construction participants (head contractors, subcontractors, subsubcontractors etc), or which tier (upper or lower) is affected in liquidation. it is however clear that trade creditors are at the receiving end in any liquidation proceeding. in the following section, construction disputes are analysed in the hope that this will permit a determination of the construction parties affected by payment delays and losses. analyses of legal disputes in construction the result of the information extracted from construction disputes which were filed in the high court between 2008 to 2010 in new zealand, are presented in the following paragraphs. there were 40 legal disputes which were heard or transferred to the high court within the period. the cases relate to payment disputes between parties to construction contracts (principal, lead contractors and sub contractors). a breakdown of the cases is presented in table 2. the table provides information on the parties and the amounts in dispute, the nature of the payment in dispute and the final status (in terms of delays and losses). on observation, the table shows that nearly 82% (33 out of 40) of the cases considered are payment disputes between principals and contractors; while the remaining 8% and 10% of the disputes are between principals and subcontractors; and contractors and subcontractors respectively. for legal disputes between principals and contractors, 60% of the times the principals were the plaintiff while in the remaining 40%, the plaintiff were the contractors. this would suggest that payment delays and losses are more likely to be among principals, and contractors than with subcontractors. analysis of the cases reveal that the disputes deal primarily with the validity of progress and final payment claims, claims for variation cost, variation between australasian journal of construction economics and building ramachandra, t and rotimi, j o (2011) ‘the nature of payment problems in the new zealand construction industry’, australasian journal of construction economics and building, 11 (2) 22-33 28 no. plaintiff (p/c/sc) defendant (p/c/sc) nature of payment in dispute amount claimed (nz$) status of payment in final judgement/decision 1 p sc fp 32k improper statutory demand loss to subcontractor. 2 sc c fp 1,184k court awarded subcontractor $327k delay and loss to subcontractor. 3 p c fp 442k claim was paid in full delay to contractor. 4 c sc fp 33k statutory demand is set aside loss to subcontractor. 5 c p fp 72k principal's statutory demand was set aside loss to principal. 6 c sc fp 345,395k application to set aside the statutory demand was withdrawn, contractor is entitled to pay subcontractor delay. 7 p c fp 110k application to stay liquidation proceeding was dismissed loss to principal. 8 p c fp 1,324k bankruptcy application is adjourned likely loss to contractor. 9 p c fp 28k caveat for non-payment is removed and the amount is held in trust account pending resolution delay to contractor. 10 p c fp 109k contractor was paid in full but experiences a delay. 11 p sc pp 47,000k case referred to adjudication. 12 c p pp undisclosed technically invalid payment claimloss to contractor. 13 p c pp 190k unresolved. 14 c p pp 219k contractor has no caveatable interest in the land likely loss to contractor. 15 p c pp 37k payment claim is not valid loss to contractor. 16 p c pp 53k contractor was paid in full delay to contractor. 17 c p pp 511k contractor was successful partially and paid $178k and lost $332k delay and loss to contractor. 18 c p pp 22k both parties were successful dispute resolved. 19 c p pp 205k claims were valid, contractor was awarded full amount but experienced delay. 20 c p pp 97k contractor remains as unsecured creditor loss to contractor. 21 p c pp 76k court awarded contractor $57k a delay and loss to contractor. 22 p c pp 466k statutory demand is not set aside, contractor is to be paid delay to contractor. 23 p c pp 139k contractor is paid in full but experienced a delay. 24 p sc pp 766k statutory demand was set aside loss to subcontractor. 25 c p pp 78k case referred to adjudication likely outcome is delay to contractor. 26 c p pp undisclosed contractor discontinued the court proceedings – dispute resolved. 27 p c pp 35k contractor was paid in full but experiences a delay. 28 p c pp 13k court ordered contractor to pay principal contractor lost the claim of $19k and pay $12k; delay to principal. 29 p c pp 157k contractor was paid in full but experiences delay. 30 c p pp 11k dispute remains unresolved likely delay or loss to contractor. 31 c p pp 246k contractor awarded partially $79k pending further order delay and loss to contractor. 32 p c pp 28k application to set aside summary judgement was successful; principal as trustee not the legal entity entitled to payment loss for the party who has done the work. 33 p c op 282k bankruptcy notice is accepted, contractor is to be paid $322k as per adjudicator's determination delay to contractor. 34 c p retention 33k contractor was paid in full but experiences delay. 35 c p op 13k court awarded contractor $13k plus the costs of preparing for and appearing at the summary judgment hearing related to payment claim of $27kdelay. 36 c sc op 123k costs awarded to contractor in dispute due to non-issuance of payment schedule for $123k is defended delay to subcontractor. 37 p c op 112k statutory demand for the payment was set aside by consents neither loss nor delay to the contractor. 38 c p op 280k contractor's application to enter the charging order is dismissed as only district court could enter a charging order likely loss and delay to contractor. 39 p c op 1,000k principal's interim relief application is declined likely delay to contractor. 40 p c op undisclosed application for adjournment was declined contractor to be paid but delayed. table 2 summary of construction payment disputes australasian journal of construction economics and building ramachandra, t and rotimi, j o (2011) ‘the nature of payment problems in the new zealand construction industry’, australasian journal of construction economics and building, 11 (2) 22-33 29 claimed and schedule amount, non-payment due to defective and incomplete work, nonissuance of payment schedule, etc. thus for ease of analyses, this paper has classified the payment claims into three: final (fp), progress (pp) and other payments (op). other payment claims includes claims which are not defined as progress or final payment; and they include payment of retention sums, claim for costs incurred in court proceedings related to the payment claim and schedule. the result show that 22 cases out of 40 (55%) studied were related to progress payments; 25% related to final payments and the remaining 20% are other payments. therefore it would seem that it is the progress and final payments that are more likely to be delayed and lost by construction participants. a breakdown showing the magnitude of the sums in dispute are depicted in figure 1. the figure shows that most of the claims (46%) are in the less than $100,000 category. the second highest number of claims (40%) is between $100,000 and $500,000. the amount claimed in 11% of the cases was above $1,000,000 while in 3% of the cases the claims were between $500,000 and $1,000,000. table 2 gives a comparison of the amounts in disputes (column 5) with those awarded in the final judgement (column 6). this shows that there is a high probability (risk) that construction payments will either be delayed, paid partly/fully or both. payment delays are obvious in court cases because the cases would have been through an adjudication process, the district court enforcement, and subsequently to the high court for appeal. though, some cases could be filed directly at the high court without necessarily going through an adjudication process. in reporting the figure, the paper therefore assumes that whether a claimant is paid fully or partially, since it was referred to the high court, the project would have been delayed. payment loss is assumed to have been experienced by a claimant when it loses the claim or was not paid by the defendant. the status of payment was classified as likely delay or loss if it was unresolved, pending further decision or determination. figure 1 distribution of amount claimed in disputes table 3 provides the summary of payment status in final judgement and indicates that, in 40% of the cases claimants were paid fully but experienced delay in getting paid. in another 10% claimants were partially paid, experienced delay in the process while also losing the amount that was not paid. it was observed that 25% of the claimants lost their case for reasons traceable to their actions or inaction. for example some of the claimants failed to comply with contractual obligations; submitted invalid payment claims and statutory demands; and provided inappropriate payment schedules. for the 25% of claimants who lost their cases, the amount lost was mostly less than $100,000. a further 20% identified in the study are those companies that are likely to be delayed or lose money, because these few cases were unresolved and referred back to adjudication. australasian journal of construction economics and building ramachandra, t and rotimi, j o (2011) ‘the nature of payment problems in the new zealand construction industry’, australasian journal of construction economics and building, 11 (2) 22-33 30 the remaining 5% shown in the table refer to cases in which both parties (claimant and defendant) came to an agreement and the disputes were consequently resolved. on evaluation of the cases, it was found that it took an average of 4 days to arrive at judgements from the date the cases were heard in the high court. 19 of the cases (out of 40) were filed in the high court following the enforcement of adjudicator’s determination at district courts. adjudication usually takes up to 6weeks from the commencement of the process. generally, irrespective of adjudication or court decisions, delay to payment requests would have been experienced by parties to a contract when a legal dispute is involved. the forgoing provides an insight into construction payment delays and losses and show that these are prevalent. it gives an indication that some solutions need to be sought. therefore the next section reviews the strategies that are used in construction liquidation and construction disputes to tackle the payment problems. payment status no of cases % paid fully – delay 16 40 paid partially loss & delay 4 10 loss 10 25 likely loss or delay 8 20 other 2 5 total 40 100 table 3 status of payment disputes strategies used to tackle payment delays and losses further analyses of the 40 legal disputes which were heard or transferred to the high court cases between 2008 and 2010 was undertaken to determine the different strategies used by claimants to protect against delays and losses. the investigations reveal that legal and contractual provisions available in the cca and standard forms of contracts (such as nzs3910:2003 and nzs3915:2005) were employed by the claimants. the cca provisions were used in more than 50% (21 out of 40) of the disputes while another 20% used standard form of contracts. other strategies used include the placing of a charging order or caveat registration, bankruptcy and liquidation proceedings etc, as a remedy for non-payment. section 29 of the cca allows a party to obtain approval for issuing a charging order against a site owned by the respondent (in this case the project owner). the dispute records show that in few cases (4 out of 40 cases) claimants have sought for a charging order to mitigate non-payment by respondents and these were approved by the adjudicator. subsequently a charging order was placed over the owners’ properties. caveats are another strategy used to tackle delays and losses in a construction contract. a caveat is a notice which is registered against a title for any party to be aware that a claim is being made and sought. caveats are used by persons who wish to protect an interest in land by preventing the registered proprietor from disposing of the land or dealing with it in a way that would affect the caveators’ rights and interests. the administration of caveats is contained in the new zealand land transfer act 1952. in one of the 40 cases the claimant (developer) lodged a caveat against the title of the land to recover payment due from owner. in another situation a project owner applied to the court for a removal of the caveat lodged by the contractor over his land. australasian journal of construction economics and building ramachandra, t and rotimi, j o (2011) ‘the nature of payment problems in the new zealand construction industry’, australasian journal of construction economics and building, 11 (2) 22-33 31 finally the dispute records show that in two cases (4%) the principal (project owner) submitted an application to set aside the bankruptcy notices issued to them. this was made after an order to pay their contractors. in few other cases, some claimants’ lodged liquidation proceedings to recover the amount claimed, which was subsequently appealed by the respondents to stay the liquidation proceedings. in both cases the applications were dismissed. these few cases give an indication that bankruptcy notice and liquidation proceedings could be used as a last resort to recover payments from project owners and debtors. conclusions this paper has analysed liquidators’ reports and construction payment dispute cases filed in the high court, to determine the nature of payment losses and delays in the new zealand construction industry. in addition it reviewed some of the strategies used to deal with delays and losses by parties in construction contracts. the results reveal that a significant percentage of construction companies went into liquidation within the period of analyses. this caused losses and delays to their trade creditors. for example, 37% of general construction companies owed between $100,000 and $500,000 while another 30% owed less than $100,000. more than 50% of construction trade service companies owed less than $100,000 whilst 55% of property developers owed less than $10,000. the study has shown that above 75% of trade creditors are unable to be paid fully by the three categories of construction companies after liquidation proceedings. liquidation proceedings take an average 18 months before being finalised. the magnitude of losses experienced by trade creditors vary widely depending on the category of construction companies that are being liquidated. it could be concluded that liquidation of companies most often result in payment losses and delays and there seems to be little security for payment losses in insolvencies. the above conclusions are corroborated by the results obtained from the investigation of payment disputes heard in the high courts. the results provide further evidence that payment delays and losses are prevalent within the industry. disputes relating to progress and final payments account for 80% of the high court cases analysed. the study found that upon court decisions, only 40% of the cases are successful in which case the claimants recovered all the money in dispute, while the remaining cases are either partially successful or unsuccessful. disputes mainly emanated from provisions in legal and contractual instruments such as those outlined in the cca and other standard conditions of contracts in new zealand. therefore as well as providing protection from delays and losses, some of the procedural requirements in these documents may become sources of disputes that could also cause delays and losses to the parties in dispute. finally the study reveals that several strategies for securing payments are being used within the new zealand construction industry. some of these include: the placing of charging orders and registering caveatable interest over properties, lodging bankruptcy and liquidation proceedings, holding money in trust account, direct payment by sureties. further investigations into the success of these strategies would be useful in future research studies. acknowledgement the authors acknowledge the contributions of daniel datt suresh for helping with the extraction of the required information from the high court case files. references ang, s. s. 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(1993) ‘review of australian building disputes settled by litigation’, building research information, 21 (1), 59-63 microsoft word paper 8 dec.doc issue for the global construction market by george r najjar et al the australian journal of construction economics & building page 73 issues for the global construction market george r najjir and philip c love, university of western sydney, and goran runeson, university of newcastle, new south wales introduction there are many issues in regard to the impact of globalization on the construction industry that have emerged or are still emerging. some are general, as for example, the polarisation of the global economy; the new rules and regulations controlled by organisations such as the world trade organisation (wto); unrestricted international capital flows; and the influence of shareholders on the strategic directions of the organisation. others are specific to the construction industry such as the influence of globalization on construction industry development; the more frequent listing of construction companies on stock exchanges; and the impact of globalization on other, non listed, construction related businesses. this paper will examine some of these construction specific issues in context of the limited knowledge of their specific implications on the globalization of that industry. the paper takes the view that much of current “knowledge” in the debate of the impact of globalization on the construction industry is oversimplified with little or no respect for evidence or need for quantification. the core theses being that globalization will create a new construction industry and that there will be little contact between the old and the new industry. defining globalisation the word ‘global’ may be over 400 years old (oed 2000 s.v. global), but the common usage of derivative words such as globalization and globalize did not begin until the late 1950’s. since the end of the cold war in the 1980’s, the concept of globalization has become more widespread. today globalization is widely assumed to be crucially important. generally, the concept of globalization is defined as (e.g. friedman 2000, scholte 2000, mulgan 1999, waters 1995) an international system of increasing connectivity between countries, corporations and individuals which involves some form of trade, exchange, sharing or distribution of either quantifiable or non quantifiable components (najjar et al. 2000). “a social process in which the constraints of geography on social and cultural arrangements recede and in which people become increasingly aware that they are receding” (waters, 1995, pg.3). from an economic perspective globalization represents increasing capital flows and trade of goods and services and the spread of free-market capitalism to virtually every country in the world (soros, 1998). from a social perspective globalization represents the sharing and exchange of ideas, beliefs and values as well as issues such as human rights, working conditions and consumer protection. from a legal perspective globalization represents rules and regulations of organisations such as the world trade organisation (wto). from a political perspective globalization represents the international relations and multilateral trade agreements with the removal of trade barriers between individual countries and economic communities. the global debate the global debate (schwartz, 2000) seems polarised between those who see globalization as a new force that will change cultures, societies and economies across the world and those that say that globalization is nothing new and incapable of influencing local states. issue for the global construction market by george r najjar et al page 74 the australian journal of construction economics & building the problems mostly associated with globalization include the inequitable distribution of goods, services and wealth together with the unresolved problems of suppression of human rights and increased poverty and social unrest. social commentators (e.g. chomsky, nader, galbraith et al.) strongly criticise organisations such as the wto, and the international monetary fund (imf) and the world bank for being un-elected, undemocratic organisations that conduct their business behind closed doors with no mechanism for public input and influence. they believe that the rules and multilateral trade agreements of the wto do not encompass the fundamental values of society (chossudovsky, 1998) and are not accountable for key issues such as the environment and human rights. they believe that the global ‘corporate model’ induces an enormous dependency on an export concentrated market that controls more and more of the world’s natural resources, including patent monopolies based on biotechnology (najjar et al. 2000). some suggests that the answer to the problems of globalisation is to “tear down the wto and tear up the rules” (nader et al. 1999, pg. 3). the main benefits of globalization are seen as the opportunity for economic and social development and higher standards of living through wealth and technology transfer (najjar et al. 2000). it is argued that free trade creates significant and meaningful job growth, increases the standard of living and fosters peace as a result of new found prosperity. they consider that ordinance of the wto, the imf and the world bank, should be increased because, not only do they increase global trade but they also protect the interests of small companies who cannot otherwise afford to protect their interests abroad. they argue that “if global corporations and big business are the enemy, ... who will supply the jobs after they're gone?” (nader et al. 1999, pg 13). quantifying globalisation approximately us$1.7 trillion are transferred daily in the global market. the major proportion of this flow, approximately 95%, is unproductive and speculative, with about 80% having a repatriation time of less than a week, often less than a day. the us$1.7 trillion a day represents over twice the combined total foreign exchange reserves of all countries (fortune, 2000). globalization has also seen an increasing influence of large corporations. the world's top two hundred corporations, now account for about quarter of all global economic activity and employ less than 1 % of the workforce (chomsky, 1999). the trend is for a smaller number of large corporations, accounting for an increasing proportion of economic activity, employing a decreasing proportion of workers. the majority of the risk associated with the speculative flow of capital is not taken by the large corporations, but by the people and governments of smaller developing economies unable to absorb the impact of relatively large shifts of capital. in the worst case scenario of unencumbered global capital flows in and out of small or developing economies, local financial markets collapse and generate a subsequent recession such as the asian crisis of 1997. in this situation there is a massive transfer of wealth from the public to the private sector and the majority of the population has to wear the risk and pay the cost (najjar et al. 1999). current understanding of the global construction market the previous era of increasing international contacts was built around falling transportation costs resulting from the invention of the steamship, railroad and automobile. today’s globalization is built around falling communications costs, deregulation of markets, and in particular the capital markets and the growth of international organisations. how that will impact on the construction industry is far from clear. construction related commentators, to date, have only discussed some general issues in relation to globalization (e.g. weddikkara et al. issue for the global construction market by george r najjar et al the australian journal of construction economics & building page 75 2001, ofori 2000, raftery et al. 1998, brandon et al. 1998, miles 1991). the theme of most of these commentators is to focus on the ‘internationalization’ of construction, in particular construction industries of developing countries, with the discussion directed at how a specific developing country or group of developing countries is reacting and/or is responding to the influence of large multinational construction organisations operating within their industries. they also focus on how the multinational construction organisations are restructuring their processes and or adopting new processes in order to operate ‘successfully’ in these foreign industries; and how there needs to be a substantial improvement in the application of it in construction to retain competitive advantage. raftery et al. (1998) investigate several asian construction industries and argue that the main trends resulting from globalization are: larger private sector participation in infrastructure projects; increasing vertical integration in the packaging of construction projects; and increased foreign participation in domestic construction. they argue that these trends are helping to polarize the technical, managerial and financial superiority of developed countries and that the developing countries will have to ‘leapfrog’ this gap in order to minimize their increasing inferiority. they consider that, in the long term, technology transfer, for example via joint ventures with developed countries such as those in the construction industries of japan and china, may fill this gap. ofori (2000) is critical of the ‘general and abstract level’ of some of the issues raised by raftery et al. he argues that the effects of globalization may be illustrated when analysed through construction industry development and its component factors such as development of: materials; project documentation and procedures; human resources; technology; contractors and institutions. he also considers that these factors may be used to provide measurable indicators of how globalization impacts on the ‘capacity and effectiveness’ of the construction industries ability to meet the demands placed on it. brandon et al. (1998) argue that “global construction is undergoing substantial change... international competition is now becoming more widespread for a greater range of sectors within construction” (brandon et. al, 1998, pg. 1). they consider comparison of the global construction market with other manufacturing industries is critical. “if the parallels with manufacturing are valid, construction urgently requires some international comparisons” (brandon et. al, 1998, pg. 2). this is essentially the debate on the impact of the multinational firm that we had in economics in the 60s and 70s (grubel, 1981), substituting construction for manufacturing and would be valid if globalisation was nothing more than a proliferation of multinational firms. however, this is not so. the multinational firm of the end of the nineteenth century, the beginning and middle of the twentieth century or even the 1980s was an organisation that had a head office in one country and manufacturing units in two or more countries, each serving its own distinct market, delimited by national borders, protected by cost of transport, tariffs and restrictions on capital movements. the global firm, on the other hand, is a totally different type of organisation. it may have the head office located in switzerland, financial services in japan, research unit in india, design unit in brazil and be listed on the stock exchanges in london and new york. it operates as if national borders do not exist. it is not aiming for export based on comparative advantage. essentially, it doesn’t export in a conventional sense, because it operates as if the globe was a single economy (runeson, 2000). david hawk (1991) talked of the global construction industry as a new industry, rather than a development or a marginal change of the industry we have now. the new industry will not just erect buildings. it issue for the global construction market by george r najjar et al page 76 the australian journal of construction economics & building will initiate, design, construct and manage, it will produce the material and arrange the finance, it may operate and eventually demolish the buildings. this vision originated in a series of interviews with twenty leading organisations that would be part of this new industry. an industry like this does not just appear, it grows out of a new environment, and raftery et al gives some insight into the process that will create it. we are seeing a growth of bot projects, often large projects where the sponsors are involved in every process, from the design of the buildings to the operation of the facilities. the unique aspect of this is, of course, that for the first time, the construction firm gains some market power. it now combines the design with the construction and operation, which means that it can control the use of technology. analysing the global construction market as a starting point, we might adopt the following framework (refer to fig. 1) to form the basis for further discussion. this initial framework consists of the following interrelationships as they apply to global construction: 1. neo-classic perspective; 2. manufacturing industries comparative perspective; 3. construction industry development perspective; and 4. ownership structure perspective. we shall discuss each in turn. 1. neo-classic perspective global construction environment 2. manufacturing industries comparison perspective 3. construction industry development perspective 4. ownership structure perspective fig. 1: a conceptual framework to initiate analysis of the ‘global construction environment’ in relation to four selected perspectives 1. neo-classic perspective neo-classical analysis is perhaps the most appropriate perspective to observe globalization because of the way classical and neoclassical theorems have been used to demonstrate the advantages of international and regional trade. the issue for the global construction market by george r najjar et al the australian journal of construction economics & building page 77 fundamental behaviour and supply and demand in the global construction market should be the same as those for any market irrespective of scale, location and product or service. hence. characteristics of the global construction market may be described in terms of factors such as supply, demand, elasticity, market power, etc. however, the theoretical framework by which the development and effects of a global construction market may be evaluated does not necessarily follow a typical neo-classical model since a large number of the essential assumptions are inappropriate. the assumption of international trade as a substitute for factor immobility does not apply because there is unrestricted mobility of capital. as a consequence there is no income equalisation as assumed in the hecksherohlin-samuelson theorem, nor any mutual adjustments of production and prices. for some particular issues, such as for instance capital movements, it has been suggested (soros 1998) that the equilibrium type models of neo-classical economics are totally inappropriate, and that we should look towards chaos-type theories instead. 2. manufacturing industries comparison perspective the construction industry has always been characterised as low technology and low productivity (harvey and ashworth, 1993). there has been little incentive for research in the industry because the construction company has little control over the use of new technology. the use of any innovation is dependent on designers incorporating it into their designs, something that they are reluctant to do if it confers monopoly power onto the sponsor of that technology. with the bot project the ‘builder’ or sponsor obtains some control over the market in the sense that it decides on the incorporation of any innovations. in fact, it may now compete on technology which for the first time puts it in a position where it has reasonable prospects of recovering expenditures on research and development. a typical example of competition on technology is the sydney harbour tunnel (saha, 1997). with the demonstration of the success of bot projects, it is likely that the private sector may adopt some of its crucial aspects, in fact we are already seeing some development towards market control in the form of developments in partnering for some types of projects. while bot projects and the like are not essential parts of globalisation, they are the results of the economic rationalism that is the foundation for the economic deregulation that created the potential for the global market (runeson, 2000). with global markets large enough to support corporations of the size necessary to incorporate research departments, with projects complex enough to benefit from high technology and with the potential for corporations in the construction industry to gain market power from new technology we have the foundation for a new, high technology industry, similar to the manufacturing industry. according to hawk (1991), the organisations he interviewed had all, one way or another started to work towards membership in this industry. because of the mobility of capital, it is possible for the global firm to locate production in the country with the lowest cost of labour, pitting developing countries against each other, further increasing the inequality of income distribution, both between and within countries (swift, 1996). in the competition for global investments, governments have used as arguments the absence of all forms of protection of labour in the form of trade unions, minimum wages and conditions or occupational health and safety (probert, 1996). in combination with tax holidays it means that the benefits to the economy of the receiving country are almost zero, although to individual shareholders it may be substantial (chossudovsky, 1998). in the case of the construction industry, the negative impacts may be less than in the case of manufacturing industry as part issue for the global construction market by george r najjar et al page 78 the australian journal of construction economics & building of the work needs to be located at the site of the project. however, for the manufacturing part of the global corporation and some of the service like design and finance, there will still be the ability to play countries against each other for lower costs and fewer regulations, making it an instrument for transfer of wealth from developing to developed countries just like global manufacturing firms. 3. construction industry development perspective construction industry development, as defined by ofori et al (2000), resulting from transfer from multinational contractors to developing countries has been limited. moreover there has been even less technological transfer from the construction industry to other industries. quantifying any globalization based construction industry development and any subsequent improvement in efficiency and effectiveness will not be possible if the major theses of this paper is accepted: that globalisation will create a new industry and that there will be little contact between the old and the new industry. international trade has always been seen as mechanisms for economic development, particularly for the less developed country (caves and jones, 1973). with no movement (or limited movement) of resources, the return to the abundant resource, (which would be labour in developing countries), would increase, and the total output to be shared between trading partners would increase. in the case of the multinational firm, new capital invested in the developing country and transfer of technology would cause economic growth. the global firm, on the other hand, doesn’t necessarily confer such benefits. this is so because the capital for production may come from a third country, not necessarily involved in the trade, which may be able to expropriate all or most of the benefits. chossudovsky (1998) gives an example of this when he demonstrates that the developing country receives less than three per cent of the total value added in the production of garments, the rest divided among various global corporation and developed countries. one of the fascinating aspects of traditional building is how resilient it has been. there has been a lot of research and innovation going into for instance single family housing without much effect on the operation of the industry. the overwhelming part of the industry concentrating on conventional, small scale building, will therefore probably not be affected at all by the new industry. rather, we will see a development of two construction industries. firstly, we will have the current, low technology local or regional firm, constructing conventional buildings in a conventional way, competing exclusively on price. it will import, as it currently does, all its new technology from the producers of equipment and material as, due to the fragmentation of the industry and its extensive use of subcontracting, no-one has a sufficiently large financial interest in the building to support research on the structure or recover any expenditures on research. secondly, we will have the new, high technology firm, operating in the global market, competing with a high technology package, providing not buildings but solutions to accommodation needs, including if necessary both finance and operation. new technology will be developed in-house and include not only materials and equipment but also technology of construction. because of the differences between the two industries there is no reason to assume that technology transfer will be as important as assumed in the debate about multinational firms. rather we will have a small number of firms in the high technology, global sector, maybe twenty or so world-wide, operating in isolation from the conventional industry (hawke, 1991). 4. ownership structure perspective if understanding the real meaning of globalization for the construction industry requires the understanding that a ‘global’ issue for the global construction market by george r najjar et al the australian journal of construction economics & building page 79 business implies more than just operating in foreign markets; producing new products for new markets; or improving capacity and effectiveness, we may get some early indications from changes in ownership structures (najjar et al. 2000). construction organisations are currently being globalized via an unrestricted capital market which facilitates international takeovers and mergers. in australia there is an increasing trend for foreign ownership of major construction companies. the largest construction organisation is now 47 per cent overseas owned and all other publicly listed construction organisations have some degree of foreign ownership with the total foreign ownership, in terms of market capitalisation, of some 30 per cent (najjar et al. 2000). similar trends are displayed in the construction industries of most developed economies. the advantage to the foreign investor is the potential for market control and the potential use of new technology. these possibilities are not as yet as transparent for the construction firms in developing countries. one of the problems of globalisation is the loss of control for the national and local governments. it has been said that the twentieth century has been characterised by three broad developments. first there has been the growth of democracy, secondly there has been the growth of the large corporations and finally, there has been the growth of the attempts by the large corporations to suppress democracy (carey, 1995). in many areas, this has been especially evident, as for instance in the suppression of a debate on issues, like sustainable economic growth, land rights for indigenous people or even globalisation or exploitation of workers in developing countries. there is also the impact of the global firm on local firms by the competition fuelled by low cost of labour. the major problem, however, is in the potential for generating the kind of destabilising capital flows discussed above, which caused the economic crisis in south-east asia in 1997 (soros, 1998) with the accompanying massive transfer of wealth from the developing economies involved towards developed economies with access to capital. conclusion globalization for the construction industry and construction organisations is creating a new type of construction industry, high technology and vertically integrated that will operate side by side but totally independent of the conventional, low technology industry. the creation of a global market means that what used to be niche markets in national markets become large enough to allow investments into research and development, and therefore prime targets for the research intensive, high technology global firm. small construction firms simply do not have the resources to operate effectively in the global market. the challenge for the national governments, international organisations and ultimately, global construction corporations is in developing a system that minimises the polarisation and dehumanisation consequences of globalization and the corporate culture process. for industry organisations such as for instance the cib this means providing a link between the two industries and facilitate the transfer of technology from the global to the local industry. for educators it means finding a way to be relevant to both industries. any framework for observing the development of the new global construction market is by no means limited to those areas discussed in this paper. indeed these perspectives represent the initial analysis of an environment that is only just emerging and may necessitate collaborative development with other disciplines vis. facilities management. the validity of any future analysis will require a shifting of the current understanding and observing a multinational firm operating in single market to recognising the global firm operating in new and totally separate market. issue for the global construction market by george r najjar et al page 80 the australian journal of construction economics & building references brandon, p.s., betts, m. and wamelink, h. 1998, ‘information technology support to construction design and production’, computers in industry, elsevier, holland. carey, a. 1995, ‘taking the risk out of democracy’, unsw press, sydney. caves, r. and jones, r. 1973, ‘world trade and payments’, little, brown and company, boston. chomsky, n. 1999, ‘globalization: the new face of capitalism’ boston college, massachusetts. chossudovsky, m. 1998, ‘the globalisation of poverty’, capetown: ipsr books. fortune, march 2000, vol 141, no. 8, time inc. new york. friedman, t. 2000, the lexus and the olive tree, anchor books, new york. grubel, h. 1981, “international economics’, (rev ed) richard d irwin, homewood, illinois harvey, r and ashworth, a. 1993, ‘the construction industry of great britain’, butterworth-heinemann, oxford. hawk, d. 1991, ‘formation of a new industry: international building construction’, stockholm school of economics, stockholm leighton holdings, 2000, annual report, sydney. miles, d. and neale, r. 1991. building for tomorrow: international experience in construction industry development, international labour office, geneva. mulgan, g. 1990, connexity, harvard business school press, boston. nader, r. vandana, f. and s, bhagwati j. 1999. `debate on the wto and globalization’, town hall, transcript, alternative radio, seattle, washington. najjar, g. mak, m. and jefferies, m. 1999. ‘the impact of the decline of the asian economy on australian contractors: proceedings, cibw92 and cibtg23 harmony and profit joint conference, chiang mai, thailand. najjar, g. weddikkara, c. 2000. ‘globaliszation and the australian construction industry: proceedings, 4th pacific association of quantity surveyors congress, cairns. ofori, g. 2000. globalization and construction industry development research opportunities. journal of construction management and economics, 18, pp.257-262. oxford english dictionary. 2000. oxford university press, melbourne. probert, b. 1996, ‘restructuring and globalisation’, in argyrous, g. and stilwell, f. (eds) ‘economics as a social science’, pluto press, sydney. raftery, j. pasadila, b. chiang, y.h. hui, c.m. and tang b.s. 2000, ‘globalization and construction industry development’. journal of construction management and economics, 16, pp.729-737. runeson, g, 2000, ‘building economics’, deakin university press, victoria. saha, s. 1997, underground construction sydney harbour tunnel, building science forum, seminar 61, canberra. scholte, j. a., 2000. globalization: a critical introduction, macmillan, basingstoke. soros, g, 1998, ‘the crisis of global capitalism” little, brown and company, london swift, r, 1996, squeezing the south, in argyrous, g and stilwell, f (eds) ‘economics as a social science’, pluto press, sydney issue for the global construction market by george r najjar et al the australian journal of construction economics & building page 81 waters, m., 1995. globalization, routledge. weddikkara. c. and devapriya, k. 2001, ‘development and supply trends and construction industry development’. the australian journal of construction economics and building, vol 1, no. 1, pp91-105, sydney. demand and supply trends and construction industry development demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya demand and supply trends and construction industry development (a case study in the sri lankan construction industry) chitra weddikkara college of law & business, school of construction, property and planning, university of western sydney, australia and kapila devapriya department of building economics, university of moratuwa sri lanka 1.0 introduction the construction industries in dcs, particularly in asia, have exhibited trends to globalization in the recent past. they have created a need for construction industry development to accommodate such changes within the domestic industry (aziz, 1993; ofori, 2000; raftery et al, 1997,1998). however, studies in the identification of causal factors that result in current global trends and their impact on the domestic industry are in complete. they in particular lack identification of constraints that originate locally to benefit from existing global trends. this paper attempts to fill this gap by taking the srilankan construction industry as a case study. a demand and supply framework has been adapted to analyze the causal factors and their implication on supply characteristics in order to identify the industry developments required. although, the analysis is focused primarily on the sri lankan construction industry, the findings also shed light on other allied construction sectors in the dcs. the paper first introduces the analytical framework. then the causal factors are analyzed to identify how the supply side is affected. this identification serves to establish the immediate construction industry development measures to foster indigenous construction capacity in the context of global trends. 2.0 analytical framework and research methodology the analytical framework (fig. 1.0) is based on demand and supply side factors in the construction industry discussed by previous writers including stone (1983); raftery (1991); hillerbrandt (1985) and ofori (1994), who best characterize the operating environment in the industry. an economic analysis on these factors serves to identify those construction industry developments necessitated by forces, which operate in both the demand and supply sides of the sector. the analysis is supported by means of a literature review of recent publications, interviews and statistical data gathered from government publications and other occasional papers. insights from recent practical cases within the sri lankan construction industry are also highlighted to assist the analysis further. all currency measurements have been denominated to us $ in respective years. 3.0 underlying factors causing changes in demand and supply for construction the construction industry is very diverse and subject to changes in the environment within which it operates to produce investment goods and services. stone (1983) and hillerbrandt (1985) rationalize such demand and supply sides factors within those environments. raftery et al (1997) also reveal some of those factors, which have also been driving forces for change in asian countries in the recent past. with respect to the sri-lankan construction industry, the framework (fig. 1.0) brings together the causal factors that contribute to the globalization trends locally as well as those factors that exert pressure on domestic industry to change its production characteristics. the following section analyzes these various demand and supply driven factors in order to identify the immediate industry development measures. the australian journal of construction economics & building page 91 demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya fig. 1.0 analytical framework recent construction industry that characterizes gl b l t d supply side determinant �� project procurement �� role of the contracting firms �� project delivery process �� technological application �� usage of construction materials demand side determinant �� government policies �� economic condition �� construction price/inflation �� population growth/ urbanization �� foreign aids/loan and grants 3.1 demand side factors among the demand side factors, the following results in trends towards globalization and have significant implications on the supply side characteristics of the industry. 3.1.1 government policies despite allocating 40-45% of public investment for infrastructure development, the sri-lankan government pursues the policy of private sector led growth. the government has already undertaken institutional, legal and economic reforms to promote private sector infrastructure development in sectors such as power generation and telecommunication. in addition to the sectoral reforms, the government's budgetary constraints have forced it mainly to introduce a policy on private sector participation in infrastructure development. as a result of this policy, both local and foreign private investments in boo/bot (built-operate-own/builtoperate-transfer) type projects are increasing and new projects are in the pipeline (table-1). the government is also "fast tracking" the construction of industrial estates and the export processing zones. the main facilitating body for both local and foreign private investment, the board of investment (boi) in sri lanka, has been assigned a leading role in this with a sum of $ 21 million. to fund directly the necessary infrastructure for these projects (central bank, 1998). during the first ten months of 1998, 143 new boi approved projects commenced construction. this represents approximately about 34% increment with compared to the same period of 1997(eiu, 1999). with the implementation of boo/bot infrastructure and other high-rise commercial developments, foreign direct investment on construction is expected to grow in this decade. construction industry development in the context of global trends �� corporate development �� institutional reforms and capacity building � financial resources development page 92 the australian journal of construction economics & building demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya table 1. major proposed private sector (boo/bot) infrastructure projects. sector proposed investment us$ million. (1) power a. thermal (200240mw) 192 b. coal (300mw) 480 (2) port 1020-1320 (3) road (expressways 135km) 240 (source: bureau of infrastructure investment, 1999 march) in addition, the construction sector was given a boost with the announcement of a reduction in the tax rate from 35% to 15%, and an exemption from duty on imports of machinery and equipment. as a result of certain concessions, e.g. double taxation relief agreements with numerous countries, and preferential tax rates, construction related imports would continue to rise year by year. the changing nature of the government’s traditional role from a regulator and investor to that of a facilitator in the construction industry is taking place in many dcs. for example, in china, india, indonesia, malaysia and thailand considerable investments in infrastructure projects with private participation has taken place from 1990 to 1998 (roger, 1999). however, the scale of such movement differs across the asian region due to the effectiveness of reforms and policies to attract private participation in large-scale projects. 3.1.2 economic condition economic growth has focused mainly on the manufacturing and services sectors rather than the dominant agricultural sector. after a moderate growth period from 1983 to 1988 and the economic boom in the first half of the 1990s, construction growth has increased again. at its peak in 1992, the construction growth prevailed at 8.1% (central bank, 1998). according to the central bank, (1998) the growth in the above sectors is expected to continue steadily for the next few years. this will favorably affect the construction sector, as there is a close relationship between the growths of the two sectors (fig.2). furthermore, the prediction by the dept. of national planning for their six-year program parameters for the period 19992004, identifies an increase in gdp (gross domestic product) of an average rate of 6.5% per annum, a steady level of gross domestic fixed capital formation (gdfcf) at about 28% of gdp, amounting to a total of approximately $ 33 billion for the period. private sector investment is predicted to be 70% of total investment (dept. of national planning, 1998). recent experience shows that the construction sector has been a pivotal ingredient in the robust economic growth of the asian economies, as investment in building and infrastructure was needed to expand further growth (rafferty et al, 1998). private-sector-led infrastructure and commercial development are clearly necessary to achieve the forecasted gdp growth pattern in sri lanka. it will be followed by the construction growth pattern since there is a close correlation between the growth patterns of both construction and gdp. this is illustrated in figure 3. the australian journal of construction economics & building page 93 demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya fig. 2 construction and manufacturing growth -10 0 10 20 30 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 cconstruction growth manufacturing growth (source: central bank,1998) fig. 3 construction and gdp growth rate -5 0 5 10 15 1980 1982 1984 1986 1988 1990 1992 1994 1996 gdp growth (%) construction growth (%) (source : central bank,1998) f ig .4 t r e n d o f c o n str u c tio n c o st 0 .0 0 5 0 .0 0 1 0 0 .0 0 1 5 0 .0 0 2 0 0 .0 0 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 c o st in d ic es (source: ictad cost indices, 2nd quarter1999 page 94 the australian journal of construction economics & building demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya 3.1.3 construction prices / inflation the gradual increase of the cost indices reveals a rising construction cost in the domestic industry (fig.4). inflation has been the main reason for rising construction cost. although, the trend indicates a slowing rate of increase, this phase of rising construction costs will increase in the next few years due to the newly introduced goods and services tax (gst). according to the central bank (1998), gst has raised consumer prices by 2-3%. this factor together with high cost of finance will adversely affect construction activities particularly of individual housing, commercial development and infrastructure projects. furthermore, the inflation rate in sri-lanka has long been higher than the average inflation rate of her trading partners and competitors. this has forced the exchange rate to depreciate by about 5 to 6% per year to enable sri lanka to remain competitive in the world commodity markets (central bank, 1998). this has resulted in fewer prospects for construction demand; since more imported materials form a major part of the cost of construction, particularly in the private sector financing large-scale project developments. 3.1.4 population growth / urbanization urban population growth is accelerating in sri lanka. according to munindradasa (1995) the country’s population growth was 1.8% in 1995, whereas in city areas the corresponding figure fell to 1.4% while increasing to 3.5% in the suburban areas near colombo city limits. this growth in the suburban areas has led to the development of satellite cities resulting in the conversion of cultivated lands such as paddy fields, marshy and low line areas close to the suburbs of colombo into housing units (munindrasa, 1995). there will thus be a continuing demand for highrise apartment construction and preconstructed houses since lateral expansion is restricted because of the limited land area within the city. table-2. urban housing requirement in the year 2005 a. state agencies 65,000 b. private sector (foreign and local property developers) 75,000 c. individual home builders (with housing loans) 185,000 325, 000 units (source: report of the presidential task force on housing & urban development, 1998) furthermore, the presidential task force (1998) recognizes that the urban population will reach 65% of the total population by 2030 and the projected requirement for housing in the year 2005 will be 512,000 with an urban requirement of 322,500 units (table-2). to achieve this target the government has identified the necessity for private sector property developers to participate. however, as the report itself identifies, the government should provide buildable lands with infrastructure facilities (particularly for large scale vertical and horizontal housing developments) so that the completed houses will be affordable for the middleincome group. 3.1.5. foreign aids / loan and grants. foreign assistance is critical to sri lanka to achieve the desired level of public investment. at present, foreign aid accounts for approximately 50% of the government's capital expenditure budget with the funding agencies supporting mainly major infrastructure projects and social development. it is estimated that the current annual expenditure in construction is $ 1.11 billion of which 75% the australian journal of construction economics & building page 95 demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya is donor funded (munasinghe, 1998). as such, planned investment in different infrastructure sectors (table-3) is to be met primarily by means of foreign aid/loan in the next few years (ictad, 1997). table-3. public sector planned investment in infrastructure sector planned investment (1) transport infrastructure (expressway -184km total) us$ 570-600 mn (2) electricity (generation hydropower) us$ 598 mn (3) port development us$ 400 mn (4) water supply project us$ 305 mn (source:ictad, 1997) this happens because sectoral aid disbursement from 1991 to 1996 reveals that a direct construction related sectors absorbed a major component of foreign aid of which a higher percentage was utilized for economic infrastructure (table4). dependence on grant aid and loans from multilateral agencies will continue till such time as sri lanka is in a position to bridge the saving and investment gap which has resulted in limited local finance available for development projects at present. with the increase of private sector participation in economic infrastructure such loans and aid should however be mainly mobilized to social infrastructure development in the future. table 4. foreign aid disbursement from 1991 to 1996. sector year (in millions of us$) 1991 % 1992 % 1993 % 1994 % 1995 % 1996 % total aid disburseme nt 898.3 100 557.2 100 736.3 100 576.8 100 641.3 100 583.9 100 (1) economic infrastructur e 195.9 21. 8 112.2 20. 1 142.5 19.4 233.7 40. 5 229 35. 7 205.9 35. 3 (2) social infrastructur e 78.6 8.7 100.4 18 140.5 19.1 124.8 21. 6 137.4 21. 4 125.9 21. 6 (3)industrial developmen t 37 4.1 32.7 5.9 24.1 3.3 17.1 2.9 19.9 3.1 26.9 4.6 (source: external resource department, 1998) page 96 the australian journal of construction economics & building demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya 3.1.6 global and regional economic co-operation sri lanka together with other saarc (south asian association for regional corporation) member countries formed sapta (saarc preferential trading agreement) in 1995 and so far thirty-one items have been identified for further tariff concessions under the agreement at the moment. such materials included bars and rods of high-speed steel, aluminum plates, and sheets that account for a considerable foreign component in construction in the domestic industry (ictad, 1997). in the context of increasing construction costs, if the costs of most of the imported construction materials and plant can be reduced under these agreements, this will have very positive effect on reducing overall costs, and increasing overall quality (ictad, 1997). this is particularly important in view of the increase of private sector participation in large-scale projects. identification of the correct construction materials /items for further tariff concession could, therefore, have a huge impact on the construction industry in the short term. 3.2 factors underlying supply side characteristics the above discussion reveals why and how demands conditions are changing in the construction industry at present. the following supply side factors were also found subject to the consequences of the above changing demand conditions and attributes arising from the impact of globalization. their analysis reveals what changes in supply side characteristics are necessary to accommodate the new demand conditions for the benefit of the domestic industry. 3.2.1 project procurement according to senavirathne (1997) the shift from traditional to non-traditional procurement arrangement (table-5) has additionally been governed by technology improvements, increases in the size /volume of projects and client requirements in the recent past in sri lanka. however, the policy of encouraging private sector participation in large-scale infrastructure projects still has a direct bearing on new project procurement. for example, private investments in such projects have been procured under project finance modalities such as boo/bot and this will continue in the foreseeable future. the increasing demand for development financing has changed the industry service provider into becoming the client. they have been forced to utilize their financial capacity and project financing skills to identify opportunities to develop projects and then transfer their ownership (eg. bot projects). however, continuity of boo/bot type projects is governed largely by favorable financial terms (including domestic financial market conditions), institutional support and healthy economic conditions. the ability to raise long-term debt finance from the local table 5. trends in contractual procurement arrangements (1977-1997) procurement period route 77-82 82-87 87-92 92-97 measure and pay 55.00% 50.00% 58.50% 46.00% design and build 14.00% 26.00% 24.00% 30.00% lumpsum 12.00% 10.00% 8.00% 7.50% primecost 10.00% 8.00% 5.00% 4.00% design and manage 8.00% 5.00% 4.00% 3.00% mgt. contracting 1.00% 1.00% 0.50% 1.00% joint venture 0.00% 0.00% 0.00% 2.50% (source: senavirathne, 1997) the australian journal of construction economics & building page 97 demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya capital market averts the inherent foreign exchange risk in these alternative project procurements and thereby enhances continuity in project development and also meets the requirement needed by the infrastructure. furthermore, where projects depend on bilateral aid, and the tenders are usually restricted to contractors of aid giving countries, sri-lankan contractors are now permitted to bid in collaboration with foreign construction contractors from the aid giving countries. it is stated that in this context, the minimum share of local collaboration should be 35% of the contract sum and whereas the foreign contractors should have 15% of local collaboration when 100% of the contract sum is given as an outright grant (ictad, 1997). this arrangement is particularly important, since foreign aids/loan and grants will finance a considerable portion of the planned infrastructure projects despite the current trend of the private sector participation in the same. however, a move from traditional to nontraditional procurement implies that alternative project arrangements must be available to the local contractors even in donor-funded projects. for example, packaging large scale projects within the competence of local contracting firms in dcs is needed to make it easier for local contractors to participate in such projects to gain technology and managerial capacities (kummaraswamy, 1998). in a recently completed japanese government funded seethawaka industrial estate project work packages such as land preparation, water supply, sewerage scheme and standard factory buildings were organized and given to local contractors. about eight leading contractors were employed as local participants (i.e. as domestic contractors) in the venture in order to give recognition of being a partner rather than the usual sub-contractor (wijesundara, 1999). in the first ever project in this nature, the national construction contractors association of sri lanka (nccasl) has initiated and provided necessary assistance to form the local collaboration with the japanese main contractor of the project. however, success of these strategies is strongly governed by the management capabilities of the domestic firms, how the parties honor obligations and the existence of proper institutional arrangement to oversee such ventures. 3.2.2 role of the contracting firm with the increase of private sector participation and investment in large-scale infrastructure projects, there is a need for a single source solution-requiring cooperation in the project delivery process based on good partnering relationships. in this context firms will seek integration to provide the entire project services with horizontalintegration, strategic alliance, joint ventures or consortia to combine their strengths and to become a single source problem solver for the client (e.g. boo/bot project developments). raftery et al (1998), observe that vertical integration of construction projects in asia is necessitated by an effective way of overcoming a firm’s weakness or other drawbacks in competitive markets. aziz (1993) also asserted that in the global market place the role of the contractor includes a comprehensive range of services from feasibility study, design, project financing and start-up to operation, on top of the main construction works. such a change of roles in the contracting sectors was recently exhibited in the bidding for the colombo-katunayake expressway, which will be the first expressway in sri lanka. bids were called on a design-build and turnkey (dbt) basis and bidders were also requested to furnish a proposal with regard to the project financing (rda, 1999). a leading local contractor joined the biding with the association of foreign contractors who had gained specialized expertise in various areas such as dredging and road paving. a consortium consisting of 23 other local contractors was arranged to carry out associated structures. this alternative project arrangement supported the argument that foreign collaboration is necessary, particularly in first time large scale project developments, since the page 98 the australian journal of construction economics & building demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya scale of technology and management know-how for such undertakings cannot be fulfilled locally in dcs (raftery et al, 1998, tiong, 1992). 3.2.3 project delivery process with more and more interest being vested in project development by the contractor (as a equity contributor / partner) productive efficiency will gain greater recognition both at the project level and firm level. productive efficiency is concerned with minimizing cost for a given level of production, by optimizing the costs and quantity of individual inputs (hillerbrandt, 1985). in this context, quality standards will be the main driving force to maintain productive efficiency. quality standards will also be used to differentiate competitors on grounds other than price. this is particularly important since competent experienced contractors who can deliver the project on time and to the required quality standards has been one of the most necessary conditions for success of bot type projects in asia (tam and leung, 1999 cited in ofori, 2000). contractors will therefore be forced to adhere to international standard certifications such as iso9000, which has become one of the quality benchmarks in doing business in the global market place. the domestic contracting sector is therefore now under pressure to adopt recognized quality practices, giving priority for adequate training and systematic supervision particularly with regard to labor sub contracting procedures. these measures are significant to sri lanka since a survey of 3300 construction workers and 56 direct construction related agencies by jaywardane et al (1998) revealed that 80% of the workforce is employed on causal basis. they further asserted that only 40% of them are fully utilized and 86% of the skilled work force has received only informal training in the construction industry. furthermore, the demand trend for construction automation, mechanization and optimum plant utilization generates a demand for higher quality and costeffective construction. the introduction of local and international standards together with standard conditions of contract to meet the quality and time targets will also boost mechanization in the industry. 3.2.4 technological applications application of new technology in the construction industry is necessitated by the nature of changing demand. these technological changes demand that construction firms enhance their technological capacities. these will be governing factors in the formulation of consortia to win large-scale projects as reported in many boo/bot type projects (tiong, 1992). new technological application will also be tested by expatriate contractors particularly donor assisted and private sector financed projects in the absence of medium sized alternative projects within the capacity of local firms. further, technology is the hall-mark needed to bring about a cost effective solution to mass vertical housing construction, which will overcome lateral expansion of housing stock due to land restrictions in urban areas. in this context, the pre-fabrication systems have a vital role to play in the cost effective construction. trends in prefabrication and standardization will reduce the traditional construction component, thus reduce cost and save time in their construction. 3.2.5 usage of construction materials increasing private investment coupled with favorable economic conditions will result in importing a considerable amount of materials and using a lot of heavy construction equipment. this will lead to technological changes in the construction process particularly in industrial and commercial sectors. using imported construction materials will be boosted as a result of the global and regional economic co-operation that advocates tariff concessions for certain items of construction materials. there will be a shift of demand from buying fragmented engineering and construction services to packaged services that provide a single source solution. this will be further enhanced by the boi concession the australian journal of construction economics & building page 99 demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya available for duty-free imports of plant, machinery, raw materials and other project -related goods in sri lanka. furthermore, standardization of the project delivery process will stimulate an increasing demand for standard readybuilt units for mass constructions and large-scale replications. however, pollution and environmental issues will hamper the supply of basic materials such as sand extraction. production of construction materials such as sand, lime and aggregate will be of increasing concern due to environmental degradation caused by their production. the low-cost pre-fabricated housing industry will therefore be badly affected by the reduction in the amount of raw materials generally generated by cottage industries in sri-lanka. 4.0 construction industry development to benifit from current global trends cib (1999 cited in ofori, 2000) defines the construction industry development “as a deliberate and managed process to improve the capacity and effectiveness of the construction industry to meet the national economic demand for building and civil engineering products, and to support sustained national economic and social objectives”. this definition indicates that industrial development goes for beyond corporate levels to the wider industry level in order to accommodate changes within the framework of underdeveloped construction industry in dcs like sri lanka. similarly, raftery et al, (1998) and ofori, (2000) assert that current trends in asian construction sectors have resulted in wider industry development in addition to corporate development. however, the foregoing discussion reveals that the following immediate development measures are necessitated by forces originating from demand and supply trends in the srilankan construction sector. they have a bearing on other similar construction sectors. 4.1 corporate development as the analysis reveals the priority areas of development are the technological and managerial capabilities of the contracting firms. in this regard, joint ventures could facilitate working in large-scale projects with foreign contractors, thereby enhancing technology and management know-how. the formation of joint ventures has been adapted successfully in countries such as china aiming at both a firm’s capacity building and technology transfer (tt) to the country (ganesan,1999). however, the challenge is to achieve a proper structure for joint ventures in order to advance such objectives. proper institutional arrangements are vital in overseeing such ventures in the domestic industry, since the contracting sector in sri lanka is still not geared to such undertakings. domestic contractors in many dcs are in fact often unable to form the preferred joint venture vehicle for tt, and often opt instead for a subcontracting arrangement with the overseas firms. findings from a survey in sri lanka reveal that, where a domestic subcontractor has adequate manpower especially management skills to be able to utilize, absorb and apply the new technologies on other projects, tt in subcontracting could make a significant contribution in terms of strengthening the firms concerned as well as enhancing the technological capacity in certain selected construction sub-sectors (devapriya and ganesan, 2000). simkoko (1992) asserted further that a tt program built into the project is vital in achieving tt objectives. however, limitations of the effectiveness of such programs are to be seen in potential conflicts involving priorities between delivering construction projects on time, within cost and quality targets the accomplishment of tt objectives (simkoko, 1992). long-term tt objectives need therefore to be properly balanced against the short-term project goals. the slicing of work packages of largescale projects also requires proper coordination and management to achieve their desired objectives. for example, management deficiencies together with page 100 the australian journal of construction economics & building demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya the underperformance of sub-contractors have not achieved the desired objectives of the seetahwaka industrial project (cited in section 3.2.1) in which local contractors experienced shortcomings in terms of project-management (wijesundara, 1999). 4.2 institutional reforms and capacity building. institutional composition is particularly important in enabling local contractors to participate in projects such as boo/bot where the capacity of the local contractor is limited to being a mere agent in the venture. to accomplish such institutional reforms, capacity building and legislative measures to regulate construction industry activities, are needed. the sri lankan government is in the process of planning these measures to bring a regulatory network in order to make the construction industry more effective and efficient under the proposed construction bill. an authority called construction industry development authority is to be established once the act is implemented. the current statutory body, the institute of construction training and development (ictad) will be reformed for this purpose. under the new proposed law, participation of overseas designers or contractors in projects such as boo/bot will first need to be approved by the new authority. then the overseas firms involved in the design or construction will be required to form joint ventures with local establishments (wijeyesekera, 1998). such alternative arrangements are necessary, since competition arising from the participation of foreign firms could inhibit the ability of local contractors to compete for projects and so hamper the development of the domestic construction sector (raftery et al,1998). this is particularly important in sri lanka since smaller firms still dominate the local construction industry and only 8% of the contractors (numbering 149 in all) are capable of carrying out projects above $ 130,000 in value (table-6). this is one of the major reasons why expatriate contractors are carrying out the greater shares of donor-assisted projects at present. a proper balance is therefore necessary for indigenous capacity to develop. ofori and chan (1999 cited in ofori, 2000) show that both local contractors and foreign contractors in singapore have benefited from us counterparts working in the domestic industry. they further assert that once local contractors gain experience in largescale projects such as boo/bot projects, they can promote themselves better in undertaking overseas projects (ofori, 2000). however, success of such arrangements is strongly governed by the capacity of institutions to execute projects successfully in the domestic industry. for example, in the seetahwaka industrial project, nccasl's capacity to oversee the execution of contractual terms has been questioned, as the foreign contractor has not properly honored the retention release terms in the contract. it is therefore necessary to build up the capacity for supporting institutions, and perhaps to give statutory recognition to oversee foreign collaborations in the domestic industry. in addition, government policy initiatives are necessary to assist the domestic contractors to secure overseas projects and thereby develop their varying capacities. in this respect, the domestic contracting sector needs to seek assistance from its regional associations such as the saarc chamber of commerce and industry construction industry council (scci-cic) and the international federation of asian and western pacific contractors’ associations (ifawpca). 4.3 financial resources development absence of a strong financial capacity of local contractors is a constraint in forming joint ventures with the foreign counterparts in international bidding for domestic projects. the availability of low cost capital resources is therefore important. the australian journal of construction economics & building page 101 demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya table 6. grading of sri-lankan contractors by 1999 grade financial term (us $ 00’) no. of contractors m1 3,896 07 m2 1,948-3.896 13 m3 649-1,948 25 m4 260-649 44 m5 130-260 60 m6 65-130 178 m7 652 m8 below 65 406 m9 518 m10 10 (source: institute of construction training and development, icatd) nevertheless, it is to be hoped that the recently set up construction industry guarantee fund in sri lanka will boost the local contracting sector, since it will provide assistance to the contractors in furnishing bid bonds and performance guarantees. in addition, the newly established private sector funding arm, private sector infrastructure development fund company (psidfc) will provide subordinate loans to strengthen the financial position of developers in the participation of private sector infrastructure development in sri lanka. local contractors can utilize such funds in becoming developers in large-scale projects so that the risk of foreign exchange involvement can be minimized. according to gray et al (1998), malaysia and thailand, which have a high level of local debt financing for private power projects, were able to mitigate the currency depreciation issue in boo/bot projects in spite of the recent asian financial crisis. 4.4 material and man power development with the expansion of the industry, training craftsmen and equipment operators is needed to maintain a skilled, competitive and adequate work force to meet the new demand in the industry. this is particularly important with respect to the local contractors, as their workmanship must comply with internationally recognized quality standards. the challenge is therefore to strengthen and develop a strong structural base for the sri-lankan construction industry through manpower training and appropriate construction resources. material industry development is also necessary, since imported construction services may otherwise grow at the expense of the indigenous sectors in dcs (raftery et al,1998). for example in sri lanka, the construction sector is overly dependent on imported materials. furthermore, the percentage imported has rose from 30% in the 1960s to 60% in the 1980s (ictad, 1997). when the local building material industry is inadequately page 102 the australian journal of construction economics & building demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya developed in terms of the required quality of materials, the designers often tend to design work with a content of high imported materials. this is a particularly important factor since sourcing good quality materials has been a critical issue in sri lanka. the problems need to be overcome shortly to meet the quality standards of new project developments. 5.0 conclusion: in the present globalise environment, government policies are changing from that of an investor to that of a facilitator and private-sector-led construction demand is predicted to increase in the future. as a result, private sector participation in economic infrastructure, industrial and commercial development is expected to dominate in the industry with an increased involvement of expatriate contractors functioning as service providers rather than traditional contractors. while forecast economic growth, urbanization trends and foreign aid are well poised for a healthy demand, the increasing costs of construction may well result in fewer prospects in terms of demand. construction firms will be under pressure to change their business strategies in order to meet the future demand. this necessity for the change will originate primarily from technological changes, the changing nature of the project delivery and new project procurement process. measures for corporate development are necessitated primarily by means of such changes and, as a result joint venture/sub-contracting arrangements could facilitate the improvement of firms’ technology and their managerial capacities. in terms of wider industry development, capacity building and institutional reforms, the development of financial resources, manpower and material sectors, all could significantly contribute to the development of domestic industry in the context of the changing nature of demand and supply trends. while the necessity for these development measures reflects in part the underdeveloped state of construction industry’s framework in dcs, they could still foster indigenous construction capacity within the context of global trends. 6.0 referenes: aziz a.r.a.;(1993); the trend towards globalization in business: lessons for contractors in developing countries; habitat intl.; vol. 17; no.3; pp 115-124. betts m. and ofori g.;(1994); strategic planing for competitive advantage in construction: the institutions; construction management and economics; 12,203-217. central bank of sri lanka;(1998); annual report -1998, colombo 01; central bank of sri lanka. devapriya k.a.k. and ganesan s.;(2000); technology transfer through subcontracting in developing countries; the 2nd international conference of the cib task group 29(tg29) on construction in developing countries; 15-17 november2000; bostwana. economic intelligent unit;(1999); country reportsri lanka1st quarter 1999; the economist intelligent unit (eiu), london. external resources department;(1998); foreign aid bulletin sri lanka 1995/96; ministry of finance & planning; colombo; sri lanka. ganesan s;(1999);employment technology and construction development : with case studies in asia and china; avebury; aldershot; u.k. gray d.r. and schuster j;(1998); the east asian financial crisis -fallout for private power projects;viewpoint;no.146; august 1998;the world bank. herath h.m.c.;(1998); performance of construction industry in cyclical environment in sri lanka; b.sc. dissertation (unpublished ); dept. of the australian journal of construction economics & building page 103 demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya building economics, university of moratuwa; sri lanka. hillerbrandt ;(1985); economic theory and the construction industry; 2nd edition; macmillan; london. institute of construction training and development(ictad)(1997); sri lanka country report; in raftery et al (1997). institute of construction training and development(ictad);(1999); construction cost indices2nd quarter 1999; colombo, sri lanka. jayawardne a. k.w. and gunawardena n. d;(1998); construction workers in developing countries: a case study of sri lanka; construction management and economics;16;521-530. kumaraswamy m.m.;(1998); industry development through creative project packaging and integrated management; engineering, construction and architectural management; vol.5; no 3;228-237. ministry of finance and national planning;(1999); public investment programme 1997-2003; ministry of finance and planing; sri lanka. department of national planning;(1998); six year development programme 1999 2004: macro framework and sector review; ministry of finance and planning; sri lanka. ministry of housing and urban development;(1998a); workshop on construction industry development: proceedings (draft);june 1998; institute of construction training and development, colombo; sri lanka. ministry of housing and urban development;(1998b); report of the presidential task force on housing & urban development; 15th may 1998, ministry of housing and urban development; colombo; sri lanka. munindradasa c. a.;(1995); high-rise residential buildings in sri lanka; dissertation (unpublished); dept. of building economics; university of moratuwa; sri lanka. munasinghe e.i.;(1998); a vision for the sri lankan construction industry; daily news; vol.18; no.16, p31. ofori g.;(1994); construction industry development : role of technology transfer; construction management and economics;12;379-392. ofori g.;(2000); globalization and construction industry development: research opportunities; construction management and economics;12;379392. raftery j;(1991); principles of building economics an introduction; bsp professional books; london. raftery. j., pasadilla, b., tang b.s., hui c.m. and chaing y.h.;(1997); the 3rd asiaconstruct conference: proceedings; the hong kong polytechnic university; hong kong. raftery j., bernie p, chiang y.h., eddie c.m.h and tang s.b.;(1998); globalization and construction industry development:implication of recent developments in the construction sector in asia; construction management and economics;16;729-737. rda and bureau of infrastructure investment;(1999);colombo-katunayke expressway project(cke) tender documents vol.1; road development authority;sri lanka; april, 1999. roger n.;(1999); recent trends in private participation in infrastructure viewpoint;no.196; august 1998;the world bank. senevirathna a.s.p.w.m.r.r.b.;(1997); assessment of the trends of changes in procurement arrangements in sri lanka.; dissertation (unpublished); dept. of page 104 the australian journal of construction economics & building demand and supply trends and construction industry development: (a case study in the sri lankan construction industry by chitra weddikkara and kapila devapriya building economics; university of moratuwa; sri lanka. simkoko e.e.;(1992); managing international construction projects for competence development within local firms; int. jr. of project management; vol.10;no.1; pp12-22. stone p.a.; (1983); building economics; 3rd ed.; pergawon; london. tiong r.k.;(1992); critical success factors in winning bot contracts; jr. of . const. eng. and management; vol. 15; no.2; pp 73-78. wijesundara s.d.g.s.;(1999); an experience in construction contracting: seethawaka industrial estate development project; constructor; june/july,1999. wijeyesekera d.s.;(1998); regulatory frame work, workshop on construction industry development; ictad; colombo; 23rd april 1998. the australian journal of construction economics & building page 105 fig. 1.0 analytical framework table-2. urban housing requirement in the year 2005 table-3. public sector planned investment in infrastructure table 6. grading of sri-lankan contractors by 1999 viewpoint core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria joshua oluwasuji dada, (obafermi awolowo university, nigeria) godwin onajite jagboro, (obafermi awolowo university, nigeria) abstract deployment of appropriate skills and competencies is crucial and germane to the development and continuous relevance of any profession. in the built environment, the art of selecting the required skills and competencies expected of quantity surveyors and understanding the inherent dependencies between them remains a research issue. the purpose of this study was to determine the skill requirements and competencies expected of quantity surveyors. a structured questionnaire was administered among quantity surveyors, architects, engineers, builders and clients in nigeria. the respondents were asked to give rating, on a 5 point likert scale, on usual skills and competencies required of quantity surveyors. a secondary objective of the study was to examine the important skills and competencies and categorized them into core skill, basic skill, core competence, optional competence and special competence. the results of the study indicate the important skills as computer literacy, building engineering, information technology, economics, measurement/quantification and knowledge of civil/heavy engineering works. the results also indicate the important competencies to be cost planning and control, estimating, construction procurement system, contract documentation, contract administration and project management. the findings of the research have considerable implications on the training and practice of quantity surveying in nigeria. keywords: skill, competence, quantity surveyors, nigeria introduction quantity surveyors add value primarily to the financial and contractual management of construction projects at the pre-construction, construction and post construction stages. they contribute to overall construction project performance by acquiring, developing and deploying appropriate competencies (nkado and meyer, 2001). the profession of quantity surveying is practiced in nigeria along the same pattern as in the united kingdom and other commonwealth countries. the regulated and other professions (miscellaneous provisions) act 1978 of nigeria recognized quantity surveying profession as one of the scheduled professions while decree no. 31 of 1986 gave legal backing to the profession and also set up the quantity surveying registration board of nigeria (qsrbn) to regulate it. in the evaluation of the training needs of construction site managers, odusami et al. (2007) opined that the general belief in modern times is that construction site managers are being faced with skill shortages. how they have been coping with the dynamism of the changing world of construction technology, materials innovation, management techniques, knowledge profusion and client requirement remains a subject of continuous inquiry. while this submission may not be different from the performance expectation of quantity surveyors; investigation into their competencies has been of interest to researchers in quantity surveying training and practice. skill can be defined as proficiency or ability acquired or developed through training or experience, while competence can be described as an action, behaviour or outcomes which australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 79 a person should be able to demonstrate, or the ability to transfer skills and knowledge to new situations within a given occupational area. from a semantics perspective, the term “competence” is used to define a particular knowledge or observable characteristics (prahalad and hamel, 1990), whereas skills are an amalgamation of human expertise and facilities, blended together by the organisation, processes, systems and culture (klein et al., 1998).the pmi (2002) defined competence as ‘a cluster of related knowledge, attitudes, skills, and other personal characteristics that affects a major part of one’s job, correlates with performance on the job, can be measured against well accepted standards, can be improved via training and development and can be broken down into dimensions of competencies’. babalola (2009) while relating this to quantity surveying profession viewed a competent quantity surveyor as a person who is expected to possess a range of skills, knowledge and understanding and be able to apply these skills and knowledge in a range of context and organization. quantity surveying profession is constantly confronted with challenges and opportunities in new markets. these are often passed over, predominantly because of the lack of relevant skills and competencies. these challenges and opportunities will not be fully leveraged if these skills are not addressed. ajanlekoko (2012) emphasized the need for quantity surveyors to move away from being a ‘thermometer’ (reader of temperature) to being a ‘thermostat’ (controller of event) in the 21 st century. if this is going to be, he called for a culture change and attitudinal development of quantity surveyors. formal measures of skills and competences require definitions and classification of skill and competence, type and extent. however, the general literature on quantity surveying skill and competence illustrates a multiplicity of perspectives (nkado and meyer, 2001; crafford and smallwood, 2007; babalola, 2009). a detailed review of the various classifications and definition of skill and competence reveals that they are very much at variance. there is duplication of categorizations and overlapping of definitions. consequently, skill and competence classifications and adoptions are difficult to compare precisely because of diverse definitions. in this paper, findings from an exploratory survey of attributes of quantity surveyors’ skill and competence are reported. the focus on quantity surveyors and allied-professionals as well as clients was chosen to avoid biased perception and to embrace the view of the identified relevant stakeholders in the subject matter. the paper is structured as follows. first, a review of literature relevant to skill and competence of quantity surveyors is presented. this is followed by a description of the research method and presentation of the research findings. an overview of skill and competence of quantity surveyors the rics (1971) emphasized that the distinctive competencies or skills of the quantity surveyor are associated with measurement and valuation which provide the basis for the proper cost management of the construction project in the context of forecasting, analysing, planning, controlling and accounting. according to leveson (1996), quantity surveying competencies lie in the financial and contractual control of the building project as well as the development of soft skills. the basic skills form the platform from which a competent quantity surveyor can develop and these are an integral part of the various units of competence. these skills may be developed during tertiary education or by personal development. some may be included as modules of quantity surveying or construction economics courses (paqs, 2001). for the construction professionals, there are certain basic and important skills and knowledge that are expected of them. these skills and knowledge are better learned at academic institutions and preferable, at tertiary institutions (chan et al., 2002). in essence, they needed to be placed in a more appropriate educational framework to ensure their continuing relevance. with the recent developments in the industry and the recent australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 80 explosion of information technology, the academic institutions are finding it almost impossible to disseminate all pertinent and available information and skills relevant to these professions. alshawi et al. (2007) captioned this very well in that traditional training and education models currently in use are often criticised for the lack of coordination between the industry needs and the actual training/education delivered. this dichotomy is often characterized as ‘skill and competence gaps’. the rics (1998) and paqs (2001) stated the units of competencies required of quantity surveyors and described, in broad terms, the functional elements of each unit in terms of performance criteria, range indicators and evidence guide. the performance criteria specify the outcomes to demonstrate acceptable performance achieved for each element of competence. range indicators frame the boundaries within which the performance criteria apply. evidence guides give an indication of tangible results that confirm satisfactory demonstration of competence (leonard, 2000). githaiga (2004) grouped the experience of the services that quantity surveyors render into budgeting and estimating. he postulated a new role in the light of better financial management role, minimizing of risk, major savings for client and better yield on investment. furthermore, he highlighted new areas of diversification where we have opportunity and challenges as: development appraisal, precontract cost control, taxation planning, contract administration, disputes, litigation and arbitration, technical auditing, valuation for fire insurance, fire loss adjustment, maintenance management schedule of condition and dilapidation, project management, research and development and overseas works. the pacific association of quantity surveyors (paqs) in response to the urgent need of quantity surveyors to reform, developed and implemented in 2001 eight basic skills requiring all quantity surveyors/cost engineers belonging to the institute in japan, malaysia, singapore, honk kong, australia, new zealand, fiji and sri lanka to comply with. these are: quantification/measurement, communication skills, personal and interpersonal skills, business and management skills, professional practice, computer and information technology, construction technology, construction law and regulation. this became a necessity for its members because a major component of its charter recognised that there is a world market for professional services and employment requiring the mobility of its members within the asia-pacific region. the paqs was said to be equally mindful of the need to enhance its membership skills, develop new skills and encourage high standard of technical and professional skills in the international market place needed in the procurement chain world (leonard, 2000). the rics (1998) set out the requirements and competencies for assessment of professional competence by listing the competencies required of quantity surveyors in three categories: basic competence, core competence and optional competencies. the basic skills are common to all construction professionals under rics structure; the core skills are uniquely required of quantity surveyors, while the optional competencies reflect areas of specialization or future career diversification (nkado and meyer, 2001). in the same vein, the aace (2005) recommended practice 11r-88, ‘required skills and knowledge of cost engineering’, presents a unique model aligned with aace’s total cost management (tcm) framework. the framework is an annotated process map that shows how each of the skills and knowledge areas of cost engineering are applied over the life cycle of assets and projects. educational and training, ensuring enhancement of skills and knowledge and continuous professional development has been recognised by aiqs (2004) as factors keying to the development of quantity surveying profession. the expected competencies may be acquired by individual quantity surveyors over a lifetime of professional practice, education and training but most quantity surveyors should have attained the competencies listed as ‘core’ or essential, either after graduation from their tertiary course and in their first five to ten years of on the job training. a number of the other competencies are quite specialized and therefore australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 81 optional and might only be acquired by quantity surveyors working in a specific area or on particular projects. it is therefore unlikely that all these competencies will be found in any one quantity surveyor. however, in many quantity surveying practices, the balance of these competencies is likely to be provided by pooling all the skills of the various staff (paqs, 2001). review of empirical researches on quantity surveyors’ skill and competence there have been a number of research studies in the area of quantity surveyor’s skill and competencies. hiew and ng (2007) revisited the quantity surveyors basic functions. their study was based on how these functions can be improved upon in order to reinforce their basic values and then deals with other services. by this more values can be created for the benefit of clients. babalola (2009) examined the core competencies of quantity surveyors in cost management and administration of electrical engineering services. this study revealed the relevant competencies expected of quantity surveyors and categorized them into strengths, weaknesses, opportunities and threats. however, the findings are limited to electrical services, which are considered a small aspect of the gamut of activities in quantity surveying practices. therefore, this cannot give a good yardstick for listing quantity surveyors’ core competencies. nkado and meyer (2001), in their study, carried out a survey of quantity surveyors’ professional practice in south africa and provided a relative importance of skills and competencies required for quantity surveying services. the results from the study indicated that technically oriented competencies were rated highest. the profession was rated as deploying below average proficiency levels in marketing, advanced financial management, leadership and project management. as good as the findings of this study would have been, the respondents were limited to quantity surveyors. this can be argued as self disclosure. as such the perception of other stakeholders clients and other built environment professionals will be a good complement to their findings. in an attempt to fill this gap, crafford and smallwood (2007) based their study of quantity surveyors’ competence on client perception. this study is also faulted in that; client’s perception only may not give the best assessment of quantity surveyors’ competence. this dichotomy between the self perception and the way other stakeholders, in the construction industry, view quantity surveyors’ competence is set to be bridged in this research. research methodology this research investigated the core skills requirement and competencies expected of quantity surveyors in nigeria. a survey method was used in eliciting necessary data for the study. secondary data were obtained through a literature review of relevant publications and information sourced from libraries and internet. this plays a major role in the establishment of the criteria and theories against which the empirical research were measured and in the compilation of the questionnaire for the survey. two sets of structured questionnaire were prepared; one was used for the construction professionals and the other for the clients. generally, the first part of the questionnaire elicited general information about the respondents, including respondents’ designation, years of experience, academic and professional qualifications, and their organisations. other parts dealt with issues relating to quantity surveyors’ skills and competencies. the respondents’ choices of answers ranged on a 5point likert scale from least favourable to most favourable. prior to sending out the final draft of the questionnaire to respondents, it was pre-tested to ensure the appropriateness of the questions in terms of rhetoric and understanding of meanings. the study population within the context of the study is a database of relevant stakeholders in the nigerian construction industry. the first group was the professional quantity surveyors. the second group comprised the allied professionals and for this group, the views of architects, structural engineers and builders, who were found to have direct dealings with quantity surveyors on construction projects, were obtained. the last group was the client australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 82 organizations who benefits mostly from the services of quantity surveyors. stratified and random sampling techniques were adopted in the selection of the respondents. in order to determine a suitable sample size for the professionals, the total population was obtained from the list of registered professionals published by the respective professional bodies. in selecting appropriate sample size from the lists, the mendenhall et al. (1971) formula for calculating sample size was used. currently the total number of registered quantity surveyors, architects, engineers and builders in the study area is 719, 672, 487 and 379 respectively. substituting these values into the formula gives 257 quantity surveyors, 251 architects, 220 engineers and 195 builders. random sampling method was thereafter used in selecting the respective numbers. for the client organisations, there is no published list that can be employed. thus, it was not possible to have an exact sampling frame. as such, purposive sampling method was used in obtaining a sample size of 100 public and private client organisations. data analysis before carrying out the data analysis, a reliability test was carried out to ensure that it was worthwhile to go ahead. the data were subjected to the cronbach alpha reliability test. the results were greater than the nunnally (1978) guideline, which suggested a measure of reliability of 0.70 or higher in the early stage of research predictor test. two separate statistical analyses were thereafter undertaken using the statistical packages for social science (spss). the first analysis ranked the variables, based on the mean value responses, and compares the mean from the different groups (quantity surveyors, architects, builders, engineers and clients) and presented associated analysis of variance (anova) for each variable within a series of quantity surveyor’s skill and competence attributes. results and discussion respondents’ information the participants’ organisations are diverse; most of them (41.12%) are from contracting firms, 23.82% are from consulting firm while 19.33% are from government establishments. about twelve percent of the respondents are client from private establishment while 4.04% are client from public establishment. the diversity in the respondents’ organisations afforded the issues, addressed in the survey, to be viewed from different perspective of construction sector. among the respondents, 31.91% are quantity surveyors, 18.20% are builders, 17.98% are engineers while 16.18% are architects. the remaining 15.70% are from client organisations and the respondents range from accountants (3.60%), lawyers (1.80%), insurance brokers (0.67%), medical doctors (1.12%), bankers (2.25%) and estate surveyors (1.57%). among the respondents from client organizations, their status range from managing director/chief executive officer, general manager, director, project manager and head of department among others. furthermore, 21.35% and 20.67% of the respondents have m.sc. and mba respectively. about 4% have ph.d. while 22.92% and 19.55% have b.sc. and hnd respectively as their highest academic qualifications. about 69% of the respondents are professionals who are associate members of their respective professional bodies. in addition, 12.80% are fellows of their professional bodies while the average years of experience of the respondents stand at 15. from the general background information results, it seems plausible to contend that the respondents, who participated in the survey, are adjudged to be of good academic and professional background. this should give credibility to the data collected. skills required of quantity surveyors the survey results on the skills required of quantity surveyors are shown in table 1. for the 21 identified skills variables, the mean values have wide range spectrum, from the lowest australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 83 value of 2.60 (solid mineral engineering) to the highest value of 3.59 (computer literacy). fifteen (15), of the items, are considered important by the respondents while the remaining 6 are considered fairly important. the important skills are: computer literacy (mean value of 3.59); building engineering (3.34); information technology (3.33); economics (3.27); and measurement/quantification (3.23). considering the rating of computer literacy and information technology; it was considered appropriate. this is consistent with nkado and meyer (2001) survey, which identifies ‘computer literacy and information technology’ as the most important skill required of quantity surveyors. this is also in line with the findings of humphery and stokes (2000) and white and fortune (2002) studies where it was suggested that computer can help a project manager to be more efficient at their job. in fact, 75 percent of humphery and stokes’ respondents indicated the ability to use computers as being one of the most important set of skills for a project manager to possess. this also supports the findings of musa et al. (2010), that computer literacy and information technology skills will play a major role in the activities of the quantity surveyors in the future. any quantity surveyor attempting to compete and succeed without these modern tools will be handicapped and their risk of failure will increase. one notable outcome is that the routine technical skill of measurement/quantification was rated lower than computer literacy and information technology skill. this suggests that enhanced computer literacy and information technology skills will be an added advantage in the discharge of basic technical competence such as measurement and quantification. presently, efforts are being shifted to automation in doing things generally. some services have diminished considerably or are being automated by technology. the reality is that whatever can be done manually can be automated. the benefit of this cannot be overemphasized in terms of time saving, accuracy and productivity. building engineering, which relates to building construction knowledge, is also rated high. the implication of this is that quantity surveyors need adequate knowledge of building construction before they carry out their basic duty of quantification and cost management of construction works. another important skill is the knowledge of economics. economics deals with the study of forces affecting the use of scarce or limited resources in satisfying human needs. the application of this to construction seeks to ensure the efficient use of the available resources in the most efficient manner. this is considered very important to quantity surveying profession in cost planning and management of construction works. the result is therefore considered appropriate. other important skills are: knowledge of civil/heavy engineering (with a mean value of 3.16); professional practice (3.15); construction law (3.14); interpersonal skill (3.11); knowledge of mechanical and electrical services engineering (3.10); financial skill (3.94) and leadership skill (3.09). the implication of this result is that, appropriate engineering technology is of paramount important and basic thing a quantity surveyor must acquire. this will help a lot in the measurement and quantification of different categories of construction works. the issue of professional practice is also considered important. this can be regarded as non negotiable, as it forms the summary of what a quantity surveyor does. interpersonal skill is also seen to be important. this is evidence from the fact that the barriers between professions are being broken down as they seek to survive in an increasingly complex and competitive society. hoxley et al. (2007) suggested that successful architectural practices should be able to successfully articulate a clear competence to potential clients and to have a clear view of the particular market segment that they serve. in line with this, quantity surveying practice can be competitively differentiated by acquisition of basic skill of design principles, engineering and the use of information technology. australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 84 skill qs architect engineer builder client overall f sig. mean rk. mean rk. mean rk. mean rk. mean rk. mean rk. computer literacy building engineering information technology economics measurement/quantification civil/heavy engineering professional practice construction law interpersonal skill m&e services engineering financial skills leadership skills managerial skill communication skill marketing/business skill mapping/surveying actuarial skill(knowledge about insurance) gas and petrochemical engineering knowledge about international trading investment analysis solid mineral engineering 3.63 3.36 3.34 3.33 3.20 3.28 3.11 3.18 3.12 3.22 3.12 3.06 3.06 3.01 3.07 2.96 2.89 2.96 2.78 2.68 2.76 1 2 3 4 7 5 11 8 9 6 9 13 13 15 12 17 18 16 19 21 20 3.55 3.18 3.31 3.04 3.14 2.90 2.96 2.94 2.93 2.94 2.94 2.94 2.94 3.09 2.86 2.70 2.57 2.51 2.43 2.32 2.19 1 3 2 6 4 14 7 8 13 8 8 8 8 5 15 16 17 18 19 20 21 3.52 3.38 3.24 3.08 3.41 3.04 3.28 3.08 3.13 2.84 3.01 3.01 3.10 3.13 2.72 2.95 2.73 2.38 2.54 2.52 2.40 1 3 5 9 2 11 4 9 6 15 12 12 8 6 17 14 16 21 18 19 20 3.57 3.35 3.32 3.42 3.11 3.15 3.26 3.15 3.10 3.12 3.18 3.09 3.05 3.11 3.02 2.99 3.11 2.72 2.79 2.80 2.64 1 3 4 2 10 7 5 7 13 9 6 14 15 10 16 17 10 20 19 18 21 3.65 3.43 3.41 3.43 3.00 3.33 3.12 3.35 3.29 3.28 3.23 3.37 3.21 3.09 3.40 3.17 3.20 3.09 2.94 2.74 2.91 1 2 4 2 18 8 15 7 9 10 11 6 12 15 5 14 13 16 20 21 19 3.59 3.34 3.33 3.27 3.23 3.16 3.15 3.14 3.11 3.10 3.10 3.09 3.07 3.07 3.01 2.96 2.90 2.76 2.71 2.62 2.60 1 2 3 4 5 6 7 8 9 10 10 12 13 13 15 16 17 18 19 20 21 0.582 0.968 0.475 3.293 2.996 3.772 1.393 1.719 1.410 3.786 1.250 2.400 0.848 0.299 4.984 2.028 4.931 7.668 2.698 2.256 5.554 0.676 0.425 0.754 0.011* 0.019* 0.005* 0.236 0.145 0.230 0.005* 0.289 0.049* 0.495 0.878 0.001* 0.090 0.001* 0.000* 0.030* 0.062 0.000* * significant at 5% level table 1 skills required of quantity surveyors australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 85 skills such as communication, managerial and marketing/business attract a moderate mean rating of 3.09, 3.07 and 3.01 respectively. these are considered basic skills necessary in addition to the technical skills. quantity surveying graduates have to be equipped not only with the technical knowledge but also in communicating and dealing with people. other skills, which were considered fairly important, are: mapping/surveying (2.96), actuarial science (knowledge about insurance (2.90); and gas/petrochemical engineering (2.76). knowledge about international trading, investment analysis and solid mineral engineering were rated least. their respective means are 2.71, 2.62 and 2.60. the implication of this is that these skills are considered less important for quantity surveyors. they can be categorized as future areas or skills to be explored. the anova conducted on the results (at sig. < 5%) showed difference in the opinion among the groups of respondents in 10 items. these are: civil/heavy engineering, gas/petrochemical engineering, solid mineral engineering, measurement/quantification, economics, marketing/business skill and leadership skill. others are, actuarial skill and knowledge about international trading. this may be due to the fact that some of the respondents might think that anything that have to do with engineering and business skill may not be necessary for quantity surveyors. the results of the overall mean ranking, however, proved otherwise this assumed notion. classification of skills required of quantity surveyors this section reports on the results of classification of the identified skills required of quantity surveyors. the detailed survey results are shown in table 2, in which the preferred classifications are presented in percentages. two main classifications were identified: basic and core skill classifications. the basic skills are those common and required of all construction professions, while the core skills are those uniquely required of quantity surveyors. the principle of classification is based on majority opinion (50%). if over 50% of the respondents are in favour of basic classification, then the particular skill is classified as ‘basic skill’. a similar principle is applied to ‘core skill’ classification. skill mean ranking rank basic core preferred classification computer literacy 3.59 1 45.2% 54.8% core building engineering 3.34 2 40.4% 59.6% core information technology economics measurement/quantification civil/heavy engineering 3.33 3.27 3.23 3.16 3 4 5 6 64.5% 42.7% 39.8% 57.6% 35.5% 57.3% 60.2% 42.4% basic basic core basic professional practice construction law interpersonal skill m & e service engineering 3.15 3.14 3.11 3.10 7 8 9 10 30.1% 40.9% 59.8% 64.5% 69.9% 59.1% 40.2% 35.5% core core basic basic financial skill leadership skill managerial skill communication skill marketing/business skill mapping/surveying actuarial skill (knowledge about insurance) gas and petrochemical engineering 3.10 3.09 3.07 3.07 3.01 2.96 2.90 2.76 10 12 13 13 15 16 17 18 38.9% 63.9% 60.7% 57.7% 58% 59.3% 59.6% 73% 61.1% 36.2% 39.3% 42.2% 42.0% 40.7% 40.4% 27.0% core basic basic basic basic basic basic basic knowledge about international trading investment analysis solid mineral engineering 2.71 2.62 2.60 19 20 21 69.7% 77.5% 72.6% 30.3% 22.5% 27.4% basic basic basic table 2 classification of skills required of quantity surveyors there are fourteen skills preferred to be classified as ‘basic’. they are: information technology, civil/heavy engineering, mechanical and electrical services engineering, gas and australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 86 petrochemical engineering, solid mineral engineering, marketing/business skills, leadership skills, managerial skills, interpersonal skills and communication skills. others are: actuarial skills, knowledge about international trading and investment analysis. these are all regarded as essential requirements needed by quantity surveyors to be able to perform his duty. they can also be regarded as essential supporting skills. core skills are shown as: computer literacy, building engineering, measurement/quantification, economics, construction law, professional practice and financial skills. these are regarded as core skills germane to the common duty of quantity surveyors. competencies expected of quantity surveyors as indicated in the literature review section, competence was broadly summarized as actions which are observable in the execution of one’s work. in other words, it is regarded as the applied skill and knowledge that enable people to perform specified functions or works. the expected competencies of quantity surveyors therefore lie in the outcome and display of the various acquired skills. the survey results on this are as indicated in table 3. the mean values range from the lowest value of 2.94 to the highest value of 3.65. from the results, cost planning and control (with a mean value of 3.65); estimating (3.63); construction procurement system (3.56); contract documentation (3.52); contract administration (3.43); project management (3.37); feasibility/viability studies (3.33); valuation (3.29); financial management (3.26); development economics (3.11) and risk management (3.09) constitutes those competencies rated important. the listing of cost planning and control as the most important competence may not be out of place. the summary of what a quantity surveyor does lie in the financial and contractual control of building project. it should be noted that budgeting for capital projects implies a dynamic process incorporating both planning and control systems enabling corrective actions when necessary. the business of cost planning of ‘designs’ at the design stage and the appropriate application of cost control methodologies and techniques at the construction stage is therefore very crucial to the fulfillment of this basic duty of a quantity surveyor in any construction project. furthermore, estimating, project procurement, contract documentation and administration all constitute the core technical services provided by quantity surveyors. it is therefore not surprising that these items were rated very important. these results compares favourably with the apc standard sets by the rics. the rics (1998) authoritatively set out the core competence of quantity surveyors as, procurement and financial management, economics of construction, construction contract and practice and construction technology and environmental services. other competence areas rated important are: life cycle costing (3.05), facility management (3.03). arbitration and dispute resolution (2.99) and economic management of urban infrastructure (2.94) were rated low. the indicated low ratings of these competencies may suggest a general dissatisfaction of the quality of professional services offered in these areas. they can also be considered as areas where quantity surveyors’ services are not pronounced. as such they are adjudged areas to be intensified and/or incorporated in quantity surveying training. the respondents (groups) held different opinions on six out of the fifteen items listed at 5% significant level. these are feasibility/viability studies, development economics, cost planning and control, construction procurement system, facility management, and arbitration and dispute resolution. australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 87 competence qs architect engineer builder client overall f sig. mean rk. mean rk. mean rk. mean rk. mean rk. mean rk. cost planning and control estimating construction procurement system contract documentation contract administration project management feasibility/viability studies valuation financial management development economics risk management life cycle costing facility management arbitration and dispute resolution economic mgmt. of urban infrastructure 3.69 3.64 3.64 3.60 3.58 3.53 3.45 3.31 3.32 3.30 3.15 3.13 3.12 3.10 3.04 1 2 2 4 5 7 6 9 8 10 11 12 13 14 15 3.41 3.46 3.36 3.32 3.26 3.19 3.17 3.17 3.04 2.80 3.06 3.00 2.88 3.04 2.69 2 1 3 4 5 6 7 7 10 14 9 12 13 10 15 3.72 3.75 3.40 3.43 3.25 3.34 3.20 3.34 3.18 2.84 2.92 2.91 2.76 2.62 2.99 2 1 4 3 7 5 8 5 9 13 11 12 14 15 10 3.78 3.75 3.67 3.70 3.49 3.34 3.29 3.30 3.42 3.26 2.99 3.12 3.05 3.18 2.89 1 2 4 3 5 7 9 8 6 10 14 12 13 11 15 3.60 3.53 3.66 3.46 3.40 3.33 3.28 3.31 3.26 3.19 3.33 3.04 3.29 2.93 3.00 2 3 1 4 5 6 10 8 11 12 6 13 9 15 14 3.65 3.63 3.56 3.52 3.43 3.37 3.33 3.29 3.26 3.11 3.09 3.05 3.03 2.99 2.94 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 3.182 1.864 3.432 2.187 2.032 2.043 2.500 0.327 1.855 6.207 1.825 0.650 3.521 4.016 2.137 0.014* 0.116 0.009* 0.070 0.089 0.087 0.042* 0.860 0.117 0.000* 0.123 0.627 0.008* 0.003* 0.075 * significant at 5% level table 3 competencies expected of quantity surveyor australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 88 classification of competencies expected of quantity surveyors this section reports on the results of classification of the competencies expected of quantity surveyors. the detailed survey results are shown in table 4, in which the preferred classifications are presented in percentages. three main classifications are identified: core, optional and special competence classifications. the core competencies are those common and germane to day to day activities of quantity surveyors. the optional competencies reflect the area of specialization, while the special ones can be regarded as those required for future career diversifications. the principle of classification is based on majority opinion. if over 50% of the respondents are in favour of core classification, then the particular competence is classified as ‘core’. a similar principle is applied to ‘optional’ and ‘special’ classification. however, where none of the option is over 50%, the particular competence is regarded has being classified as the option with the highest percentage. competence mean ranking rank core optional special preferred classification cost planning and control 3.65 1 83.0% 8.5% 8.5% core estimating 3.63 2 79.7% 7.6% 12.6% core construction procurement system 3.56 3 71.2% 13.5% 15.3% core contract documentation 3.52 4 74.2% 16.4% 9.4% core contract administration 3.43 5 69.2% 15.5% 15.3% core project management 3.37 6 61.5% 23.4% 15.1% core feasibility/viability studies valuation financial management 3.33 3.29 3.26 7 8 9 63.4% 59.1% 56.2% 24.9% 25.4% 28.1% 11.7% 15.5% 15.7% core core core development economics risk management life cycle costing facility management 3.11 3.09 3.05 3.03 10 11 12 13 57.9% 18.9% 51.2% 18.2% 31.5% 28.3% 22.7% 28.3% 10.6% 52.8% 26.1% 52.8% core special core special arbitration and dispute resolution 2.99 14 51.9% 25.6% 22.5% core economic mgmt. of urban infrastructure 2.94 15 28.5% 52.3% 19.1% optional table 4 classification of competencies expected of quantity surveyors from the results, the core competencies are presented as: feasibility/viability studies, development economics, cost planning and control, estimating, construction procurement system, contract documentation, contract administration, project management, financial management, valuation, life cycle costing and arbitration/dispute resolutions. facility and risk management are classified as special competencies while the only competence listed as optional is economic management of urban infrastructure. conclusions and recommendations based on the explorative survey of major stakeholders in the nigerian construction industry, this paper presents the findings of a study that examined the core skill requirement and competencies expected of quantity surveyors. among the twenty one skills variables investigated, the survey showed fifteen of them as important. these are: computer literacy, building engineering, information technology, economics, measurement/quantification, knowledge of civil/heavy engineering, professional practice, construction law, interpersonal skill, knowledge of mechanical and electrical services engineering, financial skill and leadership skill, communication skill, managerial skill and marketing/business skill. further analysis was used in categorizing the skills to basic and core skills. the result presents the basic skills as information technology, civil/heavy engineering, mechanical and electrical australasian journal of construction economics and building dada, j o and jagboro, g o (2012) ‘core skills requirement and competencies expected of quantity surveyors: perspectives from quantity surveyors, allied professionals and clients in nigeria’, australasian journal of construction economics and building, 12 (4) 78-90 89 services engineering, gas and petrochemical engineering, solid mineral engineering, marketing/business skill, leadership skill, managerial skill, interpersonal skill, and communication skill, actuarial skill, knowledge about international trading and investment analysis. the core skills were shown as computer literacy, building engineering, measurement/quantification, economics, construction law, professional practice and financial skill. considering the competencies expected of quantity surveyors; the research showed the important variables as: cost planning and control, estimating, construction procurement system, contract documentation, contract administration, project management, feasibility and viability studies, valuation, financial management, development economics, risk management, life cycle costing, facility management and arbitration/dispute resolution. the results of further analysis presents the core competencies as: feasibility/viability studies, development economics, cost planning and control, estimating, construction procurement system, contract documentation, contract administration, project management, financial management, valuation, life cycle costing and arbitration/dispute resolutions. facility and risk management are classified as special competencies while economic management of urban infrastructure is classified as optional competence. the study has provided considerable insight into the issue of quantity surveyors’ skill and competence. the findings of this research have considerable implications on the training and practice of quantity surveyors. these implications affect most players in quantity surveying training and practice: the academic institutions, the practitioners, the user of quantity surveying services and the professional bodies responsible for the regulation of quantity surveying practice in nigeria. from the outcome of the study, the following recommendations are made. firstly, the important skills and competencies identified in the survey should be given prominence, in the training and continuous development of the quantity surveying profession. secondly, the academic institutions and the national university commission in collaboration with the niqs should critically address this during accreditation and in running quantity surveying programs in nigerian higher institutions. finally, the niqs and qsrbn should endeavour to make strong representation in the review of quantity surveying academic program to reflect the important skills and competencies which are lacking in the current program. this will not only enrich quantity surveying curriculum and make it meet the current need of the industry but will make nigerian quantity surveyors marketable in the global market. references aace (2005) recommended practice 11r-88, required skills and knowledge of cost engineering, morgantown, wv: aace international ajanlekoko, j.o. 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(2002) ‘current practice in project management: an empirical study’, international journal of project management, 20 (1), 1-11 http://www.paquantitysurveyor.net/ influence of in-sourcing and outsourcing of consultants on construction project performance in nigeria godwin iroroakpo idoro, (university of lagos, nigeria) abstract research studies have discovered that outsourcing has several benefits and the practice is fast replacing in-sourcing especially with regard to construction consultants. in the attempt to examine the benefits of the two approaches on project outcome, this study investigates the influence of the use of in-sourced and outsourced consultants on project performance in nigeria. the objectives are to determine the use of in-sourcing and outsourcing for selected consultants, compare the use of the two approaches in project delivery and their influence on project performance and compare the performance of projects in which in-sourced and outsourced selected consultants were engaged. to achieve these objectives, a questionnaire design approach was adopted. a field survey involving a sample of 164 projects were selected by stratified random sampling. data were collected using structured questionnaires and analysed using percentage, mean, spearman and t-tests. the results of the study reveal that clients engage both in-sourced and outsourced consultants in project development and that the practice has significant influence on project performance. it also discovered that the use of the two approaches has differing benefits on project delivery time and cost. the study concludes that in-sourcing and outsourcing are common practices in project development and that clients are facing a challenge in deciding which approach to adopt. the study also discovers that both approaches has benefits associated with project outcome and suggests that clients should consider these benefits in their decision to in-source or outsource consultants. keywords: construction projects, in-sourced consultants, nigeria, outsourced consultants and project performance introduction the importance of consultants in construction project delivery cannot be over-emphasised. consultants as havemann (2007) put it are accountable for the technical risks in a conventional project. they are responsible for developing the requirements of project clients, setting targets, deadlines and establishing standards for meeting these requirements, preparing project documents that describe the targets, deadlines and standards set and sometimes monitoring the activities of contractors that execute a project to ensure that the targets, deadlines and standards are achieved. it suffices to say that a project cannot be successfully executed without the services of consultants. these consultants are engaged from two sources namely: in-house or external. in-house consultants can otherwise be described as internal service providers or in-sourced consultants. these refer to professionals on permanent employment of the client who are engaged to perform the services of consultants in the procurement of a project. outsourced consultants can otherwise be described as external or outsourced service providers. these refer to professionals who operate consultancy outfits that are engaged by a client to provide specialised services in the course of procuring a project. traditionally, organisations used to engage professionals on permanent employment to perform the services of consultants. australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 46 however, in the past decade, outsourcing has become a prevalent practice in most countries. sattineni and university (2008) opined that in developing countries, white collar jobs that were hitherto considered to be stable are now being outsourced. the main concern about consultants that prompts this study is that most of the major clients in particular the public and organised private sector clients have departments where professionals are employed. these professionals are often responsible for most pre-design services and they are fully involved in both design and construction activities. in organisations where project delivery is fully internalised, in-sourced consultants perform all the activities relating to design and construction of a project. idoro (2006) described the in-house project delivery process as direct labour approach. in other projects, clients use in-sourced consultants for some services while engaging external consultants for others. in projects where outsourced consultants are involved, client’s professional staff serve as intermediaries between the external consultants and the client who often seek their advice on every matter relating to a project. boes and doree (2009) opined that the preparatory activities in traditional contract are either carried out in-house or outsourced to consulting engineering firms and that outsourcing to consulting engineering firms requires in-house control measures. they maintained that reducing staff by outsourcing tasks to engineering consultants creates new issues of quality control, risks and staffing. the main questions raised by this practice are: what is the preference of construction clients on inhouse and outsourced consultants in project delivery? what is the effect of in-house and outsourced consultants on project performance? the problem of the study therefore is to determine the influence of in-sourced and outsourced consultants on project performance. the objectives are to compare the extent of use of in-sourced and outsourced project consultants in project delivery and the effect of their use on project performance. the achievement of these objectives will assist stakeholders in the industry in their decision on whether to engage insourced or outsourced consultants in project development. hypotheses of the study in the attempt to achieve the objectives of the study, three hypotheses were postulated. the first hypothesis states that the extent of use of in-sourced and outsourced consultants in project development is not significantly different. this hypothesis is tested to establish the preference of clients on the two types of consultants. the second hypothesis states that the extent of use of in-sourced and outsourced consultants has no significant relationship with project performance. the test of this hypothesis is expected to assist clients to know the influence of the use of insourced and outsourced consultants on project performance. the third hypothesis states that the outcome of projects in which in-sourced consultants were engaged is not significantly different from the outcome of projects in which outsourced consultants were engaged. the results of the hypothesis are expected to assist clients to know the effect of engaging the two types of consultants and which consultants to source in-house or outside conceptual framework of the study three categories of variables namely: project consultant, consultant source and project performance were used in the study. six project consultants namely: project manager, architect, quantity surveyor, structural, electrical and mechanical engineers were used. consultant source was classified into in-source and outsource while twelve variables namely: respondents’ assessment of project cost, duration, quality, variations, fluctuation, risks, conflicts between client and contractors, conflicts between client and consultants, conflicts between consultants and contractors, compliance with contract obligations, time-overrun and cost-overrun were used as parameters of project performance. the last two parameters of project performance were used as parameters of project outcome because the effects of the other ten parameters are expected to manifest in them. project success which is reflected in project performance is the australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 47 purpose of engaging consultants. hence, the relationship between the two types of consultants and project performance and the difference in the outcome of projects in which in-sourced and outsourced consultants were engaged were used to determine the benefits in project performance of the two types of consultants. this relationship is expressed in fig.1. figure 1 framework for evaluating the relationship between the use of in-sourced and outsourced consultants and project performance previous studies the construction industry is one of the most important economic sectors in nigeria. the industry is known to account for a major proportion of the gross domestic product (gdp) of nigeria (federal government of nigeria, 1986; idoro, 2004). the industry is also a major contributor to employment generation by providing employment to millions of people in diverse professions and skills as well as serving as a vocational training ground. there are several parties that are involved in the delivery of construction projects. idoro (2009a) stated that project teams consist of many parties who have several responsibilities to perform in order to ensure the success of a project. he identified the notable parties as clients, consultants, contractors, suppliers and manufacturers. clients in the nigerian construction industry are classified into two categories namely: public clients made up of the federal, state and local governments and their respective parastatals and private clients made up of individuals and corporate organisations. idoro and okun (2011) opined that in nigeria, government is the main promoter of construction projects and that the private sector depends to a considerable on government expenditure. nigerian contractors are often categorised as either indigenous that is construction firms that are fully owned and managed by nigerians or expatriates that is those firms that are jointly owned by nigerians and foreigners but solely managed by expatriates (idoro, 2009b). olateju (1991) reported that indigenous contractors were responsible for only 7% of the total value of contracts awarded from 1974 to 1994 while their expatriate counterparts were responsible for the remaining 93%. in a study that investigated the reasons for the poor participation of indigenous contractors in contracts’ execution, idoro (2010) discovered that nigerian clients perceive the quality performance of expatriate contractors to be better than that of indigenous contractors and confirmed that clients indeed give preference to expatriate contractors in the award of contracts. there are many professionals that are involved in the design and construction of projects in nigeria that are regarded as consultants. in a study of quantity surveying practice in nigeria, odusami (1999) stated that in nigeria as in britain, the quantity surveyor is one of the key professionals involved in the design and execution of construction projects. others include architects and structural, electrical and mechanical engineers. these consultants can either be consultant source 1. in-source 2. outsource project performance consultants’ assessment of 1. project time 2. project cost 3. project quality 4. variations 5. fluctuation 6. project risks 7. conflict between client & contractors 8. conflict between client & consultants 9. conflict between consultants & contractors 10. compliance with contract obligations project outcome 11. time-overrun 12. cost-overrun project consultant 1. project manager 2. architect 3. structural engineer 4. quantity surveyor 5. electrical engineer 6. mechanical engineer australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 48 outsourced through direct employment by client, nomination by architect/project manager, nomination by other consultants or competitive bidding from professionals operating consultancy outfits outside the client organisation or in-sourced from professionals that are within the client organisation (odusami, 1999). in the attempt to examine the application of outsourcing in different areas of organisations’ activities, researchers describe it in various ways: the significant contribution by external vendors in the physical and human resources associated with the entire or specific components of the it infrastructure in the user organisation (loh and venkatraman, 1992); the extent of components and finished products supplied to a firm by independent suppliers (kotabe, 1992); the reliance on external sources for the manufacturing of components and other value-adding activities (lei and hitt,1995). grover et al. (1996) described outsourcing as the practice of turning over part or all of an organisation’s internal functions to external service providers. gilley and rasheed (2000) felt that the term outsourcing is so wide that it covers virtually any good or service that an organisation procures from outside firms. referring to another way outsourcing is practised in many organisations, domberger (1998) believed that outsourcing is synonymous with contracting and therefore described it as the process of searching for and appointing contractors for the provision of goods and services and the execution of the contractual relations needed to support such activities. in another view, ender and mooney (1994) described outsourcing as a form of privatisation that refers to an organisation’s (university) decision to contract with an external organisation to provide a traditional organisation function or service to the organisation. all these descriptions (supply, externalisation, contracting and privatisation) show that outsourcing is practised in various ways in different organisations. while all of them can be said to convey the same meaning or practice, two of them mentioned another point to ponder about in outsourcing. grover et al., (1996) called it ‘internal functions’ while ender and mooney (1994) regarded it as ‘traditional functions’. the point in these definitions is that the products or services to be outsourced should be the ones that the organisation is or can currently produce or render. this view is supported by gilley and rasheed (2000) who argued that outsourcing may arise in two ways namely: 1) substitution of external purchases for internal activities that is discontinuation of goods or services and an initiation of procurement from outside suppliers and 2) abstention that is purchases of goods or services from outside organisations even when those goods or services have not been produced in-house in the past. the duo regarded outsourcing as a decision to reject internalisation that is in-house production of goods or services outsourced and opined that outsourcing occurs when the internalisation of the good or service outsourced is within the acquiring firm’s managerial and/or financial capabilities. they suggested that organisations that have no choice but to acquire a particular good or service from external source because of lack of capital or expertise are not outsourcing because the internalisation of the activity in question is not an option. this view tends to indicate that outsourcing applies when the option of in-sourcing is available and that organisations are always faced with the decision on whether to adopt in-sourcing or outsourcing for their products or services. this problem which clients have to confront when embarking on project development is the thrust of this study. kanji and wong (1998) maintained that the construction industry comprised of a multitude of occupations, professions and organisations that are involved in different phases of a construction project and consultants in collaboration with clients, contractors and sub-contractors all have a role to play in delivering a quality project. renier and volker (2009) maintained that every project is usually assigned a new team, precisely from a client’s own network in which context social aspects play an important part. if a firm cannot draw from its australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 49 own organisation structural engineers, building consultants, climate advisors, other external professionals have to be involved in the process as soon as possible. meiling and johnson (2009) opined that during design, manufacturing and erection, the building is thoroughly defined, manufactured and erected. most of the activities remain in-house while some are performed by external consultants. the duo maintained further that in industrialised buildings in sweden, drafting of the building envelope is handled by companies themselves while hvac drafting, structural design, electrical drafting and life-cycle costing are done by external consultants. although sattineni and university (2008) regarded pre-construction, conception, design and tendering services as areas that suite outsourcing, however if contracting and privatisation are forms of outsourcing, it all means that construction activities are equally being outsourced in project delivery. the point in the above studies is that outsourcing whether full or partial is inevitable in the development of most construction projects. the question that arises from the above review is ‘if outsourcing is a feature of construction project development, what are the benefits derived from it? research studies have discovered that organisations derive numerous benefits when they engage external service providers. it was discovered that by outsourcing, firms often achieve cost advantages relative to vertically integrated firms (quinn 1992; bettis, et al., 1992; d’aveni and ravenscraft, 1994; lei and hitt, 1995); manufacturing costs decline and investment in plant and equipment can be reduced (bettis et al., 1992); reduced fixed costs that leads to a lower break-even point (gilley and rasheed, 2000); firms have opportunities for flexibility in technology (harrigan, 1985); economies of scale by increasing net value and reducing costs, process expertise, access to capital and expensive technology, greater capacity for flexibility (carlson, 1989; harrison, 1994); enhanced competitiveness (gilley and rasheed, 2000); quick response to environmental changes (dess et al., 1995); increased management attention and resource allocation to those tasks that an organisation does best and reliance on management teams in other organisations to oversee tasks in which the outsourcing firm is at relative advantage (quinn et al., 1990); emerging technology without significant investment in the technology (gilley and rasheed, 2000); focus on core competencies (kotabe and murray, 1990; quinn, 1992; dess et al., 1995; sang, 2010). while previous studies have covered many benefits in outsourcing, the aspect of project performance has been virtually neglected. the benefits that a client will derive in terms of the outcome of projects which is the focus of this study are not in the studies. despite these numerous benefits, several problems have been observed on the use of external consultants. outsourcing can lead to loss of overall market performance (bettis et al., 1992; kotabe, 1992) or less investment in research and development which may lead to decline in innovation (teece, 1987). in a project that involved a change of client, michell et al., (2007) discovered problems concerning cooperation between consultants and contractors. as a solution to the problem of inaccurate proposals submitted by consultants, tembo and rwelamila (2007) suggested that organisations should formulate an evaluation process for the assessment of project proposals from consultants in a manner that will reflect true costs and schedules. these problems show that the practice of outsourcing products or services by an organisation is not without losses. research methods a questionnaire survey approach was adopted for the study and a field survey involving 164 clients was conducted. a list of 211 organisations made up of 56 government and 155 organised private establishments was prepared through a preliminary survey conducted in the first quarter of 2010 because a reliable list or statistics of organisations involved in project development could not be obtained. these organisations were used as the population frame for the study. the study sample was selected from this population by stratified random sampling. in australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 50 the sampling, the population was classified into public and private organisations thereafter; the respondents were selected from each sector randomly. one project preferably the one with the highest contract sum executed by each of the sampled organisations was selected to ensure that the consultants selected for the study were required in the project. data were collected on the characteristics of the projects sampled, the sources of six consultants discovered to be common to all the projects sampled, respondents’ assessment of project duration, cost, quality, extent of risks, variations, fluctuation, compliance with contract obligations and conflicts and disagreement between client and contractors, client and consultants and contractors and consultants of the projects using five ranks namely: poor, low, moderate, high and very high. the ranks were assigned scores of 1, 2, 3, 4 and 5 respectively. data on the initial and actual duration and cost of the projects were also collected. the data were collected using structured questionnaires. the instrument was administered to the respondents by hand through personal visits paid to the organisations sampled in mid 2010 and completed questionnaires were also collected through the same approach. the extent of use of the two categories of consultants investigated was defined as the percentage of the six selected consultants engaged in-house or outsourced to procure the projects sampled. time-overrun was defined as the percentage of the difference between actual and initial contract periods divided by initial contract period while cost-overrun was defined as the percentage of the difference between actual and initial contract sums divided by initial contract sum. the data were analysed using percentage, mean, t-test, chi-square and spearman correlation tests. results of data analysis the results of the analysis of the data collected for the study are presented as follows. characteristics of projects used for the study the characteristics of the projects used for the study were investigated for the purpose of understanding the projects which the results of the study apply to. five project characteristics and their sub-types stated table 1 were investigated. the percentages of each sub-type of project characteristics were analyzed. the results are presented in table 1. table 1 shows that the projects sampled were procured by four notable methods namely: direct labour, traditional contract, design-build and labour-only however the percentage of projects procured by direct labour method was the highest. on the owners of the projects used for the study, table 1 shows that both government and private sector projects procured were covered in the sample but private sector projects constituted the majority. on the type of construction, table 1 shows that both new construction and renovation/maintenance works were sampled but the majority of the projects were new projects. table 1 shows that projects were procured by the construction management method in which the construction manager is the coordinator, the project management system in which the project manager was the project leader and the traditional management method in which the architect was the project leader were sampled. the analysis of the rise of the buildings sampled shows that low-rise (1-3 floors), medium-rise (4-7 floors) and high-rise (above 7 floors) buildings were covered but the majority of the projects were low-rise buildings. the analysis of the value of the projects shows that the five value intervals selected were covered in the projects sampled which indicates that the projects sampled were both small and large. on the duration of the projects sampled, table 1 shows that the percentage of long duration (above 52 weeks) projects is the highest while the percentage of medium duration (26-52 weeks) projects is the lowest. on the contractor type that executed the projects sampled, table 1 shows that projects executed by both indigenous and expatriate contractors in nigeria were covered however, majority were executed by indigenous australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 51 contractors. the analysis of the use of the buildings sampled shows that the projects covered by the study have several uses. characteristic sub-type n % characteristic sub-type n % procurement method design-bid-build direct labour design-build labour-only total 42 64 42 16 164 25.6 39.0 25.6 9.0 100 project value n 125 million n26-50 million n51-75 million n76-100million above n100 million total 32 22 26 8 28 116 27.6 19.0 22.4 6.9 24.1 100 client type public private total 28 136 164 17.1 82.9 100 project duration 1-26 weeks 27-52 weeks above 52 weeks total 48 40 74 162 29.6 24.7 45.7 100 construction type new construction renovation total 122 42 164 74.4 25.6 100 contractor type expatriate indigenous total 42 122 164 25.6 74.6 100 management method traditional project mgt construction mgt total 42 58 64 164 25.6 35.4 39.0 100 project use residential commercial industrial social total 88 62 2 12 164 53.7 37.8 1.2 7.3 100 building rise 1-3 floors 4-7 floors above 7 floors total 96 6 22 124 77.4 4.8 17.7 100 table 1 descriptive result of characteristics of projects used for the study n=number of respondents. n=naira (nigerian official currency; 1us$=158n), mgt=management priority accorded the use of in-sourced and outsourced consultants to investigate the priority accorded the use of in-sourced and out-sourced consultants in project development, the percentages of the consultants in-sourced and outsourced were analysed and ranked separately. the results are presented in table 2. consultant total n in-source n % rank outsource n % rank electrical engineer mechanical engineer architect structural engineer quantity surveyor project manager 94 90 98 112 108 102 43 45.7 6 46 51.1 5 55 56.1 4 63 56.3 3 68 63.0 2 77 75.5 1 51 54.3 1 44 48.9 2 43 43.9 3 49 43.7 4 40 37.0 5 25 24.5 6 table 2 ranks of the sources of selected project consultants n=number of respondents table 2 shows that the percentage of in-sourced project managers (75.5) ranked first while that of quantity surveyors (63) ranked second. the percentage of in-sourced structural engineers (56.3) ranked third while those of architects (56.1), mechanical engineers (51.1) and electrical engineers (45.7) ranked fourth, fifth and sixth respectively. australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 52 test of difference between the use of in-sourced and outsourced consultants to test whether or not there is difference in the preference of the respondents for in-sourced and outsourced consultants, the first hypothesis was postulated. the hypothesis states that the extents of use of in-sourced and outsourced consultants in project development are not significantly different. the hypothesis was tested using the t-test with p≤0.05. the rule for the acceptance or rejection of the hypothesis is that when p-value>0.05, the hypothesis is accepted but when p-value≤0.05, the hypothesis is rejected. the results are presented in table 3. variables compared n mean t-value df p-value decision diff % of in-sourced consultants % of outsourced consultants 164 164 50.27 49.73 0.158 158 0.874 accept ns table 3 results of t-test for difference between the use of in and out sourced consultants n=number of respondents, df=degrees of freedom. diff=difference, ns=not significant table 4 shows that the p-value (0.874) for the test of difference in the extent of use of insourced and outsourced consultants is greater than the critical p-value (0.05) therefore the hypothesis is accepted. this result implies that the extent of use of in-sourced consultants is not significantly different from the extent of use of outsourced consultants. the result implies that clients have no preference for in-sourced or outsourced consultants in project development. relationship between the use of in-sourced and outsourced consultants and project performance to determine the influence of the use of the two types of consultants on project performance, the second hypothesis of the study was postulated. the hypothesis states that the extent of use of in-sourced and outsourced consultants and project performance are not significantly related that is the extent of use of either in-sourced or outsourced consultants does not have significant influence on project performance. for the test of the hypothesis, data collected on the use of the two variables of project consultants and the respondents’ assessment of the twelve variables of project performance as stated in the research methods were used. the hypothesis was tested using the chi-square and spearman correlation tests with p≤0.05. the rule for the acceptance or rejection of the hypothesis is that when p-value>0.05, the hypothesis is accepted but when pvalue≤0.05, the hypothesis is rejected. the results are presented in table 4. on the relationship between the use of in-sourced consultants and project performance, table 4 shows that the p-values for the test of relationship between the percentage of in-sourced consultants and the respondents assessment of project duration (0.758), variations (0.663), fluctuation (0.229), project risks (0.097), conflicts/disagreement between consultants and contractors (0.356) and percentage of time-overrun to initial contract period (0.080) are greater than the critical p-value (0.05) therefore the hypothesis is accepted. this result implies that the number of in-sourced project consultants has no significant relationship with the perception of clients on project duration, variations, fluctuation, project risks, conflicts or disagreements between consultants and contractors and the percentage of time-overrun to initial contract period of projects. however, the p-values for the test of correlation between the percentage of in-sourced consultants and the respondents’ assessment of project cost (0.033), project quality (0.017), conflicts between clients and contractors (0.015), conflicts between clients and consultants (0.038), compliance with contract obligations (0.001) and percentage of costoverrun to initial contract period (0.002) are lower than the critical p-value (0.05) therefore the hypothesis is rejected. the result indicates that the number of project consultants sourced from among clients’ staff has significant correlation with the perception of the clients on project cost australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 53 and quality, conflicts between clients and contractors and between client and consultants, compliance with contract obligations and overrun in the cost of projects. variables correlated n p decision rel % of in-sourced consultants res asmt of project cost res asmt of project duration res asmt of project quality res asmt of variations res asmt of fluctuation res asmt of project risk res asmt of client & contractors’ conflicts res asmt of client & consultants’ conflicts res asmt of consultants & contractors’ conflicts res asmt of compliance with contract obligations % time-overrun to initial contract period % cost-overrun to initial contract sum 164 164 164 164 164 164 164 164 164 164 80 54 2 x 0.166 -0.024 -0.186 -0.034 0.095 0.130 0.189 -0.162 0.072 0.299 r 0.197 -0.409 0.033 0.758 0.017 0.663 0.229 0.097 0.015 0.038 0.356 0.001 0.80 0.002 reject accept reject accept accept accept reject reject accept reject accept reject s ns s ns ns ns s s ns s ns s table 4 results of spearman test of correlation between the use of in-sourced and outsourced consultants and project performance n=number of respondents, x 2 = chi-square value, r=correlation coefficient, p=p-value, res=respondent, asmt=assessment, rel=relationship, s=significant, ns=not significant difference between performance of projects based on the use of in-sourced and outsourced consultants the argument in favour of the use of outsourced consultants has been that the cost is less than that of engaging in-sourced consultants. the attempt to justify the engagement of in-sourced consultants prompts the comparison between the performance of projects in which in-sourced consultants were engaged with that of projects in which outsourced consultants were engaged. for the purpose of this comparison, the percentages of time-overrun to initial contract period and cost-overrun to initial contract sum of projects in which in-sourced project managers, architects, quantity surveyors and structural, electrical and mechanical engineers were engaged were compared with those of projects in which outsourced consultants were engaged. the third hypothesis of the study was postulated for purpose of the comparison. the hypothesis states that the performance of projects in which in-sourced consultants were engaged is not significantly different from the performance of projects in which outsourced consultants were engaged. the hypothesis was tested using the t-test with p≤0.05. the rule for the acceptance or rejection of the hypothesis is that when p-value>0.05, the hypothesis is accepted but when pvalue≤0.05, the hypothesis is rejected. the results are presented in table 5. table 5 shows that the p-values for the test of difference between the percentages of timeoverrun to initial contract period of projects in which in-sourced and outsourced project managers (0.847), architects (0.563), quantity surveyors (0.649), mechanical engineers (0.360) and structural engineers (0.209) were engaged are higher than the critical p-value (0.05) therefore the hypothesis is accepted. these results imply that the time-overruns of projects in which in-sourced project managers, architects, quantity surveyors, mechanical and structural engineers were engaged are not significantly different from those of projects in which australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 54 outsourced project managers, architects, quantity surveyors, mechanical and structural engineers were engaged. similarly, the p-values for the test of difference between the percentages of cost-overrun to initial contract sum of projects in which in-sourced and outsourced project managers (0.937), electrical engineers (0.112) and structural engineers (0.733) were engaged are higher than the critical p-value (0.05). these results signify that the hypothesis is accepted that is the cost-overruns of projects in which in-sourced project managers, electrical and structural engineers were engaged are not significantly different from projects in which outsourced project managers, electrical and structural engineers were engaged. parameter consultant n mean t-value df p-value decision diff project manager time-overrun cost-overrun in-source outsource in-source outsource 66 14 50 14 16.29 17.01 12.81 13.35 -0.194 -0.080 78 62 0.847 0.937 accept accept ns ns architect time-overrun cost-overrun in-source outsource in-source outsource 30 48 24 28 16.52 14.95 7.87 16.00 0.581 -2.396 76 50 0.563 0.020 accept reject ns s quantity surveyor time-overrun cost-overrun in-source outsource in-source outsource 38 42 32 22 15.74 17.03 8.09 19.78 -0.457 -3.631 78 52 0.649 0.001 accept reject ns s mechanical engr time-overrun cost-overrun in-source outsource in-source outsource 28 52 24 30 18.19 15.47 8.52 16.32 0.920 -2.297 78 52 0.360 0.026 accept reject ns s electrical engr time-overrun cost-overrun in-source outsource in-source outsource 32 48 28 26 19.84 14.13 10.16 15.75 2.025 -1.618 78 52 0.046 0.112 reject accept s ns structural engr time-overrun cost-overrun in-source outsource in-source outsource 44 34 38 14 18.07 14.40 13.67 12.27 1.266 0.344 76 50 0.209 0.733 accept accept ns ns table 5 results of t-test of difference in project performance based on the use of in-sourced and outsourced consultants n=number of respondents, diff=difference, engr=engineer australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 55 table 5 however shows that the p-value for the test of difference between the percentages of time-overrun to initial contract period of projects in which in-sourced and outsourced electrical engineers (0.046) were engaged is less than the critical p-value (0.05) therefore the hypothesis is rejected. this result implies that the time-overrun of projects in which in-sourced electrical engineers were engaged are significantly different from that of projects in which outsourced electrical engineers were engaged. similarly, the p-values for the test of difference between the percentages of cost-overrun to initial contract sum of projects in which in-sourced and outsourced architects (0.020), quantity surveyors (0.001) and mechanical engineers (0.026) were engaged are less than the critical p-value (0.05) therefore the hypothesis is rejected. these results indicate that the cost-overruns of projects in which outsourced architects, quantity surveyors and mechanical engineers were engaged are significantly different from projects in which in-sourced architects, quantity surveyors and mechanical engineers were engaged. the results in table 5 reveal that the mean time-overrun of projects in which in-sourced electrical engineers were engaged (19.84 weeks) is higher than the mean time-overrun of projects in which outsourced electrical engineers were engaged (14.13 weeks). this result tends to indicate that less time-overrun was recorded in projects in which outsourced electrical engineers were engaged compared to projects in which their in-sourced counterparts were engaged. however, the mean cost-overrun of projects in which outsourced architects (n16 million), quantity surveyors (n19.78 million) and mechanical engineers (n16.32 million) were engaged are higher than the mean cost-overruns of projects in which in-sourced architects (n7.87 million), quantity surveyors (n8.09 million) and mechanical engineers (n8.52 million) were engaged. these results indicate that less cost-overrun was recorded in projects in which insourced architects, quantity surveyors and mechanical engineers were engaged compared to projects in which their outsourced counterparts were engaged. discussion of findings the analysis of the percentages of use of the two sources of consultants in table 2 has shown that the extent of use of in-sourced project managers is the highest, followed by in-sourced quantity surveyors while the extent of use in-sourced electrical engineers is the least. the reverse is the case of the extent of use of outsourced consultants in project development. these results indicate that clients’ preference for in-sourced and outsourced consultants in project development varies from one consultant to another, and that clients do not rely on one of the two sources of consultants in project development; rather they use their staff as some consultants and source the others from outside. the results in table 4 that there is no significant difference between the extent of use of insourced and outsourced consultants also support the finding that clients use the two types of consultants for the development of projects. this finding shows that the two types of consultants are important features of project development in nigeria. it also goes to show that clients are found of employing professionals who serve as consultants in their organizations. the results of the influence of the use of the two types of consultants in table 4 shows that the use of either in-sourced or outsourced consultants has significant influence on clients’ assessment of project cost, quality, conflicts between project team members and cost-overruns. the results of the test of difference in the performance of projects in which the two types of consultants were engaged tend to indicate that the engagement of in-sourced or outsourced project managers and structural engineers does not make any difference on project performance. this tends to imply that clients can engage their staff or external consultants as project managers and structural engineers without any increase or decrease in both time and cost overruns. however, the results of the study show that the engagement of outsourced electrical engineers could help to achieve savings in the delivery time of projects compared to australasian journal of construction economics and building idoro, g i (2011) ‘influence in-sourcing and outsourcing of consultants on construction project performance in nigeria’, australasian journal of construction economics and building, 11 (4) 45-58 56 when in-sourced electrical engineers are engaged but such will not make any difference in the overrun in the delivery cost of projects. this result may suggest that an outsourced electrical engineer is unlikely to prolong his involvement in a project but more willing to perform his service and disengage from a project on time than his counterpart in the employment of the client. this interest can be attributed to the fact that his service fee is fixed and may not vary with the duration of his involvement in a project. the implication of this result is that considerable time can be saved in projects that have long duration when electrical engineers are outsourced. on the other hand, the engagement of in-sourced architects, quantity surveyors and mechanical engineers could help to achieve savings in the delivery cost of projects compared to when outsourced consultants are engaged but this will not make any difference in the delivery time of projects. this result may indicate that in-sourced architects, quantity surveyors and mechanical engineers have better knowledge of both the client and project requirements than their outsourced counterparts and this knowledge helps to minimise incidences of variations and the likes that are responsible for cost-overrun. the implication of this result is that cost can be saved when project design, in particular architectural and mechanical drawings and bills of quantities are carried out in-house, that is direct labour instead of contract. conclusion the study has established that in-sourcing and outsourcing of consultants is a feature of the project delivery process. this finding shows that clients are often faced with the challenge of deciding which of the two types of consultants to engage when they embark on project development. organisations all over the world are abandoning the practice of keeping many construction professionals as staff because construction is a service activity and they need to concentrate on their core business activities and reduce overhead costs. this study has contributed to existing studies on the benefits of in-sourcing and outsourcing by revealing the benefits derived from project outcome when they are adopted. it has revealed that organisations do not have anything to lose on project outcome by engaging external project managers and structural engineers as project consultants. specifically, it has discovered that outsourcing electrical engineers in project development not only provide the clients with the numerous benefits of outsourcing discovered in previous studies, it will equally assist organisations to reduce the delay to be experienced in project delivery. on the other hand, the study has discovered that by engaging in-house architects, quantity surveyors and mechanical engineers as consultants, organisations are likely to derive the benefit of reduced cost-overrun. these results suggest the need for organisations to engage a mixture of in-sourced and outsourced consultants in project development. in adopting this, it is suggested that such organisations should give consideration to electrical engineers in outsourcing and architects, quantity surveyors and mechanical engineers in in-sourcing. suggestion for further studies time and cost overruns are not the only parameters of project outcome. the study could not investigate the benefits associated with other important parameters of project outcome such as project quality when the two consultants are engaged in project development. it therefore suggests further studies on the influence of the use of the two consultants on other parameters of project outcome such as project quality in order to complement the results of the study. references bettis, r., bradley, s. and hamel, g. 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(2007) ‘project management maturity in public sector organisations: the case of botswana’, proceedings of cib conference w065/055: commissions transformation through construction organised by herriot-watt, university, edinburg, dubai, november harmonisation of chalk and cheese harmonisation of chalk and cheese philip davenport (solicitor of the supreme court of nsw, nsw building disputes tribunal and senior lecturer, faculty of the built environment, university of nsw) abstract this is a response to towards harmonisation of the construction industry security of payment legislation: a consideration of the success afforded by the east and west coast models in australia by jeremy coggins, robert fenwick elliott and matthew bell. towards harmonisation is based upon the false premise that the objectives of the east coast and west coast models are the same. they are chalk and cheese. each serves a valuable purpose. each jurisdiction needs both models. a model for a dual process incorporating both the east coast and the west coast models will be found in davenport (2007). introduction as an example of the so called east coast model, the building and construction industry security of payment act 1999 nsw will be used. all the adjudication acts in australia, except those of western australia and the northern territory, are modelled on the nsw act. as an example of the west coast model, the construction contracts act 2004 wa will be used. under the nsw act, the role of the adjudicator is akin to that of a certifier such as the traditional superintendent. under the wa act, the role of the adjudicator is akin to that of an arbitrator. when enacted, the nsw act was unique. no similar legislation existed anywhere. on the other hand, the wa act follows a time honoured model similar to arbitration. it is because the east coast model departs so radically from the existing processes of dispute resolution that so many people, including many in the judiciary, have found it such a difficult concept to grasp. under the nsw act (s 21(1)(a)) the adjudicator determines ‘the amount of the progress payment (if any)’. under the wa act (s 31) the adjudicator must dismiss the application or ‘determine on the balance of probabilities whether the party to the payment dispute is liable to make a payment’. the wa act is concerned with any claim by any party for payment under or for breach of the construction contract. the nsw act is only concerned with a claim by the party who carried out the work (or provided the goods or services) for a progress payment under the construction contract. under s 3(1) of the nsw act provides: the object of this act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive and able to recover progress payments in relation to the carrying out of that work and the supplying of those goods and services. in nsw, adjudication is only one of the means by which that objective is achieved. part 2 of the nsw act creates a right to progress payments even when the construction contract does not provide for progress payments. part 3 of the act provides mechanisms to assist the australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 37 claimant to recover progress payments much more expeditiously than by suing in court. a claimant can sue in court or, if the contract so provides, initiate arbitration to prove and recover progress payments. but claimants invariably prefer the mechanisms provided by part 3 of the act. by contrast, section 31 of the wa act provides: the object of an adjudication of a payment dispute is to determine the dispute fairly and as quickly, informally and inexpensively as possible. the respective acts serve their respective objectives. in nsw, it is an entitlement and ability to receive progress payments for carrying out work. in wa it is a mechanism for resolving all payment disputes. there is not a common objective as the authors of towards harmonisation claim. the acts serve different purposes and there is need for a dual scheme of adjudication which incorporates both models. the authors of towards harmonisation say that the key question at this stage is how a uniform national approach to security of payment regulation might be achieved. the answer is a dual scheme of adjudication that incorporates both the entitlement and ability to receive progress payments for carrying out work (as incorporated in the east coast model) and a mechanism for resolving other payment disputes (as incorporated in the west coast model). a blend of chalk and cheese would be unpalatable, but separately each serves a useful purpose. a blend of the east coast and the west coast models will not work but a dual scheme incorporating both will work. wa is the poorer for not having compulsory rapid adjudication for progress claims (the east coast model) and nsw is poorer for not having adjudication for other claims (the west coast model). a dual scheme is described in davenport (2007). historical background there is a long history of legislation in the united kingdom dating from about 1464 known as the truck acts which were designed to ensure that employers paid employees promptly without deduction or set off. that legislation is now reflected in the fair work act 2009 cth which provides in s 323(1) that at least monthly an employer must pay an employee in full except for specific deductions permitted by s 324. there was no similar legislative protection for contractors who were not employees. for 200 years the gap was filled in building and construction contracts by the provision of an architect, engineer or superintendent to act as certifier. the certifier is bound to independently certify the amount of progress payments due to the contractor. the contractor could obtain summary judgment for the certified amount just as under the east coast model a claimant can obtain summary judgment for the adjudicated amount. examples are merrit cairns constructions v wulguru heights (1995) 12 bcl 293 and blue chip v concrete constructions (1996) 13 bcl 31. in chambers v goldthorpe [1901] 1 kb 624 it was held that the certifier was not liable for negligence in certifying. to reflect the independent status of the certifier the term ‘quasiarbitrator’ was used. while the certifier acted in good faith and independently, the contractor had a measure of protection against the principal who might be inclined to unjustifiably withhold payment. then, 73 years later in sutcliffe v thackrah [1974] ac 727, goldthorpe was overruled and the certifier was held liable to the principal for negligently over-certifying progress payments. this caused considerable consternation to certifiers. they became very concerned about their independence and liability. the problem was compounded by pacific associates v baxter [1988] 1 qb 993 when it was held that the contractor could not sue the independent certifier for undercertifying. the independent certifier virtually ceased to exist. the east coast model, in effect, restores the pre 1974 situation and goes further. it provides australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 38 for a truly independent certifier (the adjudicator) whenever there is a dispute over progress payments and it provides the certifier who acts in good faith with statutory immunity for negligence in certifying. comparisons the east coast model recognises the particular vulnerability of the party who carries out the construction work or provides related goods or services. in his second reading speech introducing the bill for the nsw act, the minister mr. iemma said: it is all too frequently the case that small contractors – such as bricklayers, carpenters, electricians and plumbers – are not paid for their work. many of them cannot survive financially when that occurs, with severe consequences for themselves and their families. the government is determined to rid the industry of such totally unacceptable practices. in the annual report 2009-2010 1 of the building and construction industry payments agency of queensland, referring the east coast model building and construction industry payments act 2004 qld the general manager says: the act was developed specifically to assist subcontractors who have struggled with payment issues for decades. subcontractors lodged 602 of the 887 adjudication applications. the value of their claims was $109.4 million all too often, when it comes time for payment, the recipient of the work, goods or services does not pay. sometimes a reason is provided. often no reason is provided. the approach in the east coast model is that if after a warning that the payment claim is made under the act, the respondent fails to provide a reason for withholding payment, the claimant is entitled to elect between suing for payment of the claimed amount or having the payment claim adjudicated. in the latter event, the claimant must give the respondent another opportunity to provide a reason for withholding payment. if the respondent still provides no reason, the respondent is precluded from raising any reason in the adjudication. under the nsw act, the claimant knows all the reasons, if any, that the respondent is entitled to raise for withholding the progress payment (or any part) before the claimant makes an election to go to adjudication. compare the wa act (s 27) where the respondent does not have to provide reasons for withholding payment until 14 days after being served with the adjudication application. when a contractor is not paid on time, the common law did not give the contractor the right to suspend work. both the nsw act and the wa act seek to redress this unfairness. the difference is that the nsw act2 gives the contractor the right to suspend when payment is not made on time and the respondent has provided no reason for withholding payment. by contrast, when the respondent fails to pay the adjudicated amount, even if the respondent provides no reason, the claimant has no right under the act to suspend work until after an adjudication 3. this severely disadvantages the claimant. under the nsw act, the respondent can only set off against progress payments amounts which the respondent has agreed (in the construction contract or subsequently) can be set off. under the wa act the respondent can raise counterclaims and have them adjudicated. a claimant in nsw who initiates an adjudication for a progress payment may be found not to be entitled to any payment and may have to pay the adjudicator’s fees but the claimant will 1 the report can be found at www.bcipa.qld.gov.au. 2 sections 15(2)(b) and 27. 3 section 42 of the wa act. australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 39 not, by reason of going to adjudication, be liable to pay moneys to the respondent. in wa, going to adjudication for a progress payment is a risky process. the time it takes a contractor to be paid for work is most important. here the nsw act provides a much speedier process but limited to progress payments. take for example, a small contractor seeking a progress payment of $50,000 under a simple contract with no provision for progress payments. the contractor serves a payment claim under the act. if, within 10 business days, the contractor is not paid, the contractor gives the respondent notice of the contractor’s intention to go adjudication. the respondent has 5 business days to give a reason for withholding payment. the claimant can then initiate an adjudication and have a determination of the entitlement, if any, to a progress payment within a maximum of 10 business days. the whole process takes approximately 20 to 30 business days. at [2.1] of their paper the authors say: the east coast model acts provide a detailed statutory payments regime, overriding any inconsistent contractual provisions … conversely, the west coast model acts largely preserve (rather than override) the parties’ contractual interim payment regimes. the east coast model does not override any fair contractual interim payment regime. the east coast model is designed to override unfair contractual payment regimes and to provide a fair entitlement to progress payments where the contract fails to do so. the wa act preserves unfair contractual payment regimes. the authors point out that the east cost model only allows payment claim to be made up the ‘contractual stream’. the east coast model is only concerned with progress payments. by definition, these can only be made up the ‘contractual stream’. what would be ideal is a model which provides separately for progress claims and for other claims. neither the east coast model nor the west coast model does this. at [2.4] of their paper the authors say: few in the industry would seriously advocate that the present disjointed situation ought to continue; rather there have been increasing calls – echoing those of the cole royal commission nearly a decade ago – to forge a uniform national approach to security of payment. should those states with the east coast model wind back the protection which it provides to contractors and suppliers of goods and services and adopt the west coast model? in september 2010 the services, technology & administration department, nsw called for comments on a discussion paper 4 on proposals to amend the nsw act. also in september 2010 the queensland government and the queensland building services authority issued a discussion paper 5 inviting submissions on changes to the queensland act. a number of responses to the discussion papers advocate the adoption of a dual process to extend adjudication to other than progress payments. at the time of writing, the writer has seen many of the responses but none seen by the writer advocates replacing the east coast model with the west coast model. the queensland building and construction industry payments agency proposes publishing responses. should wa extend to contractors and suppliers the protection afforded by the east coast model and wind back the existing right of both parties to have other money claims adjudicated? the authors do not suggest that wa should provide the additional protection 4 the discussion paper can be down loaded at www.services.nsw.gov.au. 5 the discussion paper can be down loaded at www.bsa.qld.gov.au. australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 40 (given by the east coast model) to contractors with respect to progress payments. both models provide benefits to sections of the construction industry. the answer is not to attempt to wind back any protections but to extend to the whole of the australian construction industry the benefits of both models. key success parameters in section 3 of towards harmonisation under the heading key success parameters the statistics cited show that the number of adjudication applications in wa on a population basis is about one fifth of that in queensland. in queensland only one party can make an adjudication application and then the application can only be in respect of a progress payment. if in queensland both parties could make the range of money claims that can be made in wa, the number of adjudications in queensland would almost certainly increase considerably. the authors say that in wa the total value of payment claims in 2008/2009 was approximately $36 million. in queensland it was $223.9 million according to the building and construction industry payment agency (2010). about that time, the writer adjudicated a single queensland payment claim for $60 million. the result does not show up in statistics because the parties requested that the decision not be published. under the heading key success parameters the authors say that to draw conclusions as to overall longer term legislative success based solely upon data indicating a significant uptake of statutory adjudication would be imprudent and misleading. they say: it is proposed that such longer term success is predicated upon continued satisfaction of all stakeholders in the construction industry with the legislation’s payment and adjudication schemes. therefore, it is argued that there are several parameters which must be considered in assessing the success of the legislation in meeting its objective of achieving sustained improvement of cash flow throughout the construction industry. the authors identify the parameters as including: • levels of justice afforded by the statutory scheme; • the consequential costs of the legislative scheme to the construction industry both in terms of administrative and legal burden generated; and • the impact of the legislation (positive or negative) on the relationship between the contracting parties. try telling that to the subcontractor who has not been paid for the work, goods or services which the subcontractor has supplied to the respondent. the subcontractor will respond along the lines, ‘get real. you are living in cloudland. all i want is to be paid and paid quickly’. the queensland building and construction industry payments agency (2010) shows that the overwhelming majority of claims submitted to adjudication were for amounts of less that $40,000. in his second reading speech on 12 november 2002 introducing the building and construction industry security of payment amendment bill the nsw minister for public works and services, mr. iemma, said: the main purpose of the act is to ensure that any person who carries out construction work or provides related goods or services, is able to promptly recover progress payments. the government wanted to stamp out the practice of developers and contractors delaying payment to subcontractors and suppliers by ignoring progress claims, raising spurious reasons for not paying or simply delaying payment. so far as the east coast model is concerned, the key success parameter is whether the legislation assists subcontractors and contractors who carry out construction work (or provide related goods or services) to promptly recover progress payments. hundreds of australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 41 times, the writer has seen first hand the spurious reasons which respondents raise to avoid paying for the work goods or services they have received. the process under the east coast model is quick and efficient. the parties usually use lawyers for the larger claims but countless small contractors have successfully had their claims adjudicated without any legal assistance. making a payment claim under the act and lodging an adjudication application is a far less daunting prospect that issuing a summons and proving a case in court. a very valuable advantage for both parties is that they do not have to take time off work or give staff time off work to attend court. adjudications are conducted in writing. an important measure of the success of the east coast model is identified in the queensland government and the queensland building services authority (2010, p6) as follows: there is a view that the greatest benefit of the bcipa [the queensland act] is the way in which it facilitates parties to payment disputes to resolve their disputes without referral to a formal adjudication or other court process. industry stakeholders advise that in comparison to the actual number of adjudication applications lodged, many more matters are resolved through negotiation between the parties. through service of a payment claim under the bcipa, the respondent is made aware: • of the full details of the claim so they are in a position to readily understand the case the claimant is advancing for payment and therefore be in a position to possibly negotiate with the claimant a suitable outcome; and • that the claimant is prepared to enforce their rights to payment through rapid adjudication process established by the bcipa. industry stakeholders indicate that the bcipa has in many cases resulted in respondents who in the past may have conducted their business so as to inappropriately delay/reduce payments to contractors and suppliers from being [un]able to continue this practice. this is because the subject respondents are aware that they cannot delay the adjudication process and if they fail to make a payment without justification they may be subject to an enforceable adjudication decision handed down against them. on the other hand, claimants appear to generally accept that they will have to address legitimate reasons for the respondent declining to pay the full amount they claimed under a payment schedule. the authors say: it is proposed that such longer term success is predicated upon continued satisfaction of all stakeholders in the construction industry with the legislation’s payment and adjudication scheme. nothing will satisfy all stakeholders. the longer term success of the east coast model is not predicated upon continued satisfaction of all stakeholders in the contraction industry. it is deliberately aimed at assisting only those who carry out construction work or provide related goods or services. it will forever remain unsatisfactory to the very large section of the construction industry that stands to benefit by delaying payment to subcontractors and suppliers by ignoring progress claims, raising spurious reasons for not paying or simply delaying payment. only pollyanna could believe that any scheme that is aimed at stamping out ‘the practice of developers and contractors delaying payment to subcontractors and suppliers by ignoring progress claims, raising spurious reasons for not paying or simply delaying payment’ could australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 42 meet the ‘continued satisfaction of all stakeholders in the construction industry with the legislation’s payment and adjudication scheme’. justice in dispute resolution under the heading ‘justice in dispute resolution’, the author’s say: a linchpin of all the legislation is the interim resolution of payment claim disputes via a mandatory adjudication scheme. often there is no dispute. often the recipient of work, goods or services (the respondent) simply does not pay. the claimant has the choice of going to court or adjudication. where the respondent has provided no reason for withholding payment, the adjudicator under the east coast model does not decide any dispute. the adjudicator simply certifies the amount of the progress payment to be made by the respondent, the due date for payment and the rate of interest. the reason for adjudication is to give the claimant a faster, less daunting and less costly method of recovering payment as quickly as possible. this is not a general ‘dispute resolution’ scheme. the process under the east coast model acts does, as the authors say at [2.1], ‘provide a detailed statutory regime, overriding any inconsistent contractual provisions’. this is necessary in order ‘to ensure that any person who carries out construction work or provides related goods or services, is able to promptly recover progress payments’ which the minister mr. iemma said is the main purpose of the legislation. however, as the authors say: conversely, the west coast model acts largely preserve (rather than override) the parties’ contractual interim payment regimes. the consequence is that in wa any person who carries out construction work or provides related goods or services, is at a disadvantage when it comes to promptly recovering progress payments. is that ‘justice’? at [4] the authors distinguish ‘substantive justice’ and ‘procedural justice’. they say: substantive, or distributive, justice essentially refers to the fairness of the outcome produced by a decision process. procedural justice refers to the justice of the processes or methods used to arrive at distributive justice. the authors say that the key differences between the east and west coast models impact upon the measures for procedural and substantive justice afforded by each model. firstly, they identify the requirement under the east coast model for the payment claim to bear the endorsement that the claim is made under the act as a potential barrier to procedural fairness. this does not make sense. if the claimant intends to make a payment claim under the act it is only fair that the claimant should warn the respondent. the authors say that a contractor or supplier may deliberately refrain from endorsing its payment claim through fear of negative repercussions in its relationship with the principal. the authors say: this effectively denies such a contractor or supplier access to the dispute resolution process available under the act. that is not so. whilst ever the contractor (or supplier) is satisfied with the contractual regime for progress payments and dispute resolution, the contractor does not need to use the statutory dispute resolution process. the option for access to the dispute resolution process australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 43 available under the act remains open for the contractor if the contractual regime breaks down. there cannot be said to be any denial of justice. at [5.2] the authors correctly point out that the east coast model provides for recovery of progress payments only and can only be used by the contractor or supplier to recover payment from the person for whom the work was carried out or to whom the goods or services were supplied. they say: herein lies another potential barrier to procedural justice in the east coast model, as the judiciary has allowed claimants to recover amounts for delay damages in adjudicated payment claims under the act. the four nsw court of appeal cases cited as authority for this proposition are all cases in which the construction contract provided an entitlement to have the delay damages included in the calculation of progress payments. the cases confirm that the act does not provide an entitlement to a progress payment for damages except where and to the extent that the construction contract gives the contractor that entitlement. the authors say: this as davenport puts it, creates an ‘imbalance’ as only one party is allowed to apply for adjudication of payment disputes regarding damages. the authors refer to the writer’s paper a proposal for a dual process of adjudication. what the author proposed is that under a dual process respondents who are stupid enough to include provision for inclusion of delay costs in progress claims under their contracts should be protected against their own stupidity and all damages claims should be adjudicated under a process separate from that applying to progress claims for the value of work, goods or services. the writer said at p15 of the paper: the proposed dual process would retain the certification process for purely progress payment claims, ie for claims for the value of work, goods or services that have actually been provided, and to adopt the traditional process for other payment disputes. the dual process would continue the existing legislation for progress claims (redefined to exclude the broader interpretation sometimes adopted by the courts) and would allow either party to have damages and debt claims adjudicated separately. the ‘certification process’ identified by the writer is essentially the east coast model and the ‘traditional process’ is essentially the west coast model. at pp 14-15 the writer said: the dual process would retain the objective of the certification process. in s 3 of the nsw act it is ‘to ensure that any person who undertakes to carry out construction work … is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work’. but the dual process would also adopt the objective of the traditional process. in s.3 of the nz act it is to provide ‘for the speedy resolution of disputes arising under a construction contract’ and to provide ‘remedies for the recovery of payments under a construction contract’. in the wa act it is ‘to provide a means for adjudicating payment disputes arising under construction contracts’. the authors say at [5.2]: as claims for damages falling within the scope of the contract have the potential to be made by either contractual party, it would appear to be blatantly unfair to allow only one party the right to refer such claims to the acts dispute resolution processes. this is true. but if the contractual regime allows a contractor to include damages in a progress claim, the nsw act does not override the parties’ agreement, as unwise as it may be. the dual process advocated by the writer would override that aspect (where it exists) of the contractual regime and allow equal rights to both parties when it comes to adjudication of claims for damages. australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 44 at [5.3] the authors say that where the respondent has not provided a reason for withholding payment, in adjudication under the east coast model the respondent is disallowed from lodging an adjudication response. the authors say that this effectively denies the respondent any voice during the adjudication. bearing in mind that the adjudication is only of a payment on account, it is not unfair that the respondent who gives no reason for withholding payment before the adjudication application is made should be barred from thereafter raising a reason. the claimant has no opportunity to dispute or canvass a reason which was not included in the payment schedule. before going to adjudication under the east coast model, the claimant knows all the respondent’s reasons for withholding payment. conversely, under the west coast model, the claimant commences the adjudication without knowing what reasons the respondent may raise in the adjudication. there are countless instances where an adjudicator (including the writer) has not allowed a progress payment or the whole of the claimed amount even when the respondent has elected not to make a submission or is barred from making a submission. in brookhollow v r&r consultants [2006] nswsc 1 palmer j at [62] said: because an adjudication determination can have drastic financial consequences, s.22(2) [of the nsw act] requires the adjudicator to see that, even when the respondent does not participate, the process is not abused. at [5.3] the authors say: indeed 41% of adjudication applications in queensland to date for the 2009/10 financial year have been made on the basis that the respondent has failed to serve a payment schedule on the claimant. before the claimant could take any of these claims to adjudication, the claimant had to give the respondent two opportunities to provide a reason for withholding payment and a warning that the claimant intends to have the payment claim adjudicated. despite two opportunities the respondent has failed to provide any reason for withholding payment. strictly speaking the adjudicator is not deciding a dispute between the parties. the adjudicator’s role is to check that the processes required by the act before an entitlement to a progress payment arises have been satisfied and to certify the amount, if any, of the progress payment to which the claimant is entitled. the respondent is not locked out of the process. the respondent receives notice of the appointment of the adjudicator and a copy of the adjudication application. the respondent can contend in the adjudication or in court that the processes required by the act have not been satisfied6. what the respondent cannot do is have yet another opportunity to raise reasons (for withholding payment) which the respondent should have raised before the adjudication commenced but elected not to raise. it is not very different to the court process. if a defendant fails to lodge a defence, the defendant cannot complain if the case is decided on the claimant’s evidence. at [5.3] the authors say: failure to serve a payment schedule not only strips the respondent of any right to subsequently defend that payment claim, but it may also potentially result in a gross miscarriage of substantive justice or, at the very least, an outcome which is not perceived fair by the respondent. it must be remembered that the respondent has been given two opportunities to provide a payment schedule setting out any reason for withholding payment and a warning that the 6 chase oyster bar v hamo industries [2010] nswca 190. australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 45 claimant intends to have the progress payment adjudicated. how many opportunities should the respondent be given? how much longer should the claimant have to wait for payment? why, if the respondent has chosen not to provide a reason for withholding payment, should the claimant have to pursue a more costly and time consuming process than the simple form of adjudication provided under the east coast model? prior to enactment of the east coast model, it was the claimant who was denied justice in the circumstance where the respondent provided no reason for withholding payment. the claimant had to sue in the courts for the payment. the injustice arose from the cost and delay in pursuing that litigation and the fact that by the time to process was complete the respondent may be insolvent. it may be that the delay in recovering payment could bankrupt the claimant. there is no potential for a gross miscarriage of substantive justice. if the respondent perceives that the outcome is unfair, there is nothing in the legislation to prevent the respondent from suing for return of the money. the authors say: even in circumstances where the respondent has duly served a payment schedule, it may only include in its adjudication response reasons for withholding payment which have previously been included in the payment schedule. thus a respondent may be prevented from being able to present its full case to the adjudicator unless it has previously served a comprehensive payment schedule which covers all the issues it may wish to rely on subsequently. the respondent is not prevented from presenting its full case to the adjudicator. the respondent is restricted from raising in the adjudication reasons of which claimant has not been given prior notice in the payment schedule. this is only fair. the claimant must be given a fair opportunity of deciding whether to contest the respondent’s reasons and, if so, to do so in the adjudication application. the claimant is not entitled to raise new claims in the adjudication. the respondent is not entitled to raise new reasons for withholding payment. the authors point out that under the west coast model there are no limitations as to the inclusion of reasons for withholding payment in a response to an adjudication application. this is a flaw in the west coast model. the respondent can raise reasons for withholding payment that the claimant has never been informed of. the claimant has to elect whether to go to adjudication or not without knowing the case in response which the claimant may have to meet. here is an example. the respondent’s reason for withholding payment may be that certain work is defective. if the claimant is made aware of this reason, the claimant may elect not to proceed to adjudication at that stage but to rectify the defect or get an expert report and perhaps pursue a payment claim at a later date. however, under the west coast model the claimant may not be aware of the respondent’s reason for withholding payment until after the adjudication commences. this is an unfair and inefficient process. referring to the east coast model, the authors say: these highly restrictive provisions with regards to payment schedules and adjudication responses have a major impact upon consideration of procedural and substantive justice. this is not how the parliaments of nsw, queensland, victoria, south australia, tasmania and the act see it. this is not how the courts see it. the ‘highly restrictive provisions’ apply equally to both parties. to ensure that the progress payment to which a party is entitled is decided promptly, in the adjudication the claimant is not entitled to raise additional claims and the respondent is not entitled to raise additional reasons but there is no restriction on australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 46 either party providing any amount of submissions and material in support of the claims in the payment claim or the reasons for withholding payment in the payment schedule. the authors say: it is difficult to conceive of any fair and respected dispute resolution process denying the right for one of the parties to put forward their arguments or, at the very least, to be heard. indeed it is a fundamental right of most dispute resolution processes that both parties have the right to present their case. lack of opportunity for the respondent to present its case, together with the consequent likelihood of a determination perceived as unjust by the respondent, would seem a recipe for respondent dissatisfaction with the dispute resolution processes provided by the east coast model. the east coast model gives each party an equal opportunity to put forward its arguments on progress payments. there is no lack of opportunity for the respondent to present its case. the payment claim and the payment schedule are, in effect, pleadings just like a statement of claim and defence in litigation or arbitration. in litigation or arbitration a party is not entitled to present a case different to that on the pleadings. so too in adjudication under the east coast model. at [5.4] the authors say that the east coast model does not permit the parties any legal representation at conferences called by the adjudicator. this is a non issue. it is extremely rare for the adjudicators to call conferences. despite adjudicating hundreds of claims over a decade, the writer has never once called a conference. in the last 1,000 determinations under the east coast model that the writer has perused, no adjudicator has held a conference. at [5.4] the authors point out that the west coast model allows the adjudicator to determine his or her own adjudication procedure and to inform himself or herself in any way he or she thinks fit. the procedure under the east coast model is spelt out so that the adjudication is quick and inexpensive and cannot be expanded beyond the determination of the progress payment due. to ensure an expeditious process and minimize costs, the adjudicator is not permitted to determine his or her own adjudication procedure and is not entitled to inform himself or herself in any way he or she thinks fit. at [5.4] the authors say that under the east coast model the parties cannot agree upon the appointment of a particular individual as adjudicator. that is not true. when a dispute arises, it is always open to the parties to agree upon the authorised nominating authority [the ana] to make the nomination of an agreed adjudicator. in fact they never agree and as a consequence the act provides that the claimant should serve the adjudication application to the government authorised ana of its choice. at [5.4] the authors point out that under the west coast model, the parties to the construction contract may agree in the contract upon a registered adjudicator or prescribed appointer. as the authors concede this provides an opportunity for a party with dominant bargaining power to unfairly influence the identity of the adjudicator at the time of contract formation and thereby erode substantive justice. that is a flaw in the west coast model which does not exist in the east coast model. at [5.4] the authors point out that all eight of the anas in wa are construction or professional bodies or associations. they say that six of the nine anas in nsw are construction or professional bodies or associations and three are private for profit companies. this may, in part, explain the slow uptake of adjudication in wa. generally speaking, construction or professional bodies or associations bodies have not proven to be very efficient and enthusiastic anas or willing to incur the capital and running expenses and australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 47 engage the staff to provide the registry services which adjudicators require if they are to be efficient and have a continuing flow of adjudication work. the ana with which the most adjudication applications are lodged is adjudicate today pty ltd. adjudicate today has a full time staff of eight running a registry, assisting parties comply with the procedural provisions of the act and assisting adjudicators on its panels. it operates in nsw, victoria, queensland, tasmania and the act and has trained and accredited adjudicators in each of those jurisdictions. adjudicate today has gone to great lengths to provide separately for each jurisdiction information, flowcharts, templates and guidelines for payment claims, payment schedules, adjudication applications, adjudication responses and various notices 7 . the authors say: generally, the professional bodies and associations provide nomination/appointment services as part of their service to the profession they represent. therein lies a conflict of interest. an ana should not treat nomination or appointment of an adjudicator as a service to any particular profession. an ana should not see its statutory role as a part of its service to the profession it represents. its statutory role should be seen as a completely separate and independent role. the authors note that all anas under the east coast model and the west coast model take a commission from the fee paid by the disputing parties to the adjudicator. they point out that the commission varies from ana to ana. they say: this raises a question as to whether adjudication outcomes are in any way affected by a claimant’s choice of a particular appointing body, and particularly whether there is any correlation between the level of commissions appropriated from adjudicators’ fees by appointing bodies and substantive outcomes of adjudications. there appears to be little, if any, research into this question to date. all adjudicators’ decisions in queensland are published on the web site of the queensland building and construction industry payments agency www.bcipa.qld.gov.au. in each case the ana which nominated the adjudicator is identified. anyone who wants to investigate the question of whether adjudication outcomes are in any way affected by a claimant’s choice of a particular appointing body can do their own research. some claimants may perceive that the adjudication outcome may be influenced by the choice of a particular constructional or professional body or association as the ana because that ana is there to serve its members. each ana has a panel of potential adjudicators from whom it selects the adjudicator to determine an adjudication application. if an ana has a very limited panel of potential adjudicators [who are known to the claimant] or a panel comprising one profession, the claimant might perceive a better outcome from that ana. that is an argument for anas to be private companies with a large panel of adjudicators from all sections of the construction industry and related professions. it is difficult to see how there could be any correlation between the level of commission paid by the adjudicator to the ana and the outcome of the adjudication. why would an adjudicator, on account of the amount of the service fee payable to the ana, be inclined to favors one party over the other? it does not make sense. the amount of the service fee is quite independent of the outcome of the adjudication. constructional and professional bodies and associations are created for the benefit of shareholders or members. their directors are no less likely to be influenced by the profit 7 see www.adjudicate.com.au. australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 48 incentive than the directors of any other company. in fact, it could be argued that because they are controlled and managed by people with interests in the particular profession or industry, they are less likely to be truly independent when selecting adjudicators. they are likely to appoint their own members and may be inclined to maximize the return to their appointees by minimizing the level of commission. any comparison of commissions must take into account the services provided by the ana to adjudicators. some provide no services whatsoever. some provide only minimal services. some are very efficient and provide all the services which an efficient registry would provide. the services provided by the best include an office in each jurisdiction for receipt of documents, delivery of documents to and from each state and service upon the adjudicator of legal process, secretarial services, training, continuing professional development courses, proof reading of decisions and service of decisions on the parties, collection of adjudications fees, submitting appearances and, most importantly, a buffer between parties and the adjudicator. some parties to adjudication are so concerned about the money that they can be quite intimidating. it is one thing to deal with legal representatives. it is another to deal with parties face to face. most parties to adjudication are not legally represented. the ‘service’ which an adjudicator provides is greatly enhanced by the quality of the support services provided by the ana. to have efficient back up and full registry services is imperative for efficient ‘service’. also, to be efficient, an adjudicator needs a regular flow of adjudication work. this can only be supplied by an ana that actively advertises and promotes adjudication so that claimants see the potential benefits of adjudication and can readily ascertain the process and download forms. this costs money. there is no government assistance so adjudicators have to meet the cost unless they are members of an industry or professional organisation which subsidises the cost. that, in itself, could create a conflict of interest. at p 18 the authors refer to the ‘ambush claim’ but they rightly concede that it may equally occur under the west coast model. a potential solution is not, as the authors suggest, to limit the length of written submissions. the answer is to be found in the dual scheme of adjudication proposed by the writer. administrative and legal burdens under the heading ‘administrative and legal burdens created by the legislation’, the authors say at [6.1]: the statutory system operated by the east coast model inevitably creates extra administrative workload, above and beyond normal contract administration duties, for parties on a construction contract. this is not the case under the west coast model, which allows primacy of the contractually agreed payment system. the first example the authors give of the alleged extra administrative load is that in a payment claim under the east coast model the claimant must identify the work for which payment is claimed ‘sufficiently to enable the respondent to understand the basis of the claim’. surely this is only reasonable. the progress payment is on account of the final contract price. the authors refer to the ‘protectavale principle’. there is no such ‘principle’. the requirements for a valid payment claim under the nsw act are very simple. see s 13(1). it is easier to make a payment claim under the act than to make a progress claim under any standard form contract. the act does not impose any additional administrative or legal burden on the claimant. the authors say at 21: australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 49 it is suggested that the requirement for the respondent to prepare a comprehensive payment schedules, in order to preserve its right to put forward the merits of its argument, is practicably too onerous. … it would be hard to exaggerate the importance and difficulty of providing payment schedules to every single payment claim that comes into an office. a typical head contractor will receive a large number of payment claims each month and it is extremely common for head contractors to fail to keep on top of the paperwork required by the legislation. under the east coast model a claimant can only make one payment claim for each reference date. this is usually monthly but a contract can provide for less frequent intervals. it was extremely common for head contractors to fail to keep up on top of the paperwork. the consequence was that progress payments to subcontractors were not being made at the agreed time. that is why there was need for the nsw act. subcontractors should not be disadvantaged by the head contractor’s failure to keep on top of their paperwork. the respondent only has to provide a payment schedule for those claims (for a payment on account) made under the act which the respondent refuses to pay. the burden is no more onerous than the provision of the superintendent’s payment certificate that is required under most standard forms of construction contract. the authors say: furthermore, if a respondent rejects a payment claim in a payment schedule, this does not prevent a tenacious claimant from making the same claim month after month. there is some case law to the contrary but there is no need to go into that. the respondent can simply provide the same payment schedule each month or say in each payment schedule that the reasons for withholding payment are set out in the first payment schedule. the authors are not correct when they say that the respondent must spell out all of its reasons on each occasion. reasons previously given can be included by reference. in most instances the payment schedule is a very brief document. volume of litigation and clarity of the law under this heading the authors say at [6.3] that in the decade since the nsw act commenced there have been 210 supreme court judgments and 41 court of appeal judgments in relation to issues concerning the act. the authors say that the majority of judgments represent attempts by the respondent to set aside an adjudicator’s determination. all but two of the attempts to set aside the adjudicators determination were instigated by respondents. this is not surprising. only respondents have to pay the adjudicated amount. the amount of litigation and number of times that the nsw supreme court itself has been found to have decided in error is concerning. the authors say at 24: such diversity in the amount of litigation generated by the nsw and wa legislation may, perhaps, be reflective of respondents’ level of dissatisfaction, and consequent lack of willingness to accept the adjudicator’s decision, with the substantive and procedural justice afforded by each of the two models. it is not that complicated. the amount of litigation in nsw is simply indicative of the lengths to which respondents will go to avoid paying progress payments on account. it is indicative of the difficulty of achieving the objective of the nsw act, namely, ‘to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive and able to recover progress payments in relation to the carrying out of that work and the supplying of those goods and services’. it is indicative of what a lottery litigation is and how it can be used to delay or avoid payment. australasian journal of construction economics and building davenport, p (2010) ‘harmonisation of chalk and cheese’, australasian journal of construction economics and building, 10 (3) 36-50 50 at p 25 the authors say: additionally, the significant body of nsw case law generated by the act may be reflective of a lack of clarity with respect to the legislative drafting leaving many issues to be interpreted and given certainty by the judiciary. the significant body of case law reflects the failure of the judiciary to give certainty to issues of interpretation of the legislation. the nsw act provides a novel scheme so unlike arbitration or litigation that judges have had problems accepting it 8 . the conflicting judicial interpretations encourage challenges. if the judiciary ever gives certainty, the amount of litigation will drop substantially. the concerns of the nsw and queensland governments with the level litigation are reflected in their respective september 2009 discussion papers referred to above. in their conclusion the authors say: to be sustainable, the procedure and outcome of a dispute resolution process need to satisfy the stakeholders in order to achieve efficiency (in terms of time and cost) and finality. all stakeholders will never be satisfied the procedure and outcome of any dispute resolution process whether it is court, arbitration or adjudication and whether the adjudication is the east coast model or the west coast model. there is nothing to suggest that the east coast model is not sustainable. it has been around for more than a decade. it has been copied in all states other than w.a. it has been copied in singapore. it has enabled thousands of contractors, subcontractors and suppliers to recover payment much more quickly and at less cost than payment could have been recovered, if at all, without the legislation. there is no reason for abandoning the east coast model but there is scope for adjudication of other money claims as the west coast model allows. references davenport, p. (2007) #115 australian construction law newsletter 12 building and construction industry payments agency, annual report 2009-2010 available at www.bcipa.qld.gov.au 8 a classic example is with respect to repeat claims. in john goss v leighton contractors [2006] nswsc 798 the adjudicator determined that where a previous adjudicator had determined that the claimant was not entitled to a particular progress claim for alleged delay costs the doctrine of issue estoppel applied. the nsw supreme court held otherwise and that the claimant was entitled to have the same claim adjudicated again. this gave rise to a flood of repeat claims where the claimant was dissatisfied with the determination in earlier adjudication. it was almost three years later that the nsw court of appeal found that the supreme court was wrong. see dualcorp v remo constructions [2009] nswca 69. this was not an example of any problem with the clarity of the legislation. it was purely an example of an error by the supreme court. cib w070, w092 & tg72 2012 conference paper template an alignment model for the research higher degree supervision process using repertory grids – reflections on application in practice in built environment research guillermo aranda-mena (rmit university, australia ) rod gameson (university of salford, united kingdom) abstract from phd-doing to phd-done is not as from a to b. this research aims to improve the understanding of the complex relationship between doctoral research and the supervisory process. the research model developed utilises repertory-grids and discussion is presented in relation to the nature of factors contributing to successful completions. the paper is argumentative in nature and provides insights to a complex process which is largely untested. a supervisory model previously presented by the authors (aranda-mena & gameson, 2004) is tested in two areas: (1) the research process and (2) personality factors. the research increases common understanding of what it takes to complete a phd, and the supervisory challenges in such a long process. it is concluded that supervision is a key factor in completing a phd, and in developing the intellectual, analytical and research skills expected of phd graduates. the authors call for more research, both theoretical and, in particular, empirical, in this important area. keywords: built environment, doctorate, research supervision introduction an awareness and understanding by both student and supervisor of the research process that lies ahead is critical to the success of any research higher degree studies (boud and lee, 2009), given an increase in the types (e.g. traditional phd, professional doctorate, dsc, dba) and modes (e.g. full-time, part-time, online, split-site) of higher degree studies now available (park, 2005; university of salford, no date). for example, denicolo et al (2010) report a 71% increase, from 2000-01 to 2005-06, in students studying for professional doctorates in the united kingdom (uk). a key driver for facilitating successful and timely completions is the input of such data to national research assessment exercises such as: the uk’s ‘research excellence framework [ref]’ (hefce, 2011), and the australian ‘excellence in research for australia [era]’ (commonwealth of australia, 2010). previous research has identified the issue of research supervision as being a critical factor in phd completions (baird, 1995; barnes & austin, 2009; hefce, 2011; wichmann-hansen et al, 2012). a major australian report on phd supervision, conducted at the australian national university [anu], (cullen et al, 1994, p.108), concluded that, “…the identification of effective supervisory practice was best accomplished not through simple aggregation of existing best practice, but rather through the deconstruction of supervisory practice and through the identification of those aspects of supervisory practice which would most benefit from strengthening, elaboration and change.” the report also identifies three main issues requiring attention:  “supervision should be conceptualised to encompass a broad view of phd education which includes more than one-to-one interaction of a student and a supervisor;  programs for staff and students to improve practice can and should be designed to contextualise the generic process of supervision with attention to disciplinary and usual human variation, and, australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 67  there is a need to go beyond individual supervisory interactions and restructure practice to ensure that responsibility for quality is shared and co-ordinated.” (cullen et al, 1994, p.108-109). the objective of this research is to critically review theoretical issues pertaining to the research supervisory process and the student – supervisor relationship, and identify key factors. a principal conclusion of haksever & manisali’s (2000) research of construction management and engineering students, was that the development of a framework to, ‘promote dialogue’, between students and supervisors would contribute to improved outcomes, which could include: improved contributions to knowledge and more highly developed student research skills. such a framework, in terms of the proposal of a supervisor-student alignment model, is also described and discussed. doing a phd there has been an upward trend in the number of students commencing phd studies in the uk. data published by hefce (2011) shows a significant increase of 62% in students commencing phds from 14,045 in 1996/97 to 22,790 in 2009/10. hefce (2011) also reports an increase of 71% in phd starters in the ‘engineering / technology / building / architecture’ subject area over the same period. a key factor to consider is how phd ‘starters’ translate into phd ‘completions’. hefce (2005, p. 4) state that, “by 2000-01, after five years, 57 per cent of phd students who began their studies on a full-time course, and 19 per cent starting on a part-time course had completed. by 2002-03, after seven years, the completion rates were 71 per cent and 34 per cent for full-time and part-time starters respectively.” this data shows that, after seven years of study, 29% of full-time students, and 66% of part-time students had not completed their studies. a major australian study by sinclair (2004, p.v) states that, “sixty-four per cent of phd candidates supervised over the 1990–97 period were conferred with the award of doctor of philosophy.” this result is similar to another australian study conducted by martin et al (2001) which estimated that only 65% of doctoral candidates completed their degrees. a hefce (2012) report presents projected rates of qualification of students on postgraduate research degrees. for students who commenced their studies in 2009/10, 67.6% are predicted to complete within 7 years, and 75.6% within 25 years. therefore, it is predicted that 32.4% of these students will not complete their studies by 2016/17. a survey by harman (2003) of australian research-intensive universities discovered low student satisfaction levels due to poor quality of supervision. specific issues identified by students included: quality and effectiveness of supervision, interpersonal skills of the supervisor and help provided in designing their projects. harman (2003) also identified the issue of an expansion in phd enrolments in australia since the early 1990’s, suggesting that universities had not kept pace with the needs of a growing body of research students, leading to increasing levels of student dissatisfaction. a survey of uk phd students, reported by haksever & manisali (2000), found that 30% of the cases cited, relating to non-completion of construction management and engineering students, were specifically due to problems with supervision; in particular ‘direct research-related help’, defined as, “…critical analysis of work, help with methodological problems, precise direction and help with the management of the project” (haksever & manisali, 2000, p.21). in summary therefore, the data presented in this section identifies a problem with level of ‘completions’ of phd research, with a key contributory factor being the quality of research supervision. australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 68 the research process there are many books that purport to give guidance on research processes and methods, both in general terms (i.e. howard and sharp, 1983; phillips and pugh, 1987; jankowicz, 1995) and, more recently, built environment related texts (i.e. fellows and liu, 1997; runeson and skitmore, 1999; knight and ruddock, 2008; farrell, 2011). such books are now increasingly supplemented by resources available to postgraduate researchers online (i.e. vitae, 2011). the stages of research could be regarded as sequential, starting with theory development and ending with conclusions. this could be considered as a ‘traditional’ model of research, aligning with hughes’s (1994) construction management contextualised view of a phd process of, “…consisting of three trimesters, the first to define and contextualize the problem [the theory], the second to do the field work [the test] and the third to write the thesis [concluding].” these three components of research could be more appropriately represented as three points on a ‘circle of research’ where, given different research approaches and/or methodological positions, the starting point of the research process may not always be the ‘theory’ component (marshall and rossman, 1989). one example of an alternative would be the ‘grounded theory’ approach where, as strauss and corbin (1990: p23) state, “one does not begin with the theory, then prove it. rather, one begins with an area of study and what is relevant to that area is allowed to emerge.” therefore new theory may emerge from a ‘test and conclude’ exercise (hunter and kelly, 2008). for the purpose of this paper the authors, whilst acknowledging that other methodological propositions exist, will present and discuss a ‘traditional’ research model of: building theory, testing theory and concluding. building theory there is a chinese proverb, attributed to lao-tzu, which says that, “a journey of a thousand miles begins with a single step.” the first research ‘step’ involves an initial review of the underpinning theories which might have a relation to the questions under scrutiny. the theory of the research process, as a starting point, involves the selection of a topic and a research area. with some initial ideas in mind this first research ‘step’ should be a comprehensive literature search and critical review. in the past this step could prove to be difficult in terms of access to information being readily available. the growth in information technology (i.e. online journals, web-based articles and reports) has led to a proliferation in information available to researchers, requiring well-developed skills in information searching; particularly during this first step of the research to ensure that recent and relevant literature is discovered (neuman, 1997). students no longer have to wait 3 to 6 months for inter-library loans, or print extracts from borrowed phds from microfilm. journal publishers often make papers available online before they are published in hard copy. with the internet being the main domain of information for students there is a potential risk of being overwhelmed by information, and coming across erroneous or misleading information. jankowicz (1995, p.26-28) proposes that researchers should ask themselves a number of questions when selecting and evaluating a research topic: does it interest you? how much do you know about it already? how difficult is it likely to be? these three questions would be hard to answer without the assistance of a mentor or supervisor because of factors such as: the inexperience / capability of the student, and not utilising the experience of the supervisor (barnes & austin, 2009). hughes (1994) suggests that the first task for construction management students, in consultation with their supervisors, is to agree a detailed specification for the research, and goes on to cite kane (1985, p.15) who contends that, “the most difficult hurdle to overcome in doing research is not in learning the techniques or doing the actual work or even writing the report. the biggest obstacle, surprisingly, lies in figuring out what you want to know.” australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 69 numerous authors have put forward suggestions as to how to focus research at this first ‘step’ of the process. jankowicz (1995, p.34) suggests, “working up and narrowing down…” a topic by moving from an ‘area’ (i.e. construction management), to a ‘field’ (i.e. legal issues) to an ‘aspect’ (i.e. dispute resolution). kane (1985) states that a ‘research statement’ should be produced, howard & sharp (1983) propose a ‘topic analysis’, leedy (1985) tenders the need for a ‘problem statement’ and black (1993) contends the need for clear ‘research questions and hypotheses’. often an outcome of this step will be a ‘research/thesis proposal’ which, “...justifies and describes the proposed study.” (griffith & watson, 2008, p.185). testing theory having clearly defined a research scope and developed a research direction the next ‘step’ is to define a satisfying research question, aim, objectives and, if appropriate, hypotheses. given the wide range of types of research projects conducted in the field of construction management numerous different research methodologies, ranging from the natural to social sciences, may be utilised (dainty, 2008). if the research involves the collection of empirical data the selection of appropriate valid, reliable and objective methodologies needs to be addressed (black, 1993; cresswell & miller, 1997). perry (1998) draws a distinction between ‘explanatory’ research, which is quantitative (i.e. considering what the precise relationship between variables is), and can be considered, according to mostyn (1985, p.116), to be, “…to determine what, where, when, and how many, rather than why.”, and ‘exploratory’ research, which is of a qualitative nature (i.e. looking at what variables are involved). a key consideration at this ‘test’ stage is to ensure that any research is conducted in an ethical manner. this is of particular importance when primary, non-publicly available data, such as questionnaires and interviews, are being conducted and/or where any data collection methods may impact upon humans. therefore ethical approval procedures must be followed (university of salford, 2010b; rmit, 2011a). when considering this step in the research process at postgraduate level, it can be seen as another ‘check-point’ allowing further discussion between student and supervisor, and providing an indicator of the student’s progress so far. most universities now have, as a minimum, a requirement for periodic assessment / review of a student’s progress (i.e. rmit, 2007; university of salford, 2010a), notwithstanding the importance of regular student – supervisor meetings throughout the whole phd process. concluding the final, and critical, step in the research process is to reach an outcome in the form of conclusions. this involves comparing “theory” with “test” to determine if the research aim and objectives have been achieved, and, if the research has hypotheses, if they are proven, or not. black (1993, p.175) provides a list of, “…common sources of misleading conclusions…”, which includes: ignoring data which is contrary to the research hypothesis; conclusions extended to a larger population than the one investigated and conclusions beyond the stated research boundaries (i.e. aim and objectives). this is also the end of the ‘writing-up’ of the research where it is critical that students clearly communicate what they have done in the research. hughes (1994), commenting on phds in construction management, states that, for many students, the most daunting task is writingup their work. a logical structure and presentation of the research is essential, ‘telling the story’ to the reader, using typographically and grammatically correct conventions (see good and bad examples in: truss, 2003). the australian model of examination, based upon reading and assessment of the thesis by two or three external examiners, with no oral examination which is also common in other parts of the world such as europe (tinkler & jackson, 2000), places significant importance upon how students write up their research. the defence of the thesis which takes place in an oral examination needs to, where no oral occurs, be made very explicitly in words, and other visual media, on paper. australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 70 phd supervision as a non-linear process traditionally, both the literature and university printed guidance on the research process provides prescriptive guidance (university of salford, 2010a; rmit, 2011b). however, there are a limited number of sources that acknowledge the complex process of thesis development in higher degrees. the more typical literature, including universities’ own guides, often prove to be rigid and highly prescriptive about supervisor, supervisee and the thesis or object of study (lawson, 2000). for example, phillips & pugh (1987) suggest steps and sequential timetables. however, in reality, the situation often proves to be somewhat different. the process of doing a phd is hardly one that goes from a to b to c. according to grant (2003) the process is iterative, complex and unstable and, for the same reasons, it would seem sensible to develop more prescriptive approaches towards supervision. figure 1 illustrates a model of the complexity and non-linearity in the supervision process. this model was first proposed by grant (2003) and provides a potentially powerful tool to explicitly externalise the situation. figure 1 also shows direct and indirect links in the ‘supervisorstudent-thesis’ relationship. the relationship between supervisor and student adjoins a third element of ‘knowledge’ which in the figure is represented by the thesis. grant (2003) states that the relationship between these three elements is in constant change. such an arrangement is affected through power relationships that work through actions; these actions have an effect upon the elements and highlight more subtle difficulties dealing with personality, cultural and power differences (lee, 2007; 2008). power relations can be a consequence of aspects of institutional position and can also vary across disciplines, institutions and nations (hofstede, 1986). thesis supervisor(s) student institutionally prescribed relationship with stable positions a field of power relations between three agencies socially positioned individuals variable, complex, unstable, therefore unpredictable relationships perceptive figure 1 student-supervisor multilayer relationship (based on grant, 2003) even if bright as undergraduates, neophyte higher degree researchers need to develop their skills further when conducting higher degree research. they can often be insecure, inexperienced, and demand close supervision. they may see the thesis as a culturally prescribed artefact and it may take some time before a student can comprehend the implications of doing postgraduate research (johnson et al, 2000). gurr (2001) suggests that the role of supervising would typically involve feedback, time, money, networks, and recognition to the student by an established authority in academia. hughes (1997) disagrees with this and argues that the supervisor does not necessarily need to be an expert in all areas/fields and that the researcher should also seek support from within the department, the university and the wider research community. whitelock et al (2008) suggest that australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 71 promoting creativity in phd supervision is important, but tensions and dilemmas within the student-supervisor relationship need to be resolved. the dimensions of supervisory styles summarised in table 1 were originally developed by cullen et al (1994) to pinpoint the styles across individuals and academic disciplines. for instance, supervisors from computing, economics, physics and engineering disciplines tend to provide a closer style than those from arts, history or sociology. this relates to hughes’s (1994) discussion on styles in supervision in built environment research. he argues that building and built environment research should seek the support of core disciplines such as economics, law, cybernetics, psychology amongst others. if building-related research is to grow and be beneficial to industry and the wider scientific community, it must establish itself as a ‘field of application’. if this is the case, it could exacerbate the complexities to apply standard codes of practice because areas of research supervision could span across many fields. style: close hands off meetings: regular, frequent irregular project: collaborative individual relation to supervisor’s research: closely related unrelated joint publication: the norm uncommon mentorship: the norm rare table 1 supervisory styles (cullen et al, 1994) in the traditional sense, the supervisor-student relationship has been described by fausa (1979, p.21) as, “...the most important channel of intellectual inheritance between one generation and the next.”, with good supervision being central to thesis completion (lawson, 2000). on the other hand it is generally expected that research students should develop their own ideas and test their own hypotheses – and not that of their supervisors (harman, 2003). a graduate from a higher degree by research (especially in phds) is expected to be academically competent and independent. achieving this is, arguably, the most challenging test in the supervision process (haksever & manisali, 2000). figure 2 supervisory assistance in research phases (cullen et al, 1994, p.91) australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 72 figure 2 presents the supervision process in terms of skills and expectations. supervisees typically demand supervisory expertise in most of these areas (e.g. theory, methodology, writing skills, etc.). in reality it is very unlikely that a single supervisor possesses all of these skills. this often applies in social science related research where students are expected to develop critical thinking not just validating findings but defending their more philosophical standings such as ontological and epistemological positions (heath, 2002). aligning the players this section introduces a model which, whilst being relatively simple, provides explicit value for academic supervision across the wide range of disciplines. the model seeks to raise awareness of the norms, expectations and standards within their discipline and be able to assess their own plans and actions to ensure compliance with them (gurr, 2001). the aim is ultimately about teaching students to be their own supervisors (phillips & pugh, 1987). gurr’s (2001) model operates to promote a ‘plan-act-review’ learning cycle. in the increasingly common arrangement where associate supervisors or supervisory panels are involved, additional parties can be invited to join subsequent discussions. figure 3 illustrates a dynamic alignment model which could be used in dialogue between a student and a supervisor to establish a shared understanding through reflection. the model is aimed at facilitating the production of a successful phd thesis. a flexible approach is required on the part of the supervisor, an approach that should be informed by open discussion with the student (vilkinas, 2002). this may then lead to establishing an appropriate supervisory style. anderson (1988) developed a model comprising of the following four styles of supervision:  “direct active: characterised by initiating, criticising, telling and directing;  indirect active: characterised by asking for opinions and suggestions, accepting and expanding supervisee’s ideas, or asking for explanations and justifications of supervisee’s statements;  indirect passive: characterised by listening and waiting for supervisees to process ideas and problem solving, and  passive: characterised by having no input and not responding to supervisee’s input.” (gurr, 2001, p.86). other emerging and increasingly popular modes of higher degrees by research include the professional doctorate (chynoweth, 2006) and the embedded practice phd. examples of both of these modes, in the built environment, are currently delivered at rmit university schools of architecture, business graduate studies and school of property, construction and project management (rmit, no date). the university of salford also delivers a professional doctorate where, “...candidates are encouraged to generate explicit academic knowledge from their wealth of existing tacit professional knowledge.” (university of salford, 2009). for these modes of doctoral studies the student-supervisor relationship takes on a different challenge (walker, 2008). in these cases the candidate is normally someone already established in industry and may have a supervisory committee of practitioners and academics. the candidates are request to report and present to the academic institution with progress reviews and presentations. most of the time this would be done face-to-face but there are cases where such reviews may be conducted ‘virtually’ via video and/or teleconference. a particular challenge here is the lack of face-to-face contact time. there have been a number of successful completions, with outcomes including conference and journal paper publications; for example bourne (2005) and holzer (2009). therefore, there is a need to find and use different and more innovative techniques to facilitate the student-supervisor relationship such as wiki-webs and social media, especially when geographic collocation is not possible. http://dx.doi.org/10.1080/07924360120043882 australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 73 possible conflict autonomy generation appropriate support begnin neglect s tu d e n t’ s s ta tu s supervisor’s recent style competently autonomous dependent hands-on hands-off figure 3 dynamic alignment model (gurr, 2001, p.87) the research to date has not identified any existing, detailed models which could be used to capture perceptions of both students and supervisors during the phd’s life-cycle. bradburyjones (2007) presented a systematic approach for exploring subjectivity during doctoral studies, but only from a student’s perspective. therefore this research now proposes using the ‘repertory grid’ method to develop a model (denicolo & pope, 2001). the repertory grid technique is based upon the principles of ‘personal construct psychology’ (kelly, 1955). the use of an alignment model in conjunction with repertory grids provides a means of judging the degree of, and framework for working towards, effective supervision. mapping-out the process a comprehensive explanation of the personal construct theory and technique is beyond the scope of this paper. however, further information concerning the use and implementation of the technique can be found in aranda & finch (2003). a repertory grid technique (rgt) is proposed to facilitate the implementation of gurr’s (2001) model. denicolo & pope (2001) identify the value of repertory grids to explicitly indicate thinking in the supervision process, and to track and record perceptual and emotive changes, often a tacit phenomenon. rgt is therefore used to facilitate conversation, unearth insights and provide focus in the supervisory relationship. repertory grid technique (rgt) systems are traditionally developed through triad elicitation (e.g. denicolo & pope, 2001). this means that a respondent or interviewee is asked to find similarities and differences of three elements at a time. those similarities and differences become what are known as a,’ bipolar construct system’. a series of bipolar constructs outline ‘attributes’ to a concept. in the context of this research such a concept would be ‘supervision’. the numerical or hierarchical grading of such construct systems follows a similar procedure to that of the likert scales (allport, 1935) or osgood’s (1954) semantic differential. ratings are assigned to a bi-polar construct system; this would facilitate a relational structure between elements and construct polarity (ie. quality – quantity). mapping out: repertory-grids the following repertory grids were originally discussed in 2004 (aranda-mena & gameson, 2004) in relation to the perception and changes during the student-supervisor relationship. the repertory grid shown in figure 4 illustrates a focused construct system and its http://mams.rmit.edu.au/sr2nrgt6gpo9z.pdf http://mams.rmit.edu.au/sr2nrgt6gpo9z.pdf australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 74 relationship and gap analysis as to what is perceived as effective supervision by both, the supervisor and the student. the grids provide a mechanism for further discussion, reflection and development of a new model. figure 4 initial rating (i.e. topic definition) at this initial stage, the student perceives appropriate support and the supervisor also considers that the supervisee needs it. however, according to gurr (2001) close support should only take place at an initial stage otherwise there is a high chance for this causing conflict (i.e. see figure 3). at this initial stage the student is more receptive and the supervisor is rather paternalistic. the grid technique is for continuous use by both the supervisor and the student and is to provide a means for discussion over differences and expectations so as to monitor changes over time. the grid provides insight into what the student and the supervisor perceive to be ‘effective supervision’. figure 5 progress rating (i.e. theory development) the repertory grid shown in figure 5 reveals how the student now perceives an appropriate supervisory style as the research develops. certainly they are experiencing a more demanding stage with less direct guidance; the distance between the two has increased. at this stage the student has started building confidence and is more in tune with the situation. the grid in figure 6 illustrates how the supervisor has moved towards a ‘hands-off’ style, which he or she perceives to be the effective one at this stage. the student has some anxieties but with the assistance of the grids, they can both discuss the current situation. australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 75 the supervisor may make it clear that it is time for the student to take ‘authorship’ of their work from this point onwards, which is expected in higher degrees. the student feels somehow neglected; however, it has been important to be aware of such expectations of the supervisor. note that new bipolar constructs can emerge at any point. figure 6 further progress rating (i.e. data analysis / testing) a breakthrough arises at this stage, as the student realises that he or she need to embrace or take control and direction of their project. the supervisor is still there but the relationship is somehow unstructured and there is no formal account of progress. the student frequently falls into procrastination and shifts attention to other activities such as tutoring and community work. figure 7 illustrates the situation towards thesis completion where the relationship seems to have improved. the student has overcome anxiety and insecurity and keeps better progress records by taking full control over the project. although more confident, the student is always experiencing anxiety but this might remain until after the final examination. figure 7 rating towards completion (concluding) the four grids above have been used to illustrate the personal perceptions of the supervisory process from both a student and a supervisor perspective. the vertical lines indicate ‘perceived as effective’ as seen/reflected by each party. the profile line of a cosupervisor could have been introduced here. it is contended that a co-supervisor could act as a bridge across the current existing supervisory gap. arguably co-supervisors can only be effective if fully engaged in the process from the outset of the research. australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 76 mapping out: cluster analysis having reflected upon the original model, developed in 2004, (aranda-mena & gameson, 2004), and conducted further research to identify relevant literature published since then, such as gatfield’s (2005) study of phd supervisory styles, a more complex repertory grid has been developed to provide further insights into research supervision encompassing a range of modes such as single and multiple supervisors. the model, as shown in figure 8, is a repertory grid comprising of elements, relating to supervision, and bi-polar constructs. the ‘elements’ (i.e. supervision/supervisory support) are: a) single supervisor b) two supervisors c) one industry and one academic supervisor d) school academic board e) school phd students f) ghost supervisor g) two academic and one industry h) on-line interest groups such as cnbr emerging ‘constructs’ (i.e. attributes to supervision/supervisory support) after triads have been self-administered by the authors. emerging constructs by comparing and contrasting elements form a to h are as follow: 1.relationship: [left construct] formal—[right construct] informal 2.communication: [l]argumentative—[r]discussions 3.expertise: [l]specialised—[r]generic 4.engagement: [l]no ownership over the project—[r]process driven 5.vision: [l]here and now—[r]long term vision 6.opinion: [l]valued—[r]not valued 7.proximity: [l]physical/psychological closeness—[r]remote 8.line of communication: [l]three way relationship—[r]unidirectional 9.line of communication: [l]unidirectional one-to-one – [r]one-to-many 10.line of communication: [l]unidirectional strong – [r]unidirectional fragile/tenuous 11.line of communication: [l]sessional triangle – [r]sessional unidirectional the resulting above figure 8 indicates the relationship between supervision/supervisory support in a cross tabulated grid with attributes on the left and right columns indicating a relationship across all attributes with all elements (i.e. 8 elements from a to h) and 11 bipolar constructs (22 individual tags either at the left (1) or right (5) sides of the grid). the shading indicates if a particular element is likely to relate to a left to right construct. for instance, element a, single supervisor, is associated with the following constructs: 7r, 8r, 5r, 4r, 10l, 1l, 3l, 2l, 9l, 11r and 6r. the shadings also form clusters indicating similarities between elements and constructs. such similarities are also indicated with the tree-shaped dendritic diagrams. the above grid indicates that supervision support as g, b and c (i.e. different modes of the supervisor and the co-supervisor) is seen as an effective supervisory mode. the contrasting situation is indicated by the proximity of a with f suggesting that the single supervisor is performing as a nowhere to be seen ghost supervisor! the nodal points in the dendritic diagrams at the top and right-hand side of the grid indicate the proximity of elements or constructs on both the x-axis and the y-axis. for instance, constructs 4 and 10 are the closest matching at 80, whereas construct 5 (vision) is the single most isolated construct with a match of 50 with any other construct. constructs 7 (proximity) and 8 (line of communication) are isolated with the rest of all other constructs australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 77 matching at 30. constructs 4 (engagement) and 10 (line of communication) are also closely aligned with a matching factor of 80. figure 8 repertory grid: 8 elements by 11 constructs the dendritic diagram at the top of the grid indicates nodal points or matching closeness factors of supervisors in three groups: (1) a,f (single supervisor and ghost supervisor) at 67 pointing out at deficiencies supervisory situation. a second supervisory group (2) h,d,e (online interest groups such as cnbr, school academic board, school phd students) at 80 indicating what would be a supportive environment (both, rational and emotional) for the phd candidate. a third group (3) g,b,c (two supervisors, one industry and one academic supervisor and two academic and one industry) at 78 create an ideal supervisory mode, which could be suggested to be a most appropriate model for future student, supervisor, cosupervisor relationships. conclusions this research concludes that to improve both thesis completion rates and the quality of research a model for student-supervisor interaction and satisfaction is essential. a technique to facilitate such a process in therefore proposed. the repertory grid technique (rgt) can provide insights into the student-supervisor relationship by explicitly revealing views and perceptions. it can also provide stronger objectivity in the progress of the research and its assessment processes. as the result of utilising the rgt the research contends that this would contribute to improved communication in dealing with student-supervisor demands and expectations. it is also hypothesised that the level of anxiety in the supervisory process would be reduced if clear and transparent communication emerges. this, in turn, can contribute to stronger objectivity in the progress of the research and its assessment processes. for example, heath (2002) found that the differences between a student and a supervisor can be diminished by the frequency of meetings. this research argues that the ‘quality’ of such meetings is the most important factor. this paper has put forward three main themes for consideration. the first describes the challenges in the current phd research process and highlights the need to increase timely completions. secondly, aspects relating to the research process are critically reviewed. australasian journal of construction economics and building aranda-mena, g and gameson, r (2012) ‘an alignment model for the research higher degree supervision process using repertory grids reflections on application in practice in built environment research’, australasian journal of construction economics and building, 12 (3) 66-81 78 finally, a model, initially conceptualised in 2004, has been extended and further developed using the rgt as a self administered reflective tool drawing upon a critical review of literature and the authors’ experiences in supervising phds. although this research has been contextualised in the construction management domain the principles, and the rgt model, could be utilised for phd’s in other built environment related disciplines, such as economics and the social sciences, and in many other academic disciplines. the next logical stage of the research is to test this model by conducting an empirical, quantitative study. references allport, g. w. 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(2003) eats, shoots and leaves: the zero tolerance approach to punctuation, london: profile books university of salford, research degrees – school of the built environment [online] http://www.sobe.salford.ac.uk/courses/research-degrees accessed 2011, march 15 university of salford (2009) professional doctorate [online] http://www.professionaldoctorate.co.uk/ assessed 2011, march 18 university of salford (2010a) code of practice for the conduct of postgraduate research degree programmes [online] http://www.governance.salford.ac.uk/cms/resources/uploads/file/aqa/pg_research_degre es_code_of_practice.pdf accessed 2011, march 17 university of salford (2010b) governance and ethics [online] http://www.rgc.salford.ac.uk/page/forms accessed 2011, march 21 vilkinas, t. (2002) the phd process: the supervisor as manager, education + training, 44 (3), 129-137 vitae (2011) postgraduate researchers [online] http://www.vitae.ac.uk/researchers/1218/postgraduate-researchers.html accessed 2011, march 17 walker, d.h.t. (2008) collaborative academic/practitioner research in project management: theory and models, international journal of managing projects in business, 1 (1), 17-32 whitelock, d., faulkner, d. & miell, d. (2008) promoting creativity in phd supervision: tensions and dilemmas, thinking skills and creativity, 3, 143-153 wichmann-hansen, g.m., bach, l.w., eika, b. & mulvany, m.j. (2012) ‘successful phd supervision: a two-way process’, in castano, m.a.r.b. & guner-akdogan, g. (eds.) mentoring in academia and industry: researching, teaching, and learning triangle, springer new york, 10 (2), 55-64 http://www.qaa.ac.uk/aboutus/policy/copyright.asp http://www.qaa.ac.uk/academicinfrastructure/fheq/ewni/default.asp http://www.sobe.salford.ac.uk/courses/research-degrees http://www.professionaldoctorate.co.uk/ http://www.governance.salford.ac.uk/cms/resources/uploads/file/aqa/pg_research_degrees_code_of_practice.pdf http://www.governance.salford.ac.uk/cms/resources/uploads/file/aqa/pg_research_degrees_code_of_practice.pdf http://www.rgc.salford.ac.uk/page/forms http://www.vitae.ac.uk/researchers/1218/postgraduate-researchers.html the effects of the global financial crisis on the australian building construction supply chain ram karthikeyan thangaraj and toong khuan chan (the university of melbourne, australia) abstract this study involves a financial analysis of 43 publicly listed and large private companies in the building and construction supply chain from 2005 to 2010; straddling the period of the global financial crisis (gfc); and examines the impact of the gfc on the performance of these companies. the construction supply chain was divided into four sectors – material suppliers, construction companies, property developers and real estate investment trusts (reits). the findings indicate that the impact was minimal for both material suppliers and construction companies, but especially severe for the more leveraged property developers and reits. building material suppliers and construction companies have benefitted substantially from the building economic stimulus packages provided by the australian government to mitigate the effects of the gfc. decreases in the valuation of assets have, to a large extent, reduced the profitability of property developers and reits during the gfc but these companies have recovered quickly from these adverse conditions to return to a sound financial position by the end of the 2010 financial year. the results will inform investors, construction company managers and construction professionals in devising strategies for prudent financial management and for weathering future financial crises. keywords: financial analysis, business management, construction, global financial crisis, australia introduction the global financial crisis (gfc) is commonly believed to have begun in july 2007 when a loss of confidence by american investors in the value of sub-prime mortgages caused a liquidity crisis. by september 2008, the crisis had worsened with a sudden dramatic decline of stock prices around the globe. with a large number of borrowers defaulting on loans, banks were faced with a situation where the repossessed house and land was worth less on the market than the bank had loaned out originally. when lehman brothers collapsed in september 2008, governments around the world struggled to rescue large financial institutions as the fallout from the housing and stock market collapse worsened. the australian equity market was no different to many other countries in facing the gfc. the s&p/asx200 index fell from a peak of 6700 in late 2007 to 3400 in november 2008. it was initially thought that australia would fare much better as the local banks’ exposure to collateralised debt obligations (cdos) was relatively small in comparison with other countries. the housing market was also in a strong position with non-conforming loans in australia accounting for only about 1% compared to 13% in the u.s. (debelle 2008). despite the smaller exposure to toxic debts and a stronger housing market, the australian gross domestic product (gdp) declined in the december quarter of 2008. building construction commencements had reduced by 10% in the september 2008 quarter in response to the tightening of credit. total building output for three subsequent quarters reduced as a consequence of the diminishing building commencements. figure 1 below illustrates the change in gdp, building commencements and building output for each quarter between 2005 and 2010. the australian property market was no different from any other industry facing the gfc. from the december 2007 quarter to the december 2008 quarter, australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 17 owner occupied housing commitments fell by 22% (abs 2010). this can be attributed to an increase in the unemployment rate during that period, and reduced confidence in the market. a market report states that office property developers in australia experienced a 20.6% decline in their revenue for the financial year 2007-08 (ibisworld 2011a). the retail market was also affected, resulting from reduced consumer spending. figure 1 changes in gdp, building starts and building volume (abs 2010; abs 2011) australia’s response to the gfc the first significant macroeconomic policy response to the global financial crisis came from the reserve bank of australia (rba). on october 7, 2008, the rba board cut interest rates by 100 basis points to 6%. on october 12, the australian government announced it would guarantee all australian bank deposits. two days later, the government announced an aud10.4 billion stimulus package that included aud1.5 billion to support housing construction. the housing aspect of the stimulus package – a time-limited grant to first home buyers – took effect immediately. to prepare for the possibility that the global financial crisis might be deeper and longer lasting than expected, the government brought forward the commencement of large-scale infrastructure projects with a first tranche worth aud4.7 billion announced in early december. on february 3, 2009 the australian government announced a second aud42 billion stimulus package titled the nation building and jobs plan. as the global recession was expected to be deep and long, infrastructure spending played the central role with 70% of the second stimulus package to be spent on schools (aud14.7 billion), social and defence housing (aud6.6 billion), energy efficiency measures (aud3.9 billion), and aud890 million on road, rail and small-scale community infrastructure projects. more recent steps were contained in the 2009-10 budget delivered in may 2009 where the government introduced the third phase in its infrastructure program where an additional aud22 billion was announced. the large increases in building starts in the third and fourth quarters of 2009 resulted from the initiation of stimulus packages earlier in the year. the building the education revolution (ber), the single largest element of the australian government’s nation building economic stimulus plan accounted for 23,600 projects. these developments provided the motivation to develop a broader understanding of the effects of this recent financial crisis on the construction supply chain. the analysis focused on characterizing the impact of the gfc on the financial performance of companies within four sectors of the industry: building material suppliers, building contractors, property -30% -20% -10% 0% 10% 20% 30% 40% -1.5% -1.0% -0.5% 0.0% 0.5% 1.0% 1.5% 2.0% 1q 2q 3q 4q 1q 2q 3q 4q 1q 2q 3q 4q 1q 2q 3q 4q 1q 2q 3q 4q 1q 2q 3q 4q change in gdp change in building volume change in building starts 2005 2006 2007 2008 2009 2010 c h a n g e in g d p ( q -o n -q , % ) c h a n g e in b u ild in g v o lu m e a n d s ta rt s ( q -o n -q , % ) australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 18 developers and australian real estate investment trusts (a-reits). the key points examined are the severity of the impact by means of ratio analysis, changes in cost structure and financial distress. the predicament of firms that were most affected was discussed in order to explore possible common characteristics of distress or failure. the findings will inform investors, managers and construction professionals in devising strategies for prudent financial management and for weathering future financial crises. background investigations into the financial performance of construction companies were initially reported in the 1970’s. sales turnover was identified to have a great impact on the profitability of the enterprise (fadel 1977). a detailed industry level analysis of uk construction industry identified the similarities and differences in profits across general contractors and home builders (akintoye and skitmore 1991). pre-tax profit margins among eighty general contractors hovered around 3.23% over the analysed period. though uncorrelated with firm size, home builders’ profit margin was observed to be four times more than general contractors. low (1997) examined the performance of property companies in the singapore stock exchange over a period of twenty one years and concluded that their performance was not better than the stock market and was highly correlated with the property market itself. other researchers yielded the same findings in different countries (abdul-rasheed and tajudeen 2006). on the contrary, balatbat et al. (2011) reported that the performance of thirty australian securities exchange (asx) listed construction firms operating in civil infrastructure, residential and non-residential sectors over a 10 year period performed better than the all ordinaries index and a pool of blue chip companies. this was due to construction companies’ higher efficiency in the utilisation of assets for revenue generation. a study (cheah et al. 2004) on global construction firms indicates that business strategy has to account for efficiency in financial, operational, technical and human factors, and that corporate failure was largely due to failures in or two critical factors. it is generally accepted practice to assess company performance using financial ratios – the analysis of these ratios over a period of time may provide substantial and reliable information on a company’s financial health. early statistical models based on these financial ratios were developed to analyse company failures. beaver (1966) identified differences based on thirty financial ratios among groups of failed and non-failed firms as early as five years before the firms failed. the differences became more significant as firms approached failure. altman (1968) combined ratio analysis and multiple discriminant analysis to formulate a statistical tool for prediction of company failure. this methodology analysed a combination of ratios, thereby eliminating possibilities of uncertainty in relying on single ratios. from a sample of sixty six manufacturing companies, of which half of them had filed for bankruptcy from 19461965, altman derived a set of ratios covering liquidity, profitability, leverage, solvency and activity ratios. many variations of this model have been created over time for specific industry segments in various regions: construction in the uk (mason and harris 1979; abidali and harris 1995), and for construction in china (ng et al. 2011). macroeconomic factors such as low construction activity, high interest rates, rise in inflation, and reduction in consumer spending have been identified by researchers to be significant factors that can drive companies towards failure (kangari 1988; arditi et al. 2000). both beaver (1966) and altman (1968) are of the view that financial ratios, based solely on financial statements, are an indicator of a company’s past performance, and future performance is beyond prediction. mason and harris (1979) went on to declare that their model is able to identify companies that are 'at risk' of failure but cannot forecast whether a company will actually fail. it is worth pointing out at this stage that these tools only give an indication, and at any point changes in a company’s strategy can transform a company from poor performance to market dominance. langford et al. (1993) recognised that these analytical tools, along with the company’s financial performance have to be used in combination for greater understanding of corporate performance. similar views have been australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 19 echoed by chan et al. (2005) when analysing the impact of the asian financial crisis on construction companies in hong kong. recent studies (abdul-rasheed and tajudeen 2006, chen 2009, balatbat et al. 2010, balatbat et al. 2011) have excluded building material suppliers and real estate investment trusts (reits) in the review of financial performance, ignoring their importance within the building construction industry. an industry report estimates about 6,100 establishments to be operating in the materials supply sector in 2010-11 generating an estimated aud20.5 billion in annual revenues (ibisworld 2011b). understanding the performance of the building material suppliers and reits, in comparison with the builders and developers, is vital to the construction industry’s resilience to future market downturns. reits came into existence in the us in 1960 (nareit 2011) to enable retail investors to invest in large scale real estate assets. australian real estate investment trust (a-reit) was established a decade later in 1971. the australian securities exchange defines areits as professionally managed and diversified portfolio of commercial real estate. investors gain exposure to both the value of the real estate the trust owns, and the regular rental income generated from the properties. data and methodology in this study, the supply chain for building construction was limited to 4 sectors: building material suppliers, building contractors, property developers and a-reits. a list of companies in each sector was determined by examining companies listed in the australian securities exchange under global industry classification standards (gics) capital goods and real estate industry groups. the next selection criteria for these companies were as follows to ensure that these companies were representative of the local economy; (i) listed in the asx prior to 2006 financial year, (ii) more than 50% of their revenues were generated from australian operations, and (iii) more than 50% of their revenue were generated from the sectors they represent, respectively. this filter resulted in a total of only 36 companies with only one operating exclusively as a building contractor. this is because most public listed building construction companies in australia were concurrently operating in both construction and development. hence in order to obtain a representative sample of the building contractors, the search was enlarged to include large (revenues exceeding aud25 million) private construction companies that were required to file annual report to the australian security investment commission (asic). this search identified 51 companies of which only 16 had filed form 388 for the years 2006 to 2010. among the 16, only 7 companies were predominantly engaged in building construction. the other firms that were involved in either development or infrastructure works along with construction were not taken into consideration. the lack of local investment opportunities has seen australian reits seeking international property investments in 2000s. while this strategy brings about diversification gains, international property introduces additional currency, political and economic risks. many of the a-reits with large total assets were excluded from this analysis as these comprised significant international properties. a full list of the companies analysed is listed in table 1. the financial performance of all selected companies was calculated over the 2006-10 period, both years inclusive. despite its many drawbacks, the most precise information on these companies can only be determined by relying on audited financial statements (langford et al. 1993). in order to assess the impact of the gfc on the performance of these companies, the values for every consecutive year was compared in a trend analysis. the cost structure for the four sectors has been examined with cost of goods sold (cogs), expenses, depreciation, amortization, interest and profit displayed as a percentage of revenue. items such as rent, utilities, wages and purchases were not always discernable or available and were considered as part of expenses. a distress analysis was conducted using australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 20 the altman’s z-index (1968). this was considered to be the most appropriate model to compare the risk of failure across the four different sectors. material supplier adelaide brighton limited (asx:abc) alesco corporation limited (asx:als) boral limited (asx:bld) bluescope steel limited (asx:bsl) brickworks limited (asx:bkw) csr limited (asx:csr) gunns limited (asx:gns) gwa group limited (asx:gwa) reece australia limited (asx:reh) building construction badge constructions (sa) pty ltd hooker cockram corporation pty ltd j. hutchinson pty ltd masterton corporation holding company pty ltd pellicano builders pty ltd reed constructions australia pty ltd st.hilliers construction pty ltd tamawood limited (asx:twd) property developer ahc limited (asx:ahc) australand property group (asx:alz) avjennings limited (asx:avj) becton property group (asx:bec) cedar woods properties ltd (asx:cwp) cic australia limited (asx:cnb) devine limited (asx:dvn) finbar group limited (asx:fri) fkp property group (asx:fkp) geo property group (asx:gpm) international equities corp ltd (asx:ieq) lend lease group (asx:llc) metroland australia limited (asx:mtd) mirvac group (asx:mgr) payce consolidated limited (asx:pay) peet limited (asx:ppc) stockland (asx:sgp) sunland group limited (asx:sdg) areit abacus property group (asx:abp) apn property group limited (asx:apd) aspen group (asx:apz) bwp trust (asx:bwp) cfs retail property trust (asx:cfx) charter hall group (asx:chc) commonwealth property (asx:cpa) cromwell property group (asx:cmw) goodman group (asx:gmg) gpt group (asx:gpt) trafalgar corporate group (asx:tgp) table 1 list of companies studied performance analysis of companies the best gauge for measure of a recession, next to gdp is the stock market. the market index is a reliable tool to plot the timeline of recession right from start to recovery. the primary investable benchmark in australia, the s&p/asx200, fell from its peak of 6748 in october 2007 to 3145 in march 2009, losing 46% of its valuation. since then the markets have recovered and remained fairly buoyant at 4500 until the end of 2010. with the market as a reliable pointer, the period of analysis has been set from financial year 2006 to 2010 to cater for the boom, fall and recovery due to the gfc in australia. in terms of revenue, property developers and a-reits exhibited significant decline in revenues in 2008 and 2009, and in the case of developers, continuing into 2010. the building material sector exhibited a marginal contraction of 2.8% in 2009 followed by a further reduction of nearly 7% in 2010. on the contrary, revenues for building contractors continued to increase, albeit by only 1.6% in 2009 and 0.8% in 2010 despite the slump in building starts in late 2008. the nature of the building construction business is that builders are not immediately affected by a downturn due to continuing construction projects awarded a couple of years earlier. the launch of a number of stimulus packages; bringing forward spending on large-scale infrastructure and additional spending on new school buildings in late 2008 and early 2009 by the australian government to mitigate the effects of the gfc on the local construction market have maintained building starts at a level of aud81.5 billion and aud75.6 billion in 2008 and 2009, respectively (abs 2010; abs 2011). australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 21 table 2 indicates that the total net assets of all the companies analysed have increased in the period examined. in fact, net assets for building contractors have more than doubled compared to 2006 with other sectors averaging an increase of 50%. this is not withstanding the small decreases in net assets for property developers and a-reits that had to revalue some of their assets in 2009 and 2010. net asset in this table is usually equal to the shareholders' equity in the company balance sheet or total assets minus total liabilities. year 2006 2007 2008 2009 2010 sales revenue building material suppliers (change, % year-on-year) 19,926 20,961 5.2% 24,454 16.7% 23,775 -2.8% 22,136 -6.95 building contractors (change, % year-on-year) 1,506 2,068 37.3% 2,455 18.7% 2,495 1.6% 2,514 0.8% property developers (change, % year-on-year) 7,205 9,323 29.4% 7,827 -16.1% 6,903 -11.8% 6,810 -1.4% a-reits (change, % year-on-year) 1,636 2,762 68.8% 2,294 -16.9% 1,331 -42.0% 1,493 12.2% net assets building material suppliers (change, % year-on-year) 10,404 11,936 14.7% 12,725 6.6% 15,105 18.7% 15,731 4.1% building contractors (change, % year-on-year) 152 248 63.1% 301 21.2% 329 9.5% 357 8.4% property developers (change, % year-on-year) 13,137 17,676 34.6% 18,760 6.1% 18,693 -0.4% 19,705 5.4% a-reits (change, % year-on-year) 6,187 8,102 30.9% 10,134 25.1% 9,521 -6.0% 9,132 -4.1% table 2 sales revenue and net assets (aud million) for years 2006 to 2010 ratios measuring profitability, liquidity, activity, leverage and solvency are generally accepted as the most significant indicators of corporate performance. table 3 lists at least one financial ratio in each of the categories above to evaluate the performance of the companies in the building construction supply chain. these ratios were weighted based on the annual revenues of the respective companies. in terms of profitability, the net profit margin (net profit divided by sales revenue) for material suppliers reduced progressively from more than 7% in 2006 to 0.8% in 2010. net profit margin for building contractors was low at between 3-4% in 2006 and 2007, and reduced to a minimum of 1.6% during the depths of the financial crisis. it recovered slightly to 1.9% in 2010. the net profit margin for property developers was more than 30% before the onset of the gfc, but converted into a 59% loss in 2009. similarly, a-reits reported a net profit margin of 70% and 53% pre-gfc and a massive loss of 106% in 2009. both the property developer and areit sectors returned to profitability and recovered to approximately one half their pre-gfc margins in 2010. return on average equity (roe) measures the rate of return on the shareholders' equity and reflects the company’s efficiency at generating profits from every dollar of equity. defined as net profits divided by average equity, the building material supplier sector exhibited returns between 13% and 17% during the period examined but dropped to a low of 0.2% during 2009 when net profits were depressed by the effects of the gfc. pre-gfc, the building contractors were achieving returns in excess of 40% but fell to 23.1% in 2008 and eventually to a low of 8.3% in 2010. this corresponded with the observed drop in net profit margin from more than 30% pre-gfc to less than 20% post-gfc. the property developers achieved an roe of approximately 20% pre-gfc but suffered losses in 2009 to report an roe of -24% during 2009 and recovering to a small 0.4% in 2010. the roe for the a-reit sector fell from 21% in 2006 to -13.9% at the pits of the gfc in 2009 but recovered when the sector returned to profitability in 2010. australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 22 the current ratio, defined as current assets divided by current liabilities, provides a measure of liquidity or the company's ability to pay back its short-term liabilities with cash, inventory and receivables. as can be seen from table 3, the current ratios for both the building material suppliers and building contractors were between 1.5 and 1.9, indicating that these companies were adequately liquid and able to pay its obligations. the current ratios remained above 1.0 during the period of the financial crisis indicating that these companies were managing their cash flows prudently. a number of companies invested in additional property, plant and equipment, increasing debts and consequently reducing the current ratio slightly in 2008. once the effects of the gfc were apparent, these companies sought ways to reduce their current liabilities with a slight improvement in current ratio in 2009. property developers exhibited an increase in current ratios in 2007-08 as completed and unsold properties were accounted for under current inventories leading to a higher current asset value. impairments to the value of properties in inventories and the increases in interest bearing liabilities resulted in higher current liabilities. these changes led to current ratios fluctuating between 1.4 and 2.3 during this period. the current ratio for areits ranged from 0.66 to 1.33 during this period, but was not considered further as this sector invested primarily in properties a non-current asset. financial year 2006 2007 2008 2009 2010 building material suppliers net profit margin 0.074 0.084 0.062 0.015 0.014 return on average equity 0.149 0.173 0.134 0.002 0.012 current ratio 1.437 1.544 1.257 1.742 1.780 working capital turnover 11.760 9.430 54.230 8.224 6.770 quick ratio 0.867 0.933 0.722 0.944 0.988 debt ratio 0.540 0.491 0.524 0.432 0.415 times interest earned ratio 93.172 12.231 10.252 3.604 8.059 building contractors net profit margin 0.034 0.040 0.028 0.016 0.019 return on average equity 0.477 0.439 0.231 0.122 0.083 current ratio 1.479 1.504 1.472 1.636 1.466 working capital turnover 6.712 4.650 15.489 11.381 50.254 quick ratio 1.104 1.018 1.034 1.181 1.074 debt ratio 0.683 0.653 0.654 0.599 0.651 times interest earned ratio 1525 6295 10194 816 48 property developers net profit margin 0.324 0.377 0.153 -0.587 0.144 return on average equity 0.203 0.189 0.069 -0.237 0.004 current ratio 1.393 1.725 1.656 2.306 1.460 working capital turnover -2.214 0.911 -1.684 2.270 3.459 quick ratio 0.454 0.778 0.602 1.367 0.726 debt ratio 0.534 0.479 0.502 0.463 0.428 times interest earned ratio 20.462 15.609 5.621 -15.014 8.088 reits net profit margin 0.707 0.776 0.581 -1.057 0.371 return on average equity 0.210 0.222 0.134 -0.139 0.048 current ratio 0.663 1.049 0.750 1.331 0.736 working capital turnover -1.227 -0.839 -0.083 -0.386 0.787 quick ratio 0.643 0.897 0.702 1.210 0.646 debt ratio 0.357 0.336 0.358 0.334 0.330 times interest earned ratio 10.663 13.324 8.294 -9.515 2.749 table 3 financial ratios (weighted on revenue) australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 23 the quick ratio, a more severe measure of liquidity, defines the company's ability to meet its short-term obligations with its most liquid assets. inventory was excluded from the current assets because of the delays involved in turning inventory into cash. as expected, the quick ratios for material suppliers were less than the current ratio, but were observed to be slightly below 1.0 indicating that current liabilities were marginally higher than current assets. the increase in short term debt in 2008 resulted in a large drop in quick ratio to 0.722. once these liabilities were restructured in response to the gfc, the quick ratio improved to previous levels. recognising that building contractors operate on very tight but prudent cash flows, the quick ratios for this sector were all marginally above 1.0 during the entire period examined. the property developers and areits exhibited notably low quick ratios as properties were considered to be non-current assets. again, some of these companies had to restructure their liabilities in 2009 leading to improved quick ratios for the year. the working capital turnover (wct) ratio is an activity ratio which represents the number of times the working capital is turned over in the course of a year. a higher wct ratio indicates the efficiency with which the working capital is being used to generate revenue. the building material suppliers exhibited a wct ratio between 6.8 and 11.8 for the period examined except for 2008 when the ratio jumped to a high of 54. this was due to large current liabilities incurred by a number of companies leading to a reduced working capital. the large wct ratio for building contractors between 2008 and 2010 was also due to reductions in working capital as the revenue was previously reported to be relatively constant over this period. the wct ratio for both the property developers and areits did not provide much information as the values fluctuated between -2.2 and +3.5, most likely attributed to large changes in the levels of current assets and liabilities. the use of debt to finance the company’s assets was evaluated by examining the debt ratio which is defined as the ratio of total debt to total assets. the debt ratios remained fairly constant over the entire period examined for all four sectors although the building contractors showed the highest debt ratio at 65% whereas the areits had the lowest ratio of approximately 33%. building contractors exhibited comparatively higher debt ratios due to high levels of short term trade debts payable to sub-contractors. when the debt ratio was examined together with the times interest earned (tie) ratio, it clearly indicated that although the building contractors were most highly leveraged, the debt amounts were small relative to the net profits earned by these companies. building contractors were obviously able to meet its debt obligations many times over. it can be inferred from an examination of the combination of debt and the tie ratios that most of the liabilities of the areits business structure are long term debts whereas building contractors incur short term debts. the tie ratio for building material suppliers reduced drastically from 93 in 2006 to 3.6 in 2009 due to a drop in net profits. the effect of the gfc was evident in two sectors; the property developers and areits, where a majority of these companies suffered losses in 2009 leading to negative tie ratios. industry cost structure the industry cost structure was examined by comparing input costs to revenue for each sector. the cost of input materials (represented by cost of goods sold, cogs) and operating expenses are a significant component of the material supplier cost structure. from figure 2a it can be observed that cogs and expenses have remained fairly consistent at 56-58% and 29-30%, respectively, leading up to the gfc. other costs such as depreciation, amortization and interest expense accounts for very small percentages of the total revenue. the most significant effect of the gfc is the drop in profit from 8% in 2007 to 1% in 2010. for the building construction sector, cogs represents close to 90% of total revenue with profits accounting for 3-4% pre-gfc as illustrated in figure 2b. it can be seen that all the inputs have remained relatively stable with an evident squeeze on profits. interest expense for the building construction sector is lowest amongst all four sectors at less than 0.1% australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 24 indicating that companies in this sector have insignificant bank loans. the cost structure for property developers include 70% for cost of goods and another 12-15% for operating expenses. interest payments amount to approximately 3% of total revenues. in terms of profits, property development sector have reported large swings in figures in excess of 12% profit pre-gfc to losses amounting to approximately 20% of revenue in 2009. the increase in expenses was attributed to a write-down in the value of property assets held by these companies during the construction stage. it may be worthwhile to note that this sector recovered in 2010 reporting a profit of 7%. property investment companies and reits have been relatively quick to react to the gfc compared to the other sectors in the supply chain. this is clearly due to a drop in value of the financial assets held by the investment companies and trusts. reits operate in a similar manner as investment funds and do not report cogs. interest payments amount to approximately 10% as this sector is heavily reliant on debt to finance the purchase of real estate assets. figure 2d clearly indicates that reits were amongst the most severely affected with a reported cost structure nearly three times that of the total revenue for 2009. this sector exhibited the highest profit margins with pre-gfc profit levels at 66% of total revenue. a decline was seen in the 2008 financial year, when the effects of the gfc started to affect the bottom line with a loss of 27%, and continuing the decline with a loss amounting to nearly 200% of total revenue in 2009. the effect of the gfc was two-fold: a loss of confidence in the property market meant that real estate valuations plunged requiring these investment companies and trusts to write-down assets values; and a drop in occupancy leading to a sharp decline in revenue. distress analysis altman (1968) used the multiple discriminant analysis model to combine several financial ratios into a single index, called the ‘distress score’ to discriminate between failed and nofailed groups. altman’s proposed z-score, based on an analysis of 66 manufacturing companies of which 33 had failed in 1946, estimated the risk of bankruptcy within a period of two to three years. this analysis was performed to investigate the possibility of business failures in response to the gfc. table 4 indicates that building contractors have remained fairly stable and well above the ‘at risk’ score of 2.7 throughout the period of study. material suppliers on the other hand exhibited excellent scores for 2006-08 but dipped slightly into the ‘at risk’ score for 2009-10 having suffered a drop in revenue and market value. property developers and reits were categorised as ‘at risk’ before the onset of the gfc but fell below the ‘imminent failure’ threshold of 1.8 in 2008. on examining the individual factors for the z-score, it is clear that the fall from the safe level for property developers and reits in 2008 has been influenced by a loss in profitability and productivity. (a) material suppliers 56.38% 56.76% 58.05% 62.03% 62.87% 30.91% 29.02% 29.89% 30.37% 30.10% 7.33% 8.33% 6.21% 1.57% 1.07% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2006 2007 2008 2009 2010 cogs expenses interest d&a net profit australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 25 (b) construction (c) property developers (d) reits figure 2 cost structure for material suppliers, construction, property developers and reit sectors (weighted based on revenue) property developers and reits with higher returns initially have seen greater erosion in their profitability to the extent of negative earnings in 2009 whereas building supplies and building contractors have remained profitable throughout the period. for both developers and reits, interest expenses, depreciation and amortization have remained fairly stable throughout the period. the reduction in profitability was significantly influenced by decreases in valuation of their assets and financial derivatives on hold, and impairment charges. the distress analysis indicates that the building materials and contractors in australia were financially sound and were able to accommodate the impact of the gfc. a similar analysis 88.44% 86.92% 88.99% 90.12% 89.42% 7.78% 8.76% 7.83% 7.48% 8.02% 3.39% 3.99% 2.78% 1.54% 1.85% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2006 2007 2008 2009 2010 cogs expenses interest d&a net profit 42.16% 42.12% 45.42% 50.30% 50.79% 24.61% 23.19% 32.32% 93.40% 32.00% 26.67% 29.85% 14.12% 12.78% 0% 20% 40% 60% 80% 100% 120% 140% 160% 2006 2007 2008 2009 2010 cogs expenses interest d&a net profit 20.18% 13.75% 23.12% 173.85% 43.04% 9.80% 11.57% 13.95% 22.76% 17.20% 68.38% 72.56% 59.93% 35.60% 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% 220% 2006 2007 2008 2009 2010 cogs expenses interest d&a net profit 42.16% 42.12% 45.42% 50.30% 50.79% 24.61% 23.19% 32.32% 93.40% 32.00% 26.67% 29.85% 14.12% 12.78% 0% 20% 40% 60% 80% 100% 120% 140% 160% 2006 2007 2008 2009 2010 cogs expenses interest d&a net profit australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 26 of contractors in hong kong (chan et al. 2005) reported z-scores falling from 2.33 in 1997/98 to 1.41 in 2001/02 due to severe competition and reduced demand for property. financial year 2006 2007 2008 2009 2010 building material suppliers z-score 2.79 3.40 2.83 2.22 2.50 building contractors z-score 4.97 4.73 4.35 4.69 4.00 property developers z-score 1.72 2.05 1.14 0.26 1.11 reits z-score 2.43 2.88 1.40 0.77 1.29 table 4 distress analysis (weighted on revenue) discussion of results the results indicate that each of the four sectors of the building supply chain was affected to different extents by the gfc. the building material suppliers were the least affected exhibiting a 3% year-on-year drop in revenue in 2009 and another 7% drop in 2010. these companies remained profitable albeit at a much reduced profit margin. net assets of these companies continued to grow over the entire period of study. a number of these companies were in the business of manufacturing products for other sectors of the economy and were marginally affected by the decline in construction demand in 2008. the activity ratio for these companies remained relatively constant over the period. these companies were moderately leveraged with debt, but earned sufficient revenues to cover the interest payments many times over. the building contractors sector exhibited increases in revenue despite the drop in total building starts in 2008 and the consequential drop in building volumes in 2009. this reflects the mode of operation of building contractors where the project duration delays the effects of a downturn to a couple of years after the onset of a fall in building starts. the net assets of the building contractors, although lowest of all four sectors, have more than doubled from 2006 to 2010, indicating that substantial additional investments were made into these companies. profit margins which were initially low at 3% to 4% were further depressed by the competition for jobs during the lead up to the gfc. the profit margins shown in table 3 for the building contractor sector were the lowest of all sectors examined. although the profit margin was low, this sector remained profitable and financially liquid throughout the gfc period. the observed profit margin was not much different from the margin of 3.23% reported by akintoye and skitmore (1991) for an analysis of 80 general contractors in the uk. it also compares reasonable better than the 1% to 2% reported by chan et al. (2005) for construction companies in hong kong immediately after the 1997 asian financial crisis. the roe ratios in excess of 40% confirms the perception that construction activities require relatively lower amounts of equity and that operations is normally funded through judicious utilisation of working capital. construction companies, though exhibiting debt ratios approximately 60%, are able to repay the interests on their debts from their profits. in general, the financial ratios indicate that they have a well-founded financial position, and are not directly prone to demand fluctuations are generally perceived. a recent study by balabat (2011) of thirty asx-listed construction firms operating in the civil infrastructure, residential and non-residential sectors reported that these firms exhibited a 25% higher growth in share value compared to blue chip companies and 48% higher compared to the asx-all ordinaries index. apparently, both the building material supplier and building contractor sectors benefitted from the stimulus packages once the numerous building projects commenced in earnest in midto late-2009. these sectors remained profitable and solvent, exhibited insignificant australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 27 changes to leverage levels; the only indication of concern was a drop in net profits and interest coverage. property developers generally rely on internally generated funds and borrowings to finance their investment opportunities resulting in the largest net assets reported for the four sectors as shown in table 2. given that these developers in australia were making healthy profits on the back of the property boom before the onset of the gfc, these companies tend to utilise more long-term debt to finance their business operations. although the year-on-year falls in revenue between 2007 and 2009 were only 16% and 12%, respectively, a drop in the valuation of properties held or under-construction resulted in serious losses in 2009. once the market recovered partially in 2010 and the revaluation of properties was conducted, these companies reported net profits and reverted to a healthy balance sheet. the reits in australia engage in the acquisition and ownership of property and primarily derive their income from rental or leasing whereas property developers are mainly involved in the development and management of real estate properties. given that rental revenues are usually relatively stable, reits tend to be perceived as a low risk investment vehicle. this study observed net profit margins in excess of 70% during 2006 and 2007, before the onset of the gfc, to a substantial loss of 106% of revenue reported in the 2009 financial year for the reits sector. however, a revaluation of its property portfolio post-gfc resulted in net profit margins recovering to 37% in 2010. although property portfolios of the developers and reits were similarly assessed each financial year, the impact of any upward and downward swings was greater for the reits sector than the property development sector. among the sub sectors being analysed, reits were in a much better situation to cover for their current liabilities with the lowest debt ratios of 0.33 to 0.36. as the reits’ business risk is relatively lower than the other three sectors, these companies utilise more long-term debts to finance their investments in real estate. it may be worthwhile to note that the sample of reits shown here have reduced the debt ratio from 0.36 in 2006 to 0.33 in 2010. excessive levels of gearing have magnified the steep decline in asset values for a number of reits during the gfc. conclusions the financial analysis of the companies operating across the building construction supply chain in australia indicates that all four sectors examined were susceptible to the global financial crisis. from the ratio and cost structure analyses, it was evident that building material suppliers were the least affected as these companies have remained profitable and solvent throughout the period examined. these companies have benefited substantially from the building economic stimulus package provided by the australian government. the impact on building contractors was also limited, as they have also remained profitable albeit at significantly reduced levels. however, there is a very high likelihood that the findings may be different if the study period was extended beyond 2010 as the projects let under the stimulus package are completed. developers and reits were the most affected sectors in this financial crisis where significant erosion in profitability was observed. the most severe drop in profitability was reported in 2009 when developers and reits exhibited losses amounting to 25% and 105% of revenue, respectively. decreases in the valuation of their assets and financial derivatives on hold, and impairment charges, have played a major role in reducing their profitability. the post-gfc recovery to profitability has been triggered by an increase in their asset valuation, more specifically, owned properties and those for sale in inventories. since 2008, the zscores for developers and reits have fallen below the ‘distress’ level, but it was encouraging to see an increase from 2009 and 2010 indicating that the worse was over. the gfc eroded the peak market capitalisation of australian reits from aud147 billion in 2007 to its present value of aud74 billion at the end of the 2010 financial year (asx 2007; asx 2011). the steep decline of asset values during the gfc was magnified by the high gearing australasian journal of construction economics and building thangaraj, r k and chan, t k (2012) ‘the effects of the global financial crisis on the australian building construction supply chain’, australasian journal of construction economics and building, 12 (3) 16-30 28 employed by the a-reit sector. the level of debt has reduced slightly to 0.33 in 2010 indicating a more conservative and managed approach to gearing in this sector after the gfc. post script after this research project was completed, two companies in the list shown in table 1 – reed constructions and st hilliers construction, were reported to be in financial distress. reed constructions, based in nsw, was reported to be in financial distress, with up to $80 million of bills outstanding, despite being allocated $383.3 million under the building the education revolution program (moran, 2012a). on 15 june 2012, reed constructions australia pty limited was placed in voluntary administration (ferrier hodgson, 2012) where debts were reportedly at $182.1 million after suffering losses on several other government contracts. on 9 july 2012, reed constructions was placed in the hands of a liquidator following a successful winding up application filed in the nsw supreme court by a creditor, sce group (schlesinger, 2012). data for reed constructions indicate that revenues increased at a compounded annual growth rate of 25% from $171 million in 2006 to $466 million in 2011 with profit before tax at $18 million and $24 million, respectively for these two financial years. at the end of the 2011 financial year, net assets were at $99 million, quick ratio at 1.12 and the debt ratio at 0.54 indicating that the company was reasonably healthy at that point in time. the 2011 financial statements indicate a $47.1 million net cash outflow from its construction activities. st hilliers construction pty limited was placed in voluntary administration on 16 may 2012 after a dispute over the funding of the $350 million ararat prison project that it was constructing under a public-private partnership approach (zappone, 2012). it was reported that st hillers construction owed its creditors and employees a total of $121 million (moran, 2012b). the financial statements indicate that although the revenues increases from $347 million in 2006 to $515 million in 2008 and declined slightly to $476 and $492 million in 2009 and 2010, respectively, the company returned profits between $5 million and $12 million between 2006 to 2009. the company exhibited early signs on distress when it incurred a loss of nearly $18 million, before tax, for the 2010 financial year mainly due to higher construction costs (or conversely, lower margins). net assets remained positive as $27 million, but its quick ratio deteriorated to 0.54 in 2010 compared to 1.00 the previous year. it suffered a net cash outflow of $16.0 million in 2010 and a further $13.3 million in the 2011 financial year. these two recent cases of financial distress is the subject of an ongoing study to further characterise the performance of the building and construction sector in these uncertain financial conditions: the results will follow in a future publication. preliminary data seems to suggest that an adequate profit margin is required to provide a buffer against unforeseen project risks. the continued effects of the gfc will become more evident once financial statements and other pertinent corporate information are made available in the public domain. references abidali, a.f. and harris, f. 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low et al., 2005). more recently sustainability in housing developments has become associated with the trend towards urban densification (sa govt, 2009). although regulatory changes are ensuring gradual improvements in the environmental performance of all housing, environmentally sustainable housing has not been widely developed in australia. this is particularly the case at the lower end of the housing market perhaps owing to deeper structural factors or inaccurate perceptions of sustainable housing (sibley et al., 2003; buys et al., 2005). paradoxically the need for environmentally sustainable housing is greatest in the affordable housing sector. this is because improvements to the environmental performance of housing, such as improved energy efficiency, provide particular ongoing economic benefits to lowerincome households. these households spend a greater proportion of their income on utilities and are least likely to be in a position to afford energy efficiency improvements without assistance (winston and eastaway, 2007). at the same time, the well developed policy and literature in australia regarding affordable housing (such as yates, 2007; gurran et al., 2008; disney, 2007; department for families and communities, n.d.; australian government, 2008) has emphasised the social and economic sustainability implications of a growing challenge to housing affordability without addressing environmental objectives. indeed, the australian experience of increasing australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’, australasian  journal of construction economics and building, 10 (1/2) 48‐64   49 affordability is that such housing tends to be poorly located on cheap land and built to minimise construction costs, resulting in lower environmental performance and questionable social acceptability (arman et al., 2009a). it is widely thought that environmental features in dwellings are inconsistent with affordability, argued, for example, by yates et al. (2008 p.63) who suggest that “measures to ensure environmental sustainability are likely to increase the capital cost of providing housing and, consequently, the housing costs”. this paper presents research carried out within the ecocents living project concerned with housing that is both affordable and sustainable. the project was particularly aimed at infill developments consistent with the aim of increasing urban housing densities (sa govt, 2009) rather than master planned greenfield developments. the paper follows on from earlier work in the project (arman et al., 2009a; arman et al., 2009b; zillante et al., 2009; zillante et al., forthcoming) which has provided a theoretical foundation to the research, considered the conceptual tensions between affordability and sustainability, and grappled with core definitional issues. this paper builds on this conceptual work and develops an assessment framework which seeks to link indicators of affordability with those of economic, social and environmental sustainability. the assessment framework will assist the development of a model of affordable and sustainable housing particularly for infill developments. this paper is structured as follows: • the background section summarises relevant literature and existing assessment frameworks; • following this a series of possible indicators of affordable and sustainable housing are identified, resulting in the development of an interim assessment framework; • the results section summarises the outcomes of the testing of the assessment framework which took place at an industry discussion forum; • the outcomes from of the research are summarised in the conclusion. research methodology the objective of this paper is to describe the development and testing of a single framework for the assessment of the affordability and sustainability in residential developments consistent with recent trends towards housing densification in urban areas. as identified in the shaded section of figure 1, the research methodology has two components. existing literature and assessment frameworks were initially analysed to provide a necessary context for an assessment framework for affordable and sustainable housing. this process highlighted and addressed some of the challenges associated with sustainability assessment frameworks and the need to apply systems thinking. the review also identified characteristics and possible indicators of affordable and sustainable housing, to influence an interim assessment framework. the second component of the methodology was an industry discussion forum, where a panel of 12 experts was assembled to test the interim assessment framework and thus provide necessary refinement and industry input. the forum was held in october 2009 and participants, who were provided with the interim assessment framework prior to the forum, were asked to reflect on five questions, in a semi-structured discussion. australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’, australasian  journal of construction economics and building, 10 (1/2) 48‐64   50 figure 1 context and scheme of research for the ecocents living project. background the simultaneous analysis of affordability and sustainability is under-developed in australia. while it has been generally agreed that environmentally sustainable housing should be affordable (see, for example, randolph et al., 2008), and that affordable housing should not come at the expense of recurrent costs, thermal comfort and quality (winston and eastaway 2007), research into the design and construction of affordable and sustainable building systems is still at an early stage. housing affordability improving housing affordability is now a mainstream public policy concern, reflected in the numerous active policies and initiatives (see, for example, australian government 2008; coag 2009; department for families and communities n.d.; city of salisbury 2009 for examples of innovations at national, state and local government levels). the literature regarding housing affordability in australia is well developed. numerous studies, such as berry 2003, yates et al. 2007, gurran et al. 2008, disney 2007, beer et al., 2007 and gurran et al., 2008, have quantified the extent of affordability challenges and unpacked the reasons behind these as well as identifying policy implications and possible solutions. sustainable housing frameworks commonly sustainable housing is presented as being synonymous with ecologically sustainable development in housing, which in some cases is reduced to manageable frameworks around environmental performance, or just energy efficiency. an example of this is the reducing the environmental impact of housing report released by the environmental change institute of the university of oxford (palmer et al., 2006). industry observation – there is a need to develop affordable and sustainable housing ecocents living research project – an industry-academic collaboration exploring the concept of affordable and sustainable housing literature review of key characteristics draft indicators and assessment framework testing via industry discussion forum application of assessment framework r ef in em en t in du st ry /g ov er nm en t in vo lv em en t australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’, australasian  journal of construction economics and building, 10 (1/2) 48‐64   51 this comprehensive study was prepared for the uk royal commission for environmental pollution which provides evidence to support policy and debate (rcep 2009). the study starts from a broad theoretical base in identifying the following priority themes for the commission: • sustainable urban transport; • sustainable urban management (including local agenda 21); • sustainable urban construction (encompassing resource and energy efficiency, demolition waste, design issues); • sustainable urban design (encompassing land use regeneration, brown field sites, urban sprawl, land use densities. (palmer et al., 2006) however, while acknowledging that the environmental impact of housing transcends all these broad urban sustainability themes, with housing associated with far-reaching and longterm impacts, the report quickly reduces its focus to the key area of energy, in addition to some very limited discussion on land use, waste production and water. however, there are now a growing number of frameworks and tools that seek to assess the environmental performance of housing, and the indicators for these are increasingly wide-ranging and well developed. the most recent contribution has been produced by the urban development institute of australia (udia) in their envirodevelopment ranking system (udia, 2009) which has a strong emphasis on environmental sustainability. envirodevelopment provides a marketing branding for an evidence-based assessment system. assessment against the framework is voluntary but provides consumers with accurate knowledge to compare different developments. the standards have been developed through collaboration with industry, government and other experts (udia, 2009). integrated assessment frameworks in terms of integrated assessment frameworks, the most comprehensive research into affordability and sustainability was undertaken by blair et al., (2004). this project involved a triple bottom line analysis of the sustainability of a ‘traditional’ regulatory subdivision compared with a master planned community. the research identified the economic, social and environmental components of sustainable housing and in the process, developed a set of 37 equally weighted indicators which were categorised as follows: • housing affordability (n=12) • sense of community, neighbourhood safety, and satisfaction (n=8) • transportation (n=3) • environment – biodiversity (n=2) • environment – energy (n=6) • environment – resources consciousness (n=4) • environment – wastewater/stormwater control (n=2) (blair et al., 2004) like many triple bottom line (tbl) analyses there were challenges with the differing levels of sophistication amongst the indicators, with the 14 environmental indicators being relatively well developed, while others, such as those regarding affordability and sense of community, were less well developed. this was then reflected in the discussion and analysis, which contained comparatively more discussion around the environmental indicators. the study highlighted that it is very difficult to develop a truly rigorous tbl assessment that gives sufficient consideration to economic, social and environmental criteria as there are often strong but difficult to quantify inter-relationships between these components (blair et al., 2004). more recently, vicurban, the victorian government’s urban development agency, has developed a ‘sustainable community rating system’ to provide a “common language” about australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’, australasian  journal of construction economics and building, 10 (1/2) 48‐64   52 sustainability in the development of master planned, urban renewal and provincial (nonmetropolitan) communities (vicurban, 2010). the sustainable community rating system is built around five objectives, each of which has several priorities. the sustainable community rating system relies on the widely accepted brundtland definition of sustainable development, and while there are no formal tbl criteria, the rating system has strong economic, social/cultural and environmental themes. the five objectives are: • commercial success; • housing affordability; • urban design excellence; • community well-being; • environment. (vicurban, 2010) in the sustainable community rating system, housing affordability is presented as a key objective of a ‘sustainable community’. sustainability assessment frameworks and systems thinking conceptualising and operationalising the idea of sustainability results in many tensions (baker, 2006, sneddon et al., 2006, davidson, 2005). as kasemir et al. (2003 in rotmans 2006 p.37) note, sustainability is a contested concept because it is inherently complex, normative, subjective and ambiguous. although the inter-relationships between, for example, the economic, social and environmental spheres of development are well documented, there are many pragmatic challenges in holding these tensions in balance and progressing toward a sustainable future (arman, 2009a). in moving towards a sustainable future, we must grapple with what rotmans (2006 p.37) calls the “sustainability paradox”. the paradox is that our current sustainability problems cannot be solved with current methods and tools that were developed or worked in the past. however, at the same time, we cannot be inactive and wait for the next generation, and their problem solving tools, methods and ideas. the future of sustainability assessment may lie in the adoption of a systems thinking approach (davidson and venning, 2009; daniell et al., 2005). systems thinking suggests that the component parts of any system can be best understood in the context of relationships with other components and other systems, rather than in isolation. thus, in terms of sustainability, a systems approach may allow a shift from the ‘silo’ approach of individual economic, social and environmental components of sustainability to one which recognises the inter-relationships between the components. to this end, davidson and venning (2009) p.10) suggest that “a sustainable outcome cannot be assured if each key component of the system is not incorporated within the decision making framework”. in perhaps an early application of a more integrated approach to sustainability assessment involving systems thinking, daniell et al. (2005) applied the assessment of urban systems through integrated modelling and exploration (austime) methodological framework to a particular housing development in adelaide. using this model, they were able to combine carbon dioxide, water, waste, ecosystem health, economic and social subsystems into a multi-agent model, and in the process, simulate a variety of changes in occupant behaviour, infrastructure and location. this project represents a progression in debates around sustainability assessment, in that it highlights the relative importance and effects of various subsystems to the overall sustainability. australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’, australasian  journal of construction economics and building, 10 (1/2) 48‐64   53 indicators of affordable and sustainable housing this section of the paper identifies key indicators of affordable and sustainable housing which form the basis of an interim assessment framework. before highlighting key indicators of affordability and sustainability, it is necessary to understand at a broad level what constitutes ‘affordable and sustainable housing’. sparks (2007) defines green affordable housing as “housing that is better designed and built, more durable, not significantly more expensive, cheaper to operate, healthier, more environmentally sound, and less risky” (sparks 2007 in arman et al., 2009b, p.13). global green usa (2007, p.1) also talks about green affordable housing and adds that such housing “forges a strong link between social justice and environmental sustainability, and connects the wellbeing of people with the wellbeing of the environment, thus building on the core social and economic values of affordable housing”. arman et al. (2009b) reviewed a variety of definitions of affordability, affordable housing, sustainability and sustainable housing and arrived at a conceptual definition of affordable and sustainable housing: housing that meets the needs and demands of the present generation without compromising the ability of future generations to meet their housing needs and demands. affordable and sustainable housing has strong and inter-related economic, social and environmental components (arman et al., 2009b, p.13). in that study, the authors argued that while it serves as a useful aspirational aim, such a definition lacks clarity and like many definitions, challenges exist when such aspirational aims are applied to different contexts and are potentially manipulated to serve predetermined objectives (arman et al., 2009b, p.14). they suggested that more specific criteria may be required to ensure that affordability and sustainability in housing are actually realised. to this end, the study arrived at ten ‘characteristics’ of affordable and sustainable housing. these broad characteristics sought to reflect literature on affordability (characteristics 1-4) economic sustainability (characteristics 5-6), social sustainability (characteristics 6-7) and environmental sustainability (characteristics 8-10). thus, an affordable and sustainable dwelling is: 1. a product where the rent or mortgage repayments do not exceed 30% of household incomes for the bottom 40% of income groups. 2. a product that is appropriately located. 3. a product that is of a suitable size and quality for its occupants. 4. a product that does not increase the incidence of housing stress over the lifecycle of the house. 5. a product where individual and government financial obligations can be met on an ongoing basis without policy change. 6. a product that is socially acceptable. 7. a product that does not increase social exclusion or polarisation. 8. a product that is located on a site that minimises biodiversity losses. 9. a product that is located on a site that maximises low-energy transportation options. 10. a product that encompasses the following environmental features • energy efficiency; • passive solar design; • sun shading; • water conservation • appropriate waste management during construction, occupation and deconstruction (source: arman et al., 2009b, p.15) australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’, australasian  journal of construction economics and building, 10 (1/2) 48‐64   54 although these characteristics flag some key issues, they are far from an assessment framework. in developing an interim affordability and sustainability assessment framework, the following notes seek to build on these characteristics by outlining eleven possible performance indicators of affordable and sustainable housing, as well as possible performance measures for these. additionally, in response to the need for a systems approach, at a conceptual level, a brief comment is made on each of the indicators in terms of possible synergies or tensions that the indicator may present in terms of affordability and sustainability. the following indicators are grounded in the above characteristics but have been modified and expanded upon to reflect established best practice in more recent housing developments, particularly with respect to urban infill housing projects which are the focus of the ecocents living project. energy efficiency energy efficiency encompasses active and passive measures to reduce energy consumption and greenhouse gas emissions of dwellings and represents one of the biggest areas where housing can make a contribution to sustainable development (kibert, 2008; larsen et al., 2008). possible measures for energy efficiency include star ratings, passive design and the adoption of specific technologies such as photovoltaic cells and solar water heating. energy efficiency measures are often thought to be inconsistent with affordability, with, for example, concern expressed by the construction industry regarding up-front costs associated with star-rating changes to the building code (bca 2009). however, improved energy efficiency can markedly improve the ongoing energy costs of households (winston and eastaway, 2008). water efficiency water efficiency encompasses water conservation, storage and re-use measures as well as water sensitive urban design techniques (apostolidis and hutton, 2006; liu et al., 2009; bedp, 2008). water conservation, storage and re-use can be applied at the scale of the whole development and at the scale of individual lots. possible measures of water efficiency include rainwater storage and re-use, water efficient appliances, application of water sensitive urban design (wsud) principles and grey water re-use. as with energy efficiency, this indicator can be associated with increased up-front costs. construction materials construction materials relates to the selection of materials such as the use of low embodied energy new materials and the re-use and recycling of old materials. reducing embodied energy can contribute to lowering the overall life cycle energy consumption of homes (pullen et al., 2006). in addition, careful analysis and selection of the materials used and the way they are combined can yield significant improvements in the comfort, cost effectiveness and energy efficiency of a home. possible performance measures for this indicator include the use of recycled or renewable materials, the embodied energy and the use of low volatile organic compound (voc) building materials. there are a variety of conflicting requirements associated with the selection of materials used in construction. specifically, the use of recycled or renewable materials may impact favourably on affordability but some of these materials might not be socially acceptable. certain materials and construction components might also impinge on the ability to appropriately modify and adapt a dwelling to suit the changing needs of the occupant. australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’, australasian  journal of construction economics and building, 10 (1/2) 48‐64   55 construction methods construction methods relates to methods and techniques, including new innovations, that will contribute to improved affordability and environmental sustainability. there are many methods in use in the australian context and each has advantages and disadvantages depending on factors such as climate, availability of materials and skilled labour, budget and social acceptability and appearance. possible performance indicators include the use of alternative or conventional construction methods, prefabrication and internal thermal massing. innovation in construction methods must be considered in the context of the contribution to affordability and sustainability, not just advancement in technology. for example, while prefabricated houses may have the potential to maximise energy efficiency as well as minimising waste and controlling cost, they may not be desirable and thus not marketable (craig et al., 2000). affordability – price mechanism affordable housing is housing that is reasonably adequate in standard and location for a lower or middle-income household and does not cost so much that such a household is unlikely to be able to meet other basic living costs on a sustainable basis (national summit on housing affordability, 2006). stone (2005) notes that affordability is not a characteristic of housing per se, but rather, it is a relationship between housing and people that depends on answering three questions: • affordable to whom? • on what standard of affordability? • for how long? (stone, 2005, p.153) while there are many economic and social determinants of affordability (including costs of running a home and associated travel over the life of the household), the most widely used measure in australia (use by, for example, australian government, 2008; beer et al., 2007; berry et al., 2004; disney, 2007; gurran et al., 2008; yates et al., 2007; yates et al., 2008) is the ‘30/40 split’ which suggests that housing costs should not exceed 30% of household income for the bottom 40% of income groups. knowing average incomes, it is then possible to calculate an affordable house cost in terms of purchase price and rent (such as department for families and communities, n.d.) and such figures may determine eligibility for certain affordable housing schemes (as in city of salisbury, 2009). there are many tensions associated with price mechanisms, not the least of which is that they may not reflect true market housing costs. indeed, in some instances, the only way to find housing that meets the strict cost is in locations that may be neither socially acceptable, nor environmentally sustainable in terms of travel required by households. difficulties can be experienced in maintaining affordable housing costs when delivering certain environmental features or innovative technologies (yates et al., 2008). however, durable houses where ongoing maintenance costs are kept to a minimum dictate good design with robust materials which often means higher construction costs. desirability desirability of a dwelling refers to how it meets and exceeds the consumers’ expectations. the market is an excellent indicator of desirability (i.e. do people want to buy this product, as distinct from do they need this product) and is a measure of desirability that is not dependent on some form of subjective assessment betts and ely (2005). it can be measured by the average price paid for a property in a development through auctions or sales, or by average rents. it might also be measured by the average appreciation (or depreciation) in the value of homes in the development over time. in some social housing projects, where the homes australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’, australasian  journal of construction economics and building, 10 (1/2) 48‐64   56 sales are restricted to low income earners, the appreciation of homes or the average time a property remains on the market for similar properties in the local area might serve the same function. density and urban form although there are no agreed standard definitions, housing density generally refers to the number of housing units in a given area (forsyth, 2003). density and the associated urban form is important considering the well-documented links between the imposition of urban growth boundaries, increasing land costs and housing unaffordability (see, for example, yates, 2007, australian government, 2008). in a general sense, increased urban densities have been linked to improved sustainability (rickwood et al., 2008). specifically, as densities increase the short term costs of providing key infrastructure drop, particularly for infill developments where existing infrastructure can be utilised. additionally, per capita energy consumption can reduce, especially when residents make a transition from private vehicles to public transport and levels of walking and cycling increase (towers 2002; hall 2001). however, perkins et al. (2009) have suggested that high density development does not guarantee lower overall per capita greenhouse gas emissions. dwelling size large dwelling sizes can unnecessarily reduce affordability and environmental sustainability. conversely minimum floor areas are required for health and well-being. floor area requirements can depend on the number of occupants but australia currently has no such regulatory standards. minimum dwelling size regulations ensure that the size of rooms and storage spaces in residential developments provide for the well-being of residents (design for homes, 2006). determining what is an appropriate dwelling size in terms of affordability and sustainability is not a straightforward exercise. while housing costs and energy consumption are likely to decline with reduced dwelling sizes, such dwellings may not be social acceptability or desirable to the market. moreover space in a dwelling should be sufficient to provide for residents’ changing needs. in this sense, minimum dwelling sizes play a role in the provision for adaptability. adaptability adaptability is used to describe a house that has been constructed to allow low-cost and low-energy modifications to suit the changing needs of the occupants. an adaptable house is one which is able to respond effectively to changing household needs without requiring costly and energy intensive alterations. low cost adaptation is important in ensuring buildings are durable, embodied energy is minimised and resource consumption is reduced (mercer et al., 2007). there are also socio-cultural benefits attached to building easily adaptable housing (bullen, 2007), not the least of which is allowing older residents to easily and cost-effectively remain in the familiar environment of their home. adaptability is often reflected by the application of ‘universal design principles’ (anuhd, 2009; connell et al., 1997). while it may seem obvious to build all homes to be adaptable, this too is associated with many trade-offs. although adaptable homes may seem cost-effective in the long-term, it inevitably involves some additional up-front costs, which may be at odds with the initial purchase costs of a dwelling. social acceptability social acceptability is defined as the acceptability of a development by the surrounding community. although it can be difficult to pin-point what factors of a development contribute to its social acceptability, the overall level of acceptability can be gauged through a variety of australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’, australasian  journal of construction economics and building, 10 (1/2) 48‐64   57 mechanisms (syme et al., 2005). for example, formal objections to a development submitted to a development assessment panel are frequently submitted by members of the community as an expression of perceptions of the development. responses to local or state government community consultations on significant developments are an expression of social acceptability. social acceptability can also be determined by the acceptance or rejection of a development application by local or state government. thus, social acceptability can exist on a variety of scales and as such it is an indicator that may be indirectly quantified. interim assessment framework figure 2 summarises the aforementioned indicators of affordable and sustainable housing and presents them as interim assessment framework. as discussed in the literature review, in terms of sustainability assessment frameworks, what we can do, however, is using current knowledge, tools and methods in the best possible manner, while developing a new paradigm that better reflects the complexity of sustainability (rotmans, 2006, p.37). in light of this, while acknowledging the complexity associated with the simultaneous assessment of affordability and sustainability, an assessment framework using the above indicators has tentatively been developed which will use current knowledge and methods in the best possible manner. it is acknowledged that difficulties will always be encountered when balancing and/or prioritising the economic, social and environmental considerations, particularly when affordability is an issue that is more than housing costs. when considering various indicators of affordability and sustainability the only way appropriate trade-offs between and weightings of the various indicators will effectively occur is through contested debate between various stakeholders (arman et al., 2009a). to this end the draft assessment framework shown in figure 2 was presented to a diverse group of construction industry, public policy and community representatives to be ‘road tested’. this framework links the many different components of affordability and sustainability and a summary score then provides an indication of which development is more affordable and sustainable. results background to the industry discussion forum a discussion forum was held to discuss the interim assessment framework and facilitate discourse about affordable and sustainable housing. the industry and community sectors that were represented included: • construction firms • architectural firms • urban and social planning firms • local government • minister’s strategic housing advisory committee • land management corporation, government land development agency • housing sa, government housing agency • ‘consumer’ of affordable and sustainable housing in preparation for the discussion group, participants were asked to reflect on the following questions: • how well do the definitions (stated under the assessment framework) reflect your understanding of the terms? • are there any issues or indicators which have been overlooked in the assessment framework? australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’, australasian journal of construction economics and building, 10 (1/2) 48‐64   58 figure 2 interim affordability and sustainability assessment framework as presented to industry discussion forum interim affordability and sustainability assessment framework as presented to industry discussion forum efficiency construction affordability appropriate density energy water materials methods financial procurement dwelling size low med high adapt ability social accept ability desirability 7.5 s tar or equivalent 6 star or equivalent a ctive s olar electricity generation and/or w ater heating s olar p assive d esign r ain w ater storage and re-use w ater e fficient a ppliances w ater e fficient landscapes (w s u d ) g rey w ater re-use r ecycled r enew able low e m bodied e nergy low v o c ’s internal t herm al m ass p re f abrication a lternative c onventional g overnm ent p rivate p ublic p rivate p artnership p urchase r ent m ixed s izes s ubjective size assessm ent u niversal d esign p rinciples a cceptability to surrounding com m unity m arket value of a dw elling case study assessment development 1 development 2 australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’ • how important is it to be able to measure “soft” indicators, such as social acceptability? how easily can this be done? • in what ways could an affordability and sustainability assessment tool for housing work for you in the realisation of successful housing outcomes? • what are appropriate housing solutions that are affordable and will be environmentally, socially and economically sustainable? key outcomes of the discussion group overall, the participants were enthusiastic about the assessment framework as it integrated components of environmental, economic and socially sustainability housing as well as key aspects of affordability. specifically there was discussion on the need to decouple the indicators for energy efficiency and energy generation. in terms of materials it was recommended that a stronger emphasis was needed on durability and robustness, as well as on issues of ongoing maintenance and occupants’ health. there was an interesting debate around innovations in construction materials and methods, in that some participants felt that structures in the industry, such as the building code of australia, were limiting the pursuit of non-conventional materials and methods. such regulation and structures potentially inhibit options that are affordable and environmentally sustainable. in terms of building adaptability, participants noted that universal design principles (connell et al., 1997; anuhd, 2008) address adaptability in an holistic manner and that these agreed standards should be the benchmark in assessing the adaptability of housing. it was suggested that the building code of australia potentially has a role to play in ensuring universal design principles are incorporated in new dwellings. the following aspects were suggested for possible inclusion in the assessment framework: • safety: this could include both physical features to facilitate passive surveillance, such as crime prevention through environmental design (see, for example, davey et al., 2005) techniques, as well as residents’ perception of safety in their neighbourhood. • quality of life: this indicator could assess the overall well-being and quality of life of occupants, reflecting issues such as time lost in travel, opportunities to develop social capital and the role of the home in wealth creation. • quality of place: this indicator could address design issues, both at a dwelling and neighbourhood scale. a strong theme at the discussion forum was that successful affordable and sustainable housing outcomes may only be achievable through a high standard of design, and as such, strong design codes are needed. • health: the discussion group noted that the physical form of dwellings and neighbourhoods has considerable scope to facilitate physically and socially healthy communities. it was, for example, noted that walkability within a neighbourhood to basic services such as local schools and shops not only has health benefits but also contributes to the development of social capital. housing affordability discussion group participants spent considerable time discussing housing affordability, the issues contributing to the problem, potential solutions and effective measures to adequately quantify housing affordability. , australasian  journal of construction economics and building, 10 (1/2) 48‐64   59 australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’ participants were generally in agreement that simple income to housing cost ratios used to derive certain purchase and rental prices for housing (as used as performance measures for affordability in the interim framework) poorly reflect the many issues that contribute to decreasing housing affordability. similarly, there was agreement that it is impossible to consider housing affordability without an in-built transportation factor, considering the substantial impact transportation can have on households’ living costs over a 25 year period. the example given was that while it may be affordable to purchase a home on the urban fringe for a relatively low cost, over a 25-year period its occupants may spend the same value as the initial purchase price in excessive transportation costs. it was thus suggested that indicators of affordability must somehow consider the life-cycle costs of living in the dwelling, in relation to transportation costs, not just affordability at the point of sale. discussion group participants reinforced the notion that any housing outcomes should seek to provide affordable housing across many different market segments, encompassing both subsidised housing as well as those struggling with home purchase and in the private rental market. this idea is well developed in the literature (see for example disney, 2007, berry, 2003) and has been a guiding principle for the entire project. in summary, the diverse and collective expertise of participants at the discussion group provided the necessary testing for the assessment framework. the results of testing the framework is summarised in table 1 and these will be incorporated as the framework is refined. indicator possible modification/ further research required energy efficiency decouple performance measures for energy efficiency from those regarding energy generation construction materials performance measures are needed regarding robustness/durability and impact on occupants’ health. construction methods the relationship between building regulation and adoption of innovative and non-conventional methods. need to consider broader governance issues affordability consider broader performance measures that better reflect locational issues, transportation and land cost. new aspects safety quality of life quality of place health table 1 results of testing of affordable and sustainable housing framework generally speaking both the background research into the assessment framework and the discussion forum highlighted the fact that those indicators dealing with environmental sustainability are reasonably well defined (i.e. energy, water, materials and methods). furthermore, there are tentative levels of performance available for each sub-indicator. this is not the case with the indicators dealing with economic and especially social sustainability (i.e. affordability, dwelling size, density, adaptability, social acceptability and desirability. these indicators require further definition and the methods for measuring performance are in need of considerable research to render the indicators useful when assessing affordable and sustainable housing. furthermore, the derivation of indicators has highlighted the issue of interdependence and the subjectivity of assessment frameworks in general. , australasian  journal of construction economics and building, 10 (1/2) 48‐64   60 australasian journal of construction economics and building pullen, s et al. (2010) ‘developing an assessment framework for affordable and sustainable housing’ conclusions the work presented in this paper has sought to develop and test a framework for the assessment of affordability and sustainability in residential developments with particular emphasis on urban infill projects. by considering other research in this area, characteristics of affordability and sustainability have been determined which have enabled performance indicators to be identified. the relevance of these indicators has been tested by reference to experts in the industry. it has been found that those indicators dealing with environmental sustainability are reasonably well defined whereas those reflecting social sustainability need further development. furthermore there are inherent synergies and tensions between the indicators which require exploration. at this stage the assessment framework can be applied in a qualitative manner to new or existing housing developments in keeping with the sustainability paradox. a quantitative application will depend on the evaluation of more rigorous metrics and the development of mechanisms that consider the inter-relationships between indicators. the work has identified the direction of future research which needs to adopt a more integrated systems-based approach in striving for the goal of housing that is both affordable and sustainable. acknowledgements the authors gratefully acknowledge the support that the ecocents living research project has received from the department for families and communities in the government of south australia and hindmarsh. references 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(ed.) sustainable construction: industrialised, integrated, intelligent, i3con handbook developing an assessment framework for affordable and sustainable housing abstract introduction research methodology background housing affordability sustainable housing frameworks integrated assessment frameworks sustainability assessment frameworks and systems thinking indicators of affordable and sustainable housing energy efficiency water efficiency construction materials construction methods affordability – price mechanism desirability density and urban form dwelling size adaptability social acceptability interim assessment framework results background to the industry discussion forum key outcomes of the discussion group housing affordability conclusions acknowledgements references microsoft word ajceb vol.2 no.1 compiled sized.doc integrated manufacturing-services businesses in the australian building and construction sector the australian journal of construction economics and building vol.2 no.1 1 integrated manufacturing-services businesses in the australian building and construction sector dr karen manley, queensland university of technology professor jane marceau, university of western sydney introduction the focus of this paper has been prompted by: emphasis in the ‘knowledge-economy’ literature on the increasing role played by services in economic growth; and recent analysis which suggests that the most dynamic sector of many economies is an integrated manufacturing-services sector. the paper initially describes the emergence of an integrated manufacturing-services sector in the context of increasingly knowledge-based economic systems. it then reports on the results of a survey of manufacturers in the australian building and construction (b&c) sector, investigating their involvement in service provision. the survey covers manufacturers of materials, products, equipment and machinery used on building and construction projects. the survey investigates the: nature of services offered growth of service provision role of service-provision in overseas work influence of contract type on value-adding opportunities through service provision marketing of services. the findings reveal the nature of service provision by manufacturers in the australian b&c sector. it appears that the ‘bundling’ of products and services by these manufacturers is a key competitive strategy yielding significant benefits for them and the sector as a whole. the new economy and service-enhanced products this section briefly overviews the emergence of new economic systems and discusses the role of services and serviceenhancement of products in the context of these systems. increasing competitive pressures internationally and the influence of technology in creating new production systems and outputs have combined to give rise to a new type of economic system – a learning intensive system, known as a ‘knowledgeeconomy’. the notion that modern economies can usefully be depicted as knowledge-economies has become well established over the past decade. the knowledge-economy perspective has been disseminated to a wide audience in publications as diverse as the beijing review (e.g. liu 1999: 6), the california management review (eg 1998, vol. 40, no. 3), nature (e.g. masood 1998: 714) and the oecd observer (e.g. drake 1998: 24). knowledge-economies have evolved away from the production of physical output as the primary source of value and employment, towards service activity as a key driver of growth. indeed many analysts have drawn attention to the shrinking size of the manufacturing sector compared to the services sector as a proportion of gdp across oecd countries over recent decades (e.g. marceau et al., 1997: 7.6). this data has led some commentators to conclude that manufacturing activity has become less important to economic growth (e.g. carson, 1998; garcia-mila and mcguire, 1998; coyle, 1997). however, recent research suggests that this may not be true, instead it appears that much of the growth in services is directly dependent on manufacturing activity. the research concludes that unsophisticated interpretation of data leads to a picture of change that: …conceals as least as much as it reveals. in particular, it obscures the increasing complexity of the linkages between service activities and goods-producing activities (pappas and sheehan, 1998: 131). dr karen manley and professor jane marceau 2 the australian journal of construction economics and building vol.2 no.1 indeed the complexity of such linkages was reflected in research conducted for the present paper, which was complicated by the difficulties that survey respondents had in separating out their service offerings from their products. this was particularly so in relation to design and engineering services. for customised output, such services can be considered part of the manufacturing process that make the product saleable. similarly, for any given sale there is likely to be an embodied r&d service component, a marketing service component and so on. based on quantitative data, pappas and sheehan argue that one of the most rapidly growing segments in knowledge-based economies is an integrated manufacturingservices sector, defined as ‘the complex of production and service activities involved in the creation, production, and distribution of manufactured goods’ (pappas and sheehan, 1998: 131). manufacturing has always involved service activities, particularly in areas such as accounting, scheduling, client service and so on. however, the increasing complexity of manufacturing output has increased service intensity in areas such as research and development, design, and engineering. further, trends towards increasing customisation of output also increase service intensity (especially for design services), as do demands from customers to supply total packages. such packages often involve transportation of output to construction sites, installation of output and project management. based on research undertaken by the us national research council (1994) and quinn (1992), pappas and sheehan (1998: 132) conclude that service inputs: …such as accounting, scheduling, design, quality control, planning, marketing and research and development, are central to the goodsproducing sectors, and on some estimates provide 60–75% of the input costs of modern manufacturing firms. of course, manufacturers also provide service outputs. these can take many forms depending on the nature of the firm. some more common services provided by manufacturers include: …planning, [installation], technical support, environmental analysis, design and engineering, systems integration, economic assessments, procurement advice, legal advice, teaching and training, and facilities management and operations support (gann and salter, 1998: 442). note that some services can manifest as either service inputs or outputs. for example, planning can be undertaken to assist a manufacturer’s internal operations, and/or planning services can be provided to assist a manufacturer’s clients. gann and salter (1998: 1) suggest we are witnessing a new era in which ‘the distinction between delivery of products and services has become blurred’. new services offered by manufacturers have been driven by changing demand patterns. buyers of manufactured goods increasingly want more than the good itself — they might want finance options to buy it, transportation to move it, insurance to protect it, expertise to install it, landscaping to enhance its appearance, advice on how to maximise returns from it and/or expertise to manage it. hence manufacturers are increasingly ‘bundling’ products and services to offer clients enhanced performance and improved value. indeed, in many instances ‘firm competences in adding services to the original physical project are the major enticement for the production of the artefact itself’ (gann and salter, 1998: 436). gann and salter report that, in the us, improved productivity performance has been linked to the effective bundling of products with a wide range of services in order to solve ‘tangible physical problems’ (lester, 1998, in gann and salter, 1998: 433). this may be achieved by the application of r&d, engineering or design services to reconfigure output, or, for example, changes in weight or endurance properties. gann and salter also suggest that serviceenhanced products are particularly important for project-based firms, such as those operating in the building and construction industries. for many project-based firms, ‘services are increasingly necessary to ensure that sophisticated component systems can be designed, integrated and operated as final complex products’ (gann and salter, 1998: 439). integrated manufacturing-services businesses in the australian building and construction sector the australian journal of construction economics and building vol.2 no.1 3 a project is a significant undertaking rather than a relatively simple matter of supplying output to a distributor. therefore a greater range of more sophisticated services will be necessary to execute a project. supply to a distributor implies a relatively standardised product typically requiring no specialised engineering or design input. also, supply to distribution channels will not involve any project-based services such as installation (possibly including plumbing services, electrical services and so on), landscaping or project management. in the australian context, pappas and sheehan (1998) present a convincing case showing the existence of an integrated manufacturing-services sector. their approach relies primarily on input-output data and employment data to demonstrate ‘clear evidence of the increasing service intensity of australian manufacturing’ (pappas and sheehan 1998: 141). the input-output data they present indicates that australia’s manufacturing sector draws heavily on purchases from service firms in industries such as transportation, communication services, finance, insurance, property services, and building services. this consumption of service inputs has increased rapidly since the late 1970s (pappas and sheehan, 1998: 9–13). further, pappas and sheehan (1998: 13–14) present evidence to suggest that this growth is not simply the result of increased outsourcing by manufacturers (which would simply shift the source of services provided from within the firm to external parties, rather than increasing the value of services consumed) but the result of increased service intensity in manufacturing operations. they rely on employment data showing a pronounced shift in the occupational distribution of employment within the manufacturing sector in reaching this conclusion. their data indicate that since the late 1970s the proportion of total manufacturing employment accounted for by service occupations has shown strong growth. the research undertaken for this paper rounds out this picture, primarily by extending analysis of the provision of services by manufacturers. the current project also produces useful industry-level insights through its examination of the b&c sector. services provided by manufacturers in the australian building and construction sector the remainder of the paper is based on a survey of 18 leading manufacturers in the australian b&c sector. these manufacturers collectively dominate their industry. the survey was based on a questionnaire administered by phone interview. the questionnaire sought to determine the nature and growth of services offered and the scope for service enhancement. sample businesses were selected from leading manufacturers. hence, compared with the total population of manufacturers supplying the b&c sector, the manufacturers surveyed here can be expected to be at the forefront of the trend toward valueadding via the provision of services. thirteen of the 18 respondents were material/product suppliers, while five were machinery/equipment suppliers. eight of the 18 respondents sold at least half of their output through direct project-based work, while 15 sold at least 20% of their output through direct project-based work. hence, given findings in the literature concerning the importance of service-enhancement to project-based businesses (reported in the previous section), we would expect this sample to be actively involved in such enhancement. nature and growth of services technical service was the most common service provided by manufacturers, undertaken by 17 of the 18 respondents, as shown in figure 1. such services primarily involved providing clients with information regarding the characteristics of the material, product, machinery or equipment supplied. this included, for example, the provision of advice regarding strength, durability, weight, operation, systems integration and installation, for example. technical service was probably the most common service provided because a large number of different types of services could be considered technical services (including design, maintenance or training). dr karen manley and professor jane marceau 4 the australian journal of construction economics and building vol.2 no.1 figure 1: nature of services provided to clients, by number of businesses economic services refers primarily to the provision of comparative prices to potential clients; business plans refers to help with business plans for small clients; project man. refers to project management; financial services include the provision of payment options, such as extended credit. design services were the second most common service provided. this is a more specific type of service and is the most important single service (given the broad interpretation of technical services by respondents). this finding is likely to be related to the increasing sophistication and customisation of manufactured input into b&c activity. after-sales services were the equal-third most common service offered. the survey question specifically related to ‘after-sales service provided by dedicated personnel’, rather than being more general. the three manufacturers that did not have any employees devoted to after-sales service may have still provided such service, though in a more general way. transport services were the other equalthird most common service provided. most manufacturers would arrange transport of their output to their clients. however, it is interesting that manufacturers were marginally more likely to provide design services than transport services. perhaps the higher value of design work explains this finding. engineering and installation services were the equal fourth most common services offered. engineering services were closely associated with design and installation activity. the provision of installation services is very significant for it largely determines whether or not a manufacturer is directly active on construction sites and hence impacts of the scope to add value via the provision of project-based services. although installation is a key route to on-site work, other linkages to site-work are possible; for example, a steel manufacturer may not be involved in fabrication or installation of steel products, but may have significant design, engineering or project management expertise applied to on-site work. interviews associated with the survey suggest that leading manufacturers are both very likely to be engaged in on-site (project) work and very likely to rely on such work as a major source of revenue. three other types of service were provided by at least half of the businesses surveyed. 0 2 4 6 8 10 12 14 16 18 te ch ni ca l d es ig n af te r sa le s tr an sp or t en gi ne er in g in st al la tio n tr ai ni ng r ep ai r/ m ai nt . so ft w ar e p ro je ct m an . ec on om ic s er vi ce s fi na nc ia l s er vi ce s e nv ir on m en t sy st em in te gr at io n fa ci lit ie s m an . b us in es s pl an s in su ra nc e le ga l o th er integrated manufacturing-services businesses in the australian building and construction sector the australian journal of construction economics and building vol.2 no.1 5 own operate, project m anage, design, supply and install contract for project project managem ent, design, supply and install contract for project design, supply and install contract for project supply and install contract for project supply contract for project further fabrication distributor manufacturer forestry/mining distributor these were training/teaching, repair/ maintenance and software services. unstructured discussions with respondents revealed the following regarding the remaining services shown in figure 1: project management and systems integration services appeared to be high value, strategically important services, is discussed later in this paper facility management services appeared to be strategically significant in view of growing client demand for increasingly comprehensive ‘total packages’ business plan services comprised planning help primarily for small businesses economic services often involved the provision of comparative prices to potential clients financial services tended to comprise the provision of payment options to potential clients. the other services category contained a range of services including testing services, modernisation services (e.g. upgrading lifts), distribution services, landscaping services, colour consultancy and site security services. discussions with survey respondents revealed that the ability of a manufacturer to add value to its operations via the provision of services is related to its role in the supply chain. figure 2 presents a summary of the different ways in which manufacturers can be related to project work. as noted earlier, the significance of a close relationship to project work is that it gives manufacturers much greater scope to add value to their operations by the provision of services. project work primarily involves work carried out on a construction site, but it also includes site-related work such as product supply, transport services and the components of design/engineering/software services provided off-site. hence, manufacturers may respond to project-based demands without actively being present onsite. non-project activity typically comprises sales through distribution outlets. examples of services often provided to distributors, or to back-up distributor sales, include finance services, after-sales service and business advisory services. project work can involve any of the following additional services: transport, installation, earth-moving, landscaping, plumbing, electrical, design, project management and facilities management. installation tends to be the ‘entry level’ service to on-site work. figure 2: supply-chain value-adding possibilities for manufacturers in the b&c sector dr karen manley and professor jane marceau 6 the australian journal of construction economics and building vol.2 no.1 in terms of figure 2 the least involvement a manufacturer could have in the b&c sector would be purchasing raw materials from an unrelated distributor, and selling manufactured output to an unrelated distributor. none of the survey respondents fell into this category. the two respondents with zero tenderbased sales had no involvement in project work. they both had involvement in downstream activity and sold their manufactured output to an unrelated organisation that undertook further fabrication. the fabricator was then in a position to bid on projectbased contracts. for example, a glass manufacturer may be vertically integrated down-stream (undertaking mining activity), but not up-stream, selling the manufactured output (glass) to an unrelated window fabricator. the window fabricator (not the original glass manufacturer) is then in a position to bid on project contracts (probably not contracts with broad responsibilities, like project management, because the fabricator’s part of the total value of a project would be too small to justify taking on the associated risks). the least direct involvement a manufacturer can have on a project is through a contract for supply only (this will provide scope for normal client services plus limited scope for site-related services (e.g. transport to the site). the data indicate that two of the surveyed manufacturers fell into this category. the most involvement a manufacturer could have in the b&c sector would be to operate from the mining/forestry stage through to high value build-own-operate projects. at least one survey respondent was involved in the system to this extent, if all the businesses controlled by the parent company were considered. this manufacturer provided all of the project services noted above, viz., installation, earth-moving, landscaping, plumbing, electrical, project management, ownership and facilities management. as could be expected, the more stages a manufacturer is involved in the greater the scope for service-enhancement of products. the supply/value-chain literature supports this conclusion, indicating that valuecreation opportunities are directly related the breadth of a firm’s involvement in the supply/value chain (e.g. walters and lancaster, 2000; normann and ramirez, 1993). further, interviews conducted alongside the survey indicated that the closer a manufacturer is to on-site work, the greater the scope for service-enhancement, as the project end of the supply chain is more service intensive than the raw material end. fourteen of the 18 respondents provided at least eight different services (as defined in figure 1). hence, more than three-quarters of respondents provided nearly half of the total number of services listed in the survey. this indicates a very high level of service intensity amongst manufacturers in the australian b&c sector. discussions with survey respondents indicated that this broad scope of activity is indeed the result of increasing client demands for the delivery of comprehensive ‘total packages’, as discussed earlier. three respondents provided four or less services; two of these respondents were the smallest businesses in the sample and had low levels of involvement in project-based work. the highest value services offered are shown in figure 3. integrated manufacturing-services businesses in the australian building and construction sector the australian journal of construction economics and building vol.2 no.1 7 0 2 4 6 8 10 12 installation design proj. man. engineering after-sales repair/maint. figure 3: the highest value service offered, by number of respondents eleven of the 17 respondents able to answer this question nominated installation as their highest value service. this appeared to be because of the immediate revenue generated from installation services and the strategic role played by such services. it appears that installation services are of particular strategic importance to the manufacturers surveyed. as noted earlier, part of this importance lies in the scope to add further value via the provision of related services once an on-site role has been established. respondents were also asked to nominate the newest, most innovative and fastest growing services they offered. figure 4 shows that of the ten respondents able to identify the newest service offered, three nominated installation. hence, installation services were again highlighted, although this time in a less pronounced way. figure 4: the newest service offered, by number of respondents 0 1 2 3 4 installation facilities management financial it fire engineering design remote electronic monitoring repair maintenance dr karen manley and professor jane marceau 8 the australian journal of construction economics and building vol.2 no.1 0 1 2 3 4 5 6 7 design facility managem ent rem ote electronic monitoring it figure 5: most innovative service offered, by number of respondents figure 5 shows that of the 10 respondents able to identify the most innovative service offered, six nominated design services — three of the six were able to be more specific, noting design specialities such as webbased design, concrete design and fire engineering design. the respondent nominating web-based design as their most innovative service explained that their clients (not project owners but major contractors in this instance) can scan in their plans and lodge them electronically at the manufacturer’s web-site. this manufacturer is then able to provide product quotes and design analysis electronically. the major contractor uses the information provided to finalise its quote and submit a tender for say, a design and build contract. if the builder wins the job, the manufacturer is likely to become a subcontractor. despite the examples of innovative design methods and applications noted above, discussions with respondents indicated that the result shown in figure 5 tends to reflect the inherent creativity associated with design activity rather than indicating that the design methods employed or design applications were particularly innovative. figure 6 shows that of the eight respondents able to identify the fastest growing service offered, two nominated installation while another two nominated repair/ maintenance. the results indicate that there is no single service growing appreciably more rapidly than others offered by manufacturers supplying the b&c sector. growth seems to revolve around the range of services offered. twelve of the 18 respondents had ‘greatly extended’ the range of services offered over the past decade. this is to be expected given: an increasing desire on the part of project owners to limit the number of players they deal with and to obtain a ‘total project solution’ from one source the trend toward increased outsourcing of project functions by project owners, particularly in the public sector. scope for service enhancement the scope for service enhancement by respondents was investigated with regard to export markets, negotiated contracts, independent marketing of services, and sources of service improvement. of the 13 respondents active in export markets, only four thought that services were markedly more important in those markets compared to domestic markets. it seems that the importance of services in export markets is very much related to the type of business being conducted in those markets. in this case, most of the respondents were selling to distributors rather than being directly involved on b&c projects. they integrated manufacturing-services businesses in the australian building and construction sector the australian journal of construction economics and building vol.2 no.1 9 provided those distributors with the same services that they provided to their domestic distributors. further, in most cases the distributor was responsible for after-sales service. in contrast, respondents working directly on overseas projects (i.e. not using distributors) emphatically made the point that the service intensity of their contribution to those projects was greater than for domestic projects. for instance, overseas projects may involve: a greater transport service component the need for translation services more elaborate packaging services (e.g. to ensure packaging can withstand extreme weather conditions, or extended travel, or handling by inexperienced parties) more complex after-sales service arrangements more complex design services (to meet overseas standards) more intensive system integration services (ensuring compatibility with foreign systems). the differences found here between the service-intensity of project versus distribution activity in export markets supports the findings by gann and salter (1998) that serviceenhancement is particularly important for project-based firms. the survey also investigated the scope for service enhancement via negotiated contracts rather than open-bidding contracts. eleven of the 16 respondents able to answer this question strongly felt that a dedicated (negotiated) relationship with project owners enabled them to deliver a greater range of services and better quality service. further, several respondents noted that there was scope for greater provision of design services on negotiated contracts. it appears that the four respondents who did not see greater scope for service enhancement on negotiated contracts felt that the common industry practice of submitting non-conforming bids in competitive bidding situations allowed the same scope for service enhancement (although many respondents disagreed with this view). this scope was thought to arise through the extra design work, although clearly under these conditions there would be, for instance, less scope to negotiate a position of project management. also, in a competitive situation, the scope for service enhancement is limited by the manufacturers ability to win the contract with a non-confirming bid, as opposed to negotiated processes, which provide greater security. figure 6: fastest growing services offered, by number of respondents 0 1 2 3 installation repair maintenance web-based design services facilities management remote electronic monitoring rental services dr karen manley and professor jane marceau 10 the australian journal of construction economics and building vol.2 no.1 these results highlight the extent to which relationships with clients create opportunities for value-adding via the provision of services. in part this is because the additional communication with clients involved in negotiated contracts allows the manufacturer to better understand client requirements, putting it in a better position to provide a comprehensive and effective package of products and services to meet total client needs. the importance of such ‘bundling’ opportunities to the profitability of manufacturing enterprises was discussed earlier. this ‘bundling’ is reflected in marketing behaviour. for instance, of the 18 respondents, 15 never marketed services independently of products. of the three that did, one respondent often provided facilities management services in relation to facilities built and installed by competitors, while another respondent occasionally provided colour consultancy services and landscaping design services independently of products. these findings support the notion of the emergence of an integrated manufacturingservices sector, which was raised by pappas and sheehan (1998) and discussed earlier. it appears that the services provided by manufacturers are complexly entwined with their physical output, so much so that it is not profitable for them to provide services independently. as may be expected, the core value of operations seems to remain with the manufacturing activity. the last question in the survey sought to determine the extent to which project-based learning was the key source of learning in relation to service improvement, compared to the role of on-going business processes (such as annual market surveys). of the 16 respondents answering this question, nine felt strongly that service improvement arose mainly from project work, while seven supported the proposition less strongly. the latter group appeared to be less involved in on-site work. this finding adds weight to the proposition that the overall competitiveness of manufacturers in the b&c sector is influenced by the extent of their involvement in projectbased work and the extent to which they maximise opportunities arising from such involvement. although project work is clearly a major source of service improvement, several respondents considered that market surveys were also an important source of learning. conclusion the literature review conducted for this paper indicated the importance of integrated provision of products and services. the empirical work conducted for this study suggests that such integration is growing in the australian b&c sector. manufacturers are: providing an expanding range of services and already provides all of the services indicated in the literature reviewed reaping significant value from service provision. the results of the study support many of gann and salter’s (1998) findings, namely that: manufacturers are ‘bundling’ products and services to improve business performance the distinction between products and services has become blurred the delivery of new services has been driven by changing client demand patterns manufacturer competency in adding services to original physical products is a key driving force behind manufacturing; and services are increasingly necessary to ensure sophisticated component systems can be designed, integrated and operated. indeed, the ‘blurring’ of the distinction between products and services complicated the research process underpinning this study. interviewees found it difficult to identify the services they offered without prompting from the researcher, as many of their services were so closely associated with their products that, to the respondents, the services were essentially part of the products. despite supporting gann and salter’s (1998) finding that changing client demand patterns are a key driver of serviceenhancement of products, this study found that manufacturers were not always keen to provide a broader range of services. some manufacturers felt pushed to provide a greater variety of functions on projects in order to maintain profitability. however, in an ideal world, they would choose to concentrate on a more limited range of core competencies. integrated manufacturing-services businesses in the australian building and construction sector the australian journal of construction economics and building vol.2 no.1 11 many manufacturers rely on high-level service skills to underpin overall performance. this was particularly true of manufacturers providing complex component systems. such findings support gann and salter’s (1998) observation that serviceenhancement of output drives manufacturing success in knowledge economies. this project has made a key contribution to the literature in terms of our knowledge of the role of different services in manufacturers’ operations, and the factors influencing the scope of service-enhancement. the present study found that installation and design services are of particular strategic importance to manufacturers. both these services play crucial roles in securing projects and are key gateways to adding more value via the provision of other services. this study also found that greater scope for service enhancement exists: for project work in export markets compared to domestic markets (although this finding does not apply to more straightforward distribution arrangements overseas) in relation to negotiated contracts compared to open bidding contracts in relation to the joint provision of products and services, compared to marketing services independently through project-based learning, compared to learning arising from on-going business process (such as annual market surveys), particularly if the manufacturer is heavily engaged in project-based work where a manufacturer is engaged in several stages of the supply-chain where a manufacturer is operating close to the project-end of the supply-chain. the higher levels of service enhancement recorded were associated with larger manufacturers producing more complex products. further, the concept of ‘serviceenhancement’ or ‘value-adding through the provision of services’ was far more readily understood by such manufacturers compared to smaller manufacturers producing a single, relatively simple product. further research, conducted on a larger scale than the present study, is required to improve the robustness of results. such research appears to be warranted based on: the extent to which service enhancement is undertaken by manufacturers the role that such enhancement is said to play in the formation of integrated manufacturing-services sectors the apparent importance of such sectors in the effective functioning of successful knowledge economies. in particular, although this study supports suggestions in the literature that client demands are an important factor underpinning increased service provision by manufacturers, it is necessary that further investigation be carried out to determine manufacturers’ capabilities to meet these new demands, for example, how are smaller manufacturers coping with these trends? it is also important to understand the limits to the new integration: how do manufacturers manage the expansion of their core capabilities into new service areas, and how does such expansion impact on service providers? interviews conducted for this paper suggest that these are important issues worthy of further attention. references california management review (1998) special issue of knowledge and the firm. california management review, 40 (3). carson, i. (1998) the world as a single machine. the economist, 347 (8073), s3–s6. coyle, d. (1997) economics: the weightless economy. critical quarterly, 39 (4), 7. disr (1998) r&d scoreboard ’98. department of industry sciences and resources. ausindustry/ir&d board, canberra. drake, k. (1998) firms, knowledge and competitiveness. oecd observer, 211, 24–27. gann, d.m. and salter, a. (1998) learning and innovation management in projectbased, service-enhanced firms. international journal of innovation management, 2 (4), 431–454. garcia-mila, t. and mcguire, t.j. (1998) a note on the shift to a service-based economy and the consequences for regional growth. journal of regional science, 38 (2), 353–364. kennedy, p. (1999) commercial manager, baulderstone hornibrook, telephone interview, august 9th. dr karen manley and professor jane marceau 12 the australian journal of construction economics and building vol.2 no.1 liu, j. (1999) knowledge economy affects the globe’ beijing review, 42 (5), 6–7. marceau, j., manley, k. and sicklen, d. (1997) the high road or the low road?: alternatives for australia’s future. australian business foundation limited, sydney. masood, e. (1998) britain embraces ‘knowledge economy’. nature, dec 24, 714–716. normann, r. and ramirez, r. (1993) from value chain to value constellation: designing interactive strategy. harvard business review, 71 (july–august), 65–78. pappas, n. and sheehan, p. (1998) the new manufacturing: linkages between production and service activities. in: sheehan, p. and tegart g. (eds) working for the future. victoria university press: melbourne. walters, d. and lancaster, g. (2000) implementing value strategy through the value chain. management decision, 38 (3), 160–178. 502 bad gateway 502 bad gateway nginx determining the optimal fee-technical proposal combination in two envelope fee bidding the australian journal of construction economics and building vol.2 no.2 1 determining the optimal fee-technical proposal combination in two envelope fee bidding professor derek s. drew, connie w.k. kwong and patrick x.w. zou university of new south wales l.y. shen, the hong kong polytechnic university introduction bid strategy modelling has traditionally been concerned with setting the mark up level to a value that is likely to provide the best pay off. famous construction bid strategy models include those proposed by friedman (1956), gates (1961) and carr (1982). more recently bid strategy modelling has expanded to encompass contracts awarded on a multi-criteria basis. for example, construction clients are increasingly calling for bids that require competing contractors to submit both bid price and contract time (shen et al., 1999). in such cases contractors’ bid prices and proposed contract times are commonly assessed in accordance with the following equation (herbsman et al., 1995): tcb = p + (utv x t) (1) where tcb = total combined bid p = price utv = unit time value specified by the client (such as liquidated damages rate) t = time the contractor with the lowest tcb is awarded the contract. shen et al. (1999) have considered this from a contractor’s bid strategy viewpoint by relating the contractor’s price-time curve to the client’s pricetime curve and from this they have developed a mathematical bid optimisation model. the rationale behind the model is illustrated in figure 1. it is widely accepted (e.g. callahan et al., 1991) that every competing contractor has an optimum pricetime point for each construction contract. the price-time curve of a contractor is shown in figure 1 as being s1 with the optimum point as b1 and the corresponding bid price-time combination as p1, t1. the liquidated damages rate, commonly used to represent utv, is shown as a straight line (s2) since it is a constant rate. the total combined bid curve s (i.e. assessed cost to the client) becomes s1 + s2. the optimum point at which the contractor is most competitive from the client’s viewpoint is b0. the contractor should, therefore, submit the bid price-time combination p0, t0 to the client. consultants are faced with a similar problem in two envelope fee bidding given that the commission is awarded on the combined basis of price (i.e. fee) and quality (i.e. technical proposal). consultants are required to submit to the client one envelope containing the technical proposal and a second envelope containing the fee. each competing consultant’s technical proposal and fee is then converted by the client to a score and aggregated. the consultant with the highest overall score is then awarded the commission (see, for example, construction industry board (1996) for a detailed explanation of two envelope fee bidding procedures). bid strategy decision making is more complicated in price-time contracts and two envelope fee bidding. in addition to setting the mark up level to provide the best pay off, bidders need to make an additional decision with regard to the second criterion. for example, they must decide whether to submit a higher (or lower) tender price with a shorter (or longer) contract period, or in the case of two envelope fee bidding, on whether to aim for a higher technical score (which is likely to require a higher fee) or submit a lower fee (which is likely to result in a lower technical score). the objective of an optimum bid strategy model is to provide the bidder with an optimal solution, whether it be optimum mark-up (as with traditional price only models) or optimum price-time or fee-technical score combination (with biparameter models). derek s. drew, connie w.k. kwong, patrick x.w. zou and l.y. shen 2 the australian journal of construction economics and building vol.2 no.2 figure 1: the price-time relationship between the contractor’s price-time curve (s1) and the client’s price-time curve (s) (source: shen et al. 1999) based on the same logic proposed by shen et al. (1999), drew et al. (2002b) offered consultants an optimum bid strategy model for two envelope fee bidding. they show that consultants have a choice of aiming for a low scored technical proposal-low fee combination or a high scored technical proposal-high fee combination or a combination in between, and that only one of these combinations will result in the highest possible aggregated score. they claim that if consultants follow the modelling approach set out in their paper, they should be in a position to better identify their optimum feetechnical score combination, thereby increasing their chances of winning the commission. drew et al. (2002b) introduced the modelling approach using hypothetical examples. this paper sets out to test the modelling approach using data supplied by a hong kong quantity surveying consultant. aggregating fees and technical score construction clients set out the two envelope bidding procedures that consultants are required to follow. this includes using a particular formulation with which to aggregate the fees and technical scores. drew et al. (2001) identified seven different feetechnical score formulations from the literature and also suggested two more new formulations. a commonly used formulation (connaughton, 1994), also used by the hong kong housing authority (one of hong kong’s largest public sector clients), is: ca = wqq/qmax + wf fmin/f (2) where qmax = highest technical score q = consultant’s technical score f = consultant’s fee fmin = lowest fee wq = predetermined weighting for technical score wf = predetermined weighting for fees ca = total score the consultant with the highest ca value wins the contract. for example, suppose there were four competing consultants labelled a, b, c and d who submitted respective fees of $5.43, $5.14, $4.42 and $4.62 million and whose technical proposals were given scores of 82, 76, 69 and 73. suppose also that the technical score/fee predetermined weightings were 70/30 respectively. table 1 shows consultant a winning the competition. construction time t t e n d e r p ri c e p time value curve (ldr x t) price-time curve total combined bid curve (s1 + s2) s2 s1 s b0 b0 b1 b1 tcb1 tcb0 p0 p1 t0 t1 determining the optimal fee-technical proposal combination in two envelope fee bidding the australian journal of construction economics and building vol.2 no.2 3 table 1: aggregating fee and technical score using equation 2 consultant identities tm f$m tsc fsc totsc rank a 82 5.43 70.0 24.3 94.30 1 b 76 5.14 65.1 25.8 90.90 3 c 69 4.42 58.8 30.0 88.80 4 d 73 4.62 62.3 28.7 91.00 2 the example also shows that fees and technical scores are, to some extent, positively correlated (i.e. consultant a submitted the highest fee and obtained the highest technical score, consultant c submitted the lowest fee and obtained the lowest technical score and consultants b and d somewhere in between). it can be seen that this becomes a negative correlation when converted to a ratio since the fee ratio is an inverse ratio. an important reason for such a correlation is that architectural, engineering and surveying commissions are regarded as a ‘complex intellectual process’ (construction industry board, 1996) and as such, in order to deliver a good quality service, two important variables are total time spent on the commission, and experience of the consultant. with a lower fee the consultant will not be able to spend so much time on the commission and/or use less experienced staff. spending less time and/or using less experienced staff should result in the consultant receiving a lower raw technical score. on the other hand, greater experience and more involvement are likely to result in a consultant receiving a higher technical score. since experienced staff are normally paid higher salaries this is likely to require a larger fee. a higher technical score therefore requires a larger fee, and fees are likely to go up at an increasing rate according to the technical score (because of the increased rate of salary differences between lower and higher paid staff). this suggests that there is a positive convex correlation between fee and raw technical score. the fee-raw technical score correlation that is often produced when consultants are in competition with one another will also occur with a particular consultant deciding on whether to aim for a low scored technical proposal-low fee combination or a high scored technical proposal-high fee combination or something in between. for example, suppose consultant a had developed three technical proposals for the commission just described. the three technical proposals may attract full fees of say $4.43, $5.43 and $6.43 million respectively. if all three technical proposals were scored it is quite likely that the raw technical scores and corresponding fees would, to some extent, be positively correlated. determining the optimum fee and technical score the consultant’s objective in two envelope fee bidding is to get the highest possible total score since this maximizes the chance of winning the commission. in the previous example the consultant would submit the fee-technical proposal combination that it thought would result in the highest score. drew et al. (2002b) claim that consultants can actually determine the highest scoring fee-technical proposal combination for a particular commission by following the following seven steps: 1. assemble the technical proposal and calculate the corresponding fee in the normal way, then estimate the corresponding technical score. 2. determine the absolute lowest full fee for the commission and estimate the corresponding technical score 3. estimate the absolute highest technical score for the commission and determine the corresponding full fee. 4. use the client’s formulation (e.g. equation 2) and calculate the three respective total scores using (1) the original fee and corresponding technical score, (2) absolute lowest fee and corresponding technical score and (3) absolute highest technical score and corresponding fee. derek s. drew, connie w.k. kwong, patrick x.w. zou and l.y. shen 4 the australian journal of construction economics and building vol.2 no.2 figure 2: possible optimum fee outcomes (source: drew et al. 2002b) 5. regress the three total scores against the fee to produce a total score continuum. since the continuum, represented by a line, is regressed on three points it will almost certainly be curvilinear in shape, being either concave or convex. figure 2 shows that there are three possible outcomes. if concave, the optimum fee will fall at the highest point along the continuum (i.e. outcome 1). if, however, the continuum is convex, the optimum fee will fall at either the low end (i.e. outcome 2) or high end (i.e. outcome 3) of the continuum. 6. determine the optimum fee for outcome 1 using differentiation since the total score continuum, represented by a curvilinear regression line, is based on the equation: y = a + bx +cx2 (3) where y = total score x = fee for outcome 2 and 3 the optimum fee is simply that shown at either the low end (i.e. outcome 2) or high end (i.e. outcome 3) of the continuum. 7. determine the optimum technical score for outcome 1 by inserting the optimum fee and total score into the client’s formulation to find the corresponding technical score. for outcome 2 and 3 the optimum technical score is the one already estimated. the original technical proposal should then be adjusted to reflect the optimum technical score. this may involve including more/less staff with greater/less experience and/or spending more or less time on the commission. the optimum fee and the adjusted technical proposal should then be submitted to the procurer. in addition to illustrating the foregoing approach using hypothetical examples, drew et al. (2002b) were able to show the effect of using the optimum bid strategy on bidding performance. they identified that this could be done by measuring the optimum total score percentage increase on the original total score. this seven step approach will be replicated and developed in this paper using data collected from a leading hong kong quantity surveying consultant. data collection the consultant, who regularly tenders for hong kong housing authority commissions, provided the following data for 51 bidding attempts: 1. original fee 2. estimated raw score 3. absolute low fee 4. corresponding estimated technical score 5. absolute high estimated technical score 6. corresponding fee case 36 case 37 fee ($) t o ta l s c o re optimum fee outcome 2 optimum fee outcome 1 optimum fee outcome 3 determining the optimal fee-technical proposal combination in two envelope fee bidding the australian journal of construction economics and building vol.2 no.2 5 7. fee/technical score predetermined weighting 8. tender date the commissions were tendered for between september 1997 and april 2001. the hong kong housing authority used feetechnical score predetermined weightings of 30/70 for 14 cases and 50/50 for the remaining 37 cases. the fees submitted ranged from just under hk$1 million to just under hk$17 million. the hong kong housing authority uses equation 2 to aggregate fees and technical scores. analysis the analysis is in three parts. three representative cases are used in the first part of the analysis to illustrate each of the three possible outcomes (i.e. outcome 1 = in between absolute low fee/absolute high technical score, outcome 2 = absolute low fee/low technical score, outcome 3 = absolute high technical score/high fee). the frequency of the three possible outcomes and the effect of the predetermined weightings are considered in the second part of the analysis. the last part considers the effect that the optimum bidding strategy has on the consultant’s original bidding performance. representative cases illustrating the three different outcomes the three possible outcomes are illustrated with cases 36, 37 and 38. table 2 shows the (1) original fee/estimated raw score, (2) absolute low fee/corresponding estimated technical score and (3) absolute high estimated technical score/corresponding fee combinations for these three representative cases. the fees and technical marks are converted into fee, technical and total scores using equation 2. for case 36 it can be seen the consultant’s original fee and estimated raw score produced the highest score, while for case 37 the absolute high estimated technical score and corresponding fee resulted in the highest total score and for case 38 the absolute lowest fee/corresponding technical score combination yielded the highest total score. regression analysis is used to produce the total score continuums. figure 3 shows a concave curve for case 36 (i.e. outcome 1), a positive convex curve for case 37 (i.e. outcome 3) and a negative convex curve for case 38 (i.e. outcome 2). for case 36 the regression equation coefficients generated by the excel software package are: y = -1397.81 + 890.84x – 132.60x2 (4) table 2: technical scores, fee scores and total scores for competition nos. 36, 37 and 38 using equation 2 with a 50/50 predetermined weighting case no. tm f$m tsc fsc totsc rank 45.00 3.20 45.00 50.00 95.00 3 46.95 3.24 46.95 49.43 96.38 1 36 50.00 3.50 50.00 45.71 95.71 2 mean 47.32 48.38 sd 2.52 2.33 sd ratio 1.08 40.00 5.40 40.00 50.00 90.00 2 42.53 6.06 42.53 44.59 87.12 3 37 50.00 6.50 50.00 41.54 91.54 1 mean 44.18 45.38 sd 5.20 4.29 sd ratio 1.21 35.00 4.00 38.89 50.00 88.89 1 38.86 6.23 43.18 32.09 75.27 3 38 45.00 7.00 50.00 28.57 78.57 2 mean 44.02 36.89 sd 5.60 11.49 sd ratio 0.49 derek s. drew, connie w.k. kwong, patrick x.w. zou and l.y. shen 6 the australian journal of construction economics and building vol.2 no.2 70.00 75.00 80.00 85.00 90.00 95.00 100.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 6.00 6.50 7.00 7.50 fee $ m t o ta l s c o re figure 3: total score continuums for cases 36, 37 and 38 using differentiation the optimum fee becomes: y1 = 890.84 – 265.20x (5) x = 890.84/265.20 (6) x = 3.359 (7) with an optimum fee of $3.359 million, the optimum total score becomes: y = -1397.81 + (890.84 x 3.359) – (132.60 x 3.3592) (8) y = -1397.81 + 2992.33 – 1496.11 (9) y = 98.41 (10) given an optimum fee of $3.359 million and an optimum total score of 98.41, the corresponding technical score can be found by using equation 2 i.e. 98.41 = 50 (q / 50) + 50 (3.00 / 3.359) (11) 98.41 = q + 44.66 (12) q = 98.41 – 44.66 (13) q = 53.75 (14) the original technical proposal should be amended to achieve a raw score of 53.75. the amended technical proposal and a fee of $3.359 million should be submitted to the client. for cases 37 and 38 the solution is much simpler since the highest score occurs at the either end of the continuum. for case 37 the consultant should submit a fee of $6.5 million and adjust the technical proposal to obtain a raw score of 50.00. for case 38 the consultant should put in a fee of $4.00 million and adjust the technical proposal to obtain a raw score of 35.00. frequency of the three different outcomes and effect of the predetermined weightings the three cases illustrate each of the possible outcomes. the same approach was used to analyse all 51 cases. interestingly table 3 shows that in only 10 cases did the optimum total score fall in between absolute low fee and absolute high technical score (i.e. outcome 1), while in 20 cases it aligned with absolute low fee (i.e. outcome 2) and in 21 cases with absolute high technical score (i.e. outcome 3). the results show that the optimum fee – technical proposal combination will most likely occur at one end of the consultant’s continuum and there is an almost even chance of it occurring either at the low fee or high technical score end of the continuum. determining the optimal fee-technical proposal combination in two envelope fee bidding the australian journal of construction economics and building vol.2 no.2 7 the reason why there are only 10 cases that produce a result in between absolute low fee and absolute high technical score (i.e. outcome 1) is because of the variability differences between fees and technical score. this can be explained by referring back to the three representative cases. table 2 shows the respective fee and technical score standard deviations of 2.52 and 2.33 for case 36. this produces a standard deviation ratio of 1.08 meaning that fee and technical scores are almost equal in terms of variability (see drew et al. 2002a for adetailed treatment of this aspect). for case 37 it can be seen that technical scores vary more than fee score meaning that technical score is more dominant in the aggregation and for case 38 fee score varies more than technical score meaning that fees are more dominant in the aggregation. in other words, outcome 1 (i.e. in between) will be most likely to occur where the fee/technical score variability is more or less equal. however, where fee score varies more than technical score, outcome 2 (i.e. absolute low fee) is likely to occur and where technical score varies more than fee score, outcome 3 (i.e. absolute high technical score) is likely to occur. the even split of 15 low fee competitions to 15 high technical score competitions for 50/50 and corresponding 5 to 6 for 70/30 indicates that the change in weightings from 70/30 to 50/50 has very little effect on the proportion of competitions that require a low fee or high technical score. the effect of optimum bidding strategy on original bidding performance tables 4 and 5 show the actual and percentage differences between optimal total scores and original total scores obtained by the consultant for the 70/30 and 50/50 predetermined weightings. for 70/30 predetermined weightings table 5 shows that the consultant’s overall total score increased from 88.08 to 92.19 giving an average improvement of 4.84%. for 50/50 table 6 shows that the consultant’s overall score increased from 82.61 to 88.74 making an average improvement of 7.90%. tables 5 and 6 also show that the overall improvement range is from 30.80% to just 0.41%. interestingly there were eleven competitions whereby the original total score could be improved on by more than 10%. the average improvement of optimal total score on original total score over the 51 cases was 7.07%. table 3: effect of predetermined weightings on optimum bid strategy outcome weightings absolute low fee absolute high technical score in-between total 50 / 50 15 15 7 37 70 / 30 5 6 3 14 total 20 21 10 51 table 4: original total score/ optimum total score comparisons using 70/30 predetermined weightings competition no optimal score original score actual difference percentage change 1 88.00 86.77 1.23 1.41 2 88.20 80.27 7.93 9.88 3 88.36 87.09 1.27 1.46 4 85.83 78.56 7.27 9.25 5 88.24 81.92 6.32 7.71 43 95.00 85.07 9.93 11.67 44 94.00 87.33 6.67 7.64 45 95.00 93.65 1.35 1.45 46 93.64 88.67 4.96 5.60 47 95.45 94.47 0.98 1.04 48 95.92 95.53 0.39 0.41 49 95.00 92.01 2.99 3.25 50 93.99 92.75 1.24 1.34 51 94.00 88.98 5.03 5.65 average 92.19 88.08 4.11 4.84 derek s. drew, connie w.k. kwong, patrick x.w. zou and l.y. shen 8 the australian journal of construction economics and building vol.2 no.2 table 5: original total score/ optimum total score comparisons using 50/50 predetermined weightings competition no optimal score original score actual difference percentage change 6 85.63 80.03 5.60 7.00 7 78.69 73.39 5.30 7.22 8 80.25 71.49 8.76 12.26 9 80.00 68.54 11.46 16.72 10 80.19 76.44 3.75 4.90 11 84.68 77.56 7.11 9.17 12 84.87 81.63 3.24 3.97 13 90.83 86.76 4.07 4.70 14 91.55 84.74 6.81 8.04 15 86.84 66.39 20.45 30.80 16 99.74 90.58 9.16 10.12 17 87.50 83.50 4.00 4.80 18 95.65 92.14 3.51 3.81 19 86.96 83.50 3.46 4.15 20 86.96 85.26 1.70 1.99 21 88.64 87.82 0.82 0.94 22 87.56 86.30 1.27 1.47 23 86.96 81.66 5.29 6.48 24 86.96 83.51 3.44 4.12 25 86.96 85.11 1.85 2.17 26 89.47 86.04 3.43 3.99 27 86.96 81.87 5.09 6.21 28 90.80 89.28 1.52 1.71 29 86.96 67.30 19.66 29.21 30 88.46 86.66 1.81 2.08 31 88.89 82.23 6.66 8.10 32 92.94 81.97 10.97 13.38 33 86.96 73.24 13.71 18.72 34 87.50 85.57 1.93 2.25 35 91.82 88.92 2.89 3.25 36 98.41 96.44 1.97 2.05 37 91.54 87.12 4.42 5.07 38 88.89 75.27 13.62 18.09 39 88.89 78.18 10.71 13.70 40 96.43 94.98 1.45 1.53 41 96.43 85.97 10.46 12.17 42 95.00 89.20 5.80 6.50 average 88.74 82.61 6.13 7.90 conclusions drew et al. (2002b) proposed an optimal two envelope fee bid strategy model using hypothetical examples. 51 bidding attempts, supplied by a hong kong quantity surveying consultant, were used in this paper to test the model. it was found that consultants could improve there total score by an average of 7.07%. the difference in total score improvement varies from just 0.41% to 30.80%. there are eleven competitions where the consultant’s original total score could be improved by more than 10%. it was found that when fee scores vary more than technical scores, fees become the dominant variable. in such cases the optimum strategy is to aim for an absolute low fee—low scored technical proposal combination. where technical scores vary more than fees, the optimum strategy is to aim for an absolute high technical score—high fee combination. where the variability of fee determining the optimal fee-technical proposal combination in two envelope fee bidding the australian journal of construction economics and building vol.2 no.2 9 scores and technical scores are more or less equal, the optimum strategy is to aim somewhere in between these two extremes. the optimum strategy was to aim for an absolute low fee—low scored technical proposal on 21 occasions, absolute high scored technical proposal—high fee on 20 occasions and somewhere between these two extremes on the remaining ten occasions. a key reason for the optimum bidding strategy being at the end of the consultant’s total score continuum for the vast majority of competitions is the differences in fee and technical score variability. a limitation of this model is that the consultant’s total score continuum is represented by three points, the minimum number required to produce a quadratic equation. in addition this model is based on the consultant’s best estimates of the client’s technical score. suggestions for further research are to improve the model’s reliability by (1) including additional combinations of fees and technical scores and measure the effect on the optimum total score and (2) measure the consultant’s accuracy of the consultant’s estimate of the client’s technical score, determine the reasons for the inaccuracy and then attempt to improve the accuracy. the analysis could also be extended by comparing the competing consultant’s optimal fee/technical score with those of the successful consultants. references callahan, m.t., quackenbush, d.g. and rowings, j.e. (1992) construction project scheduling. mcgraw-hill, new york. carr, r. i. (1982) general bidding model, journal of the construction division. american society of civil engineers, 108, 639–650. connaughton, j. (1994) value by competition. construction industry research and information association, london. construction industry board (1996) selecting consultants for the team: balancing quality and price. construction industry board, thomas telford publishing, london. drew, d.s., li, h. and shen, l.y. (2000) feedback in competitive fee tendering. journal of construction procurement, 6 (2), 220–230. drew, d.s., ho, l.c.y. and skitmore, r.m. (2001) analysing a consultant’s competitiveness in two envelope fee tendering. construction management and economics, 19, 503–510. drew, d.s., tang, s.l.y. and lo, h.p. (2002a) developing a tendering strategy in two envelope fee tendering based on technical score fee variability. construction management and economics, 20, 67–81. drew, d.s., shen l.y. and zou, p.x.w. (2002b) developing an optimal bidding strategy in two envelope fee bidding. construction management and economics (accepted for publication). friedman, l. (1956) a competitive bidding strategy. operations research, 1 (4), 104– 112. gates, m. (1967) bidding strategies and probabilities. journal of the construction division, american society of civil engineers, 93, 75–107. herbsman, z.j., chen, w.t. and epstien, w.c. (1995) time is money: innovative contracting methods in highway construction. asce journal of construction engineering and management, 121 (3), pp.273–281. hong kong government (1993) handbook on selection, appointment and administration of architectural and associated consultants. architectural services department, hong kong government. hoxley, m. (1998) value for money? the impact of competitive fee tendering on construction professional service quality. the royal institution of chartered surveyors, london. shen, l.y., drew d.s. and zhang z.h. (1999) an optimal bid model for price-time biparameter construction contracts. asce journal of construction engineering and management, 125 (3), pp.204–209. ajceb_vol2_no2_28-11-02_part7 ajceb_vol2_no2_28-11-02_part8 ajceb_vol2_no2_28-11-02_part9 ajceb_vol2_no2_28-11-02_part10 ajceb_vol2_no2_28-11-02_part11 ajceb_vol2_no2_28-11-02_part12 ajceb_vol2_no2_28-11-02_part13 ajceb_vol2_no2_28-11-02_part14 ajceb_vol2_no2_28-11-02_part15 viewpoint a theory of construction management? gerard de valence, (university technology of sydney, australia) theory the links between construction management (cm), and for that matter construction economics (ce) and theory, are not strong (see de valence 2011). this may be one of the reasons why they have not gained complete acceptance as academic disciplines and are not seen as distinct branches of management and economics respectively. another reason may be that products and production (the focus of management and economic theories respectively) are not the same as projects and project management in general, and construction projects and cm in particular. so, are management theories of production product-based or process-based? the emphasis seems to be mainly on the range of methods and techniques available to improve the efficiency with which products are delivered, although many of these products are management decisions or plans. processes are secondary, because they are bundled with the production decision, and despite the appearance of diversity in the range of management theories, the approach taken typically treats the firm as a ‘black box’ that turns inputs into outputs using a range of capabilities (porter 1980). these then are a productbased set of theories. there are a number of economic concepts involved in production theory. the important ones include returns to scale, price elasticity of demand, elasticity of substitution between input factors, and technological change. technological change has the three aspects of rate of technical change, acceleration of technical change over time, and the rate of change of marginal products (of factors). these economic effects come from the underlying production process, or processes, that firms choose between when making production decisions. the economic theory of production focuses on the input demand and output supply functions under a technical constraint that describes a range of production processes available to a firm. in that case, could production theory be relevant to cm, because the delivery of a new building or construction project is clearly about producing something. a relationship between cm and the economic theory of production is plausible because both are concerned with technology choices. however, production theory is complex. the economic theory of production developed out of the classical concern with marginal productivities into a production function focused on substitutability of factors under a technological constraint. can cm be reinterpreted in these terms? would that improve industry performance? can a theory be founded on the characteristics of the industry? a new book from milan radosavljevic and john bennett takes on these questions. construction management strategies: a theory of construction management (2012) attempts to provide that foundation by proposing a theory of construction management which identifies the actions which help construction projects and companies to be efficient. it takes on the challenge of creating a precise, tightly defined model of construction management (cm), using five clearly differentiated methods for the delivery of building and construction projects. it is an ambitious and intellectually bold attempt to introduce new thinking into the field. de valence g (2012) ‘a theory of construction management?’, australasian journal of construction economics and building, 12 (3) 95-100 96 what they don’t do is draw on any of the many theories of management or production available. on one hand this seems to be an extreme case of exceptionalism that construction is different from all other industries school of thought. in their defence, on the other hand, radosavljevic and bennett argue that construction is different, because it is complex: projects have a number of interacting teams where outcomes in the future depend on the number of involved teams, the quality of relationships between interacting teams and their performance variability. in addition there is also unpredictable interference which may arise from numerous external factors (p. 77). a theory of cm the authors aim is to provide a “rigorous theory” based on a “tool kit of concepts and relationships” that will improve the efficiency and quality of “construction products”. the distinction between the conventional approach of cm, where contractors deliver projects, and the idea of companies producing a product is an important element in the thinking behind the theory proposed here. a related aim of the book is therefore to raise the viewpoint of cm from projects to the companies that manage projects. following that intention they “identifies and defines the concepts needed to understand cm”. radosavljevic and bennett somewhat self-consciously develop their theory without drawing on general management theories, rather wanting to base their ideas on construction industry projects and practice, which makes these definitions extremely important to their theory of cm and to our understanding of that theory. the concepts are construction products and processes, organizations, interactions and relationships, and learning and performance. the main factors are communication, feedback lops, and how well established relationships are (called internal) or not (called boundary relationships). the definition of cm is “taking responsibility for the performance of a construction organization”, measured by efficiency, which is “inversely related to the waste caused by complexity and external interference which prevent organizations achieving their agreed objectives”. these concepts and definitions are important in the exploration of the theory of cm which is the core of the book. through a series of propositions about cm, cm teams (task groups) and related efficiency conditions they build a detailed description of construction organizations, processes and management. this results in “the basic concepts used in the theory of cm in mathematical terms to provide effective measures of features of construction which have a crucial impact on cm decisions”. these are the six inherent difficulty indicators” (idis), which are the fundamental variables in the theory of cm and are used to determine the most appropriate cm strategy. these idis are: 1. established relationships – consequential relationships between interacting teams that existed before the project started; 2. relationship fluctuation – differences between times during the project with and without established relationships between teams; 3. relationship quality – time teams have spent previously working together; 4. relationship configuration – the pattern of team interactions over the project (this is a quite complex indicator because it can vary greatly over time, i.e. during a project); 5. performance variability – team performance may not be consistent between projects; 6. external interference – factors outside the control of the project managers. project size is measured in the number of team days, because “cm is concerned with the selection and organization of teams”. this results in a set of five size groups, from minor (100 team days) to normal (5,000 team days) to mega (25,000 team days). the theory then guides the choice of cm strategy for a project and the idis can check the effect of selecting a particular strategy for that project. here cm strategy is the approach used to deliver the project, and the five “major cm approaches currently used in practice” are: de valence g (2012) ‘a theory of construction management?’, australasian journal of construction economics and building, 12 (3) 95-100 97 1. traditional construction – includes the uk’s “developed traditional construction” or architect led version, and the us (specialist contractor design) and european (architect and engineers design) versions; 2. design build – a single point of responsibility for delivery of the project; 3. management approachesdesign and management teams working under the general direction of the client; 4. partnering – concentrates on establishing effective relationships rather than roles and responsibilities, and can be a strategic or ongoing relationship; 5. total construction service – industrialised building modelled on car manufacturers with an emphasis on reliability, quality and continuous improvement. those familiar with john bennett’s work over the last couple of decades will not be surprised that the japanese construction industry features in the discussion of total construction service. the big five contractors and the industrialised home builders are held up as prime examples of what total service is and how it is delivered. to illustrate the theory they use an interesting case study of a large, family-run german building company. they clearly believe this is the future of the industry, and their theory not surprisingly supports that view. each of the cm approaches is described and discussed in some detail, and a hypothetical project is analysed to quantify the six idis, and from these values get a forecast (prediction?) of the project’s likelihood of successful completion. these discussions demonstrate the application of the theory and the use of the idis. whether all this is a theory in the scientific sense of predictive value can be argued about. if data were gathered on a number of projects, and as the sample increases, the ability of the models six variables (the idis) to predict the “probability of project completion as planned” will become apparent. the theory of lean construction this use of a theory of cm as a series of interactions between teams under internal and external constraints is, as far as i know, a completely new and novel approach to cm, indeed, outside the lean construction (lc) movement there has been limited interest in a, or any, theory of production as applied to the construction industry. that said, lc can be also be thought of as a philosophy, as can be seen in many of the publications by the founder of lc, lauri koskela (his editorial in a 2008 special issue of building research and information on theories of the built environment, that did not include cm, is a good example). in the evolution of koskela’s ideas since the 1992 publication of “application of the new production philosophy to construction” production theory has developed into what is now the transformation-flow-value (tfv) theory (koskela 2000). this is a theory that draws on the management literature and history as its base, and these origins are covered in koskela (2000), where the roots of lc in production theory are explored. koskela and his colleagues argue that: what is needed is a production theory and related tools that fully integrate the transformation, flow and value concepts. as a first step toward such integration we can conceptualise production simultaneously from these three points of view … however, the ultimate goal should be to create a unified conception of production instead. (koskela et. al. 2002: 214). the tfv theory combines three points of view and is built on the insight that there are ‘three fundamental phenomena in production that should be managed simultaneously’. the ideas of lc started with site operations but have been progressively applied to the supply chain, design and cost management and project delivery. these elements are brought together in the lpds. the lpds is detailed by koskela et. al. (2002), and the lc tools and techniques by ballard et. al. (2002). de valence g (2012) ‘a theory of construction management?’, australasian journal of construction economics and building, 12 (3) 95-100 98 for the construction industry, the ideas and methods of lc in particular offer an alternative to management theories. there are three reasons, apart from the usefulness of conceptualising production processes in a discipline traditionally preoccupied with practical matters. first, lc was, prior to radosavljevic and bennett, the only theory of production to have been developed specifically for the construction industry, as discussed above in this paper. therefore it provides insights into the range of processes that are involved, based on theory, that lead to propositions that can be tested by application to building and construction projects. the many case studies that have been published at the lc conferences over the years are all tests of the theory and practice of lc. these tests now add to a substantial body of evidence for the effectiveness of lc in a wide range of settings. second, the lean project delivery system (lpds, ballard et. al. 2000) is an integrated approach to managing all the participants and stages of a project, from initiation to operation. other approaches, such as value management, design management and indeed project management, only cover certain stages or a specific stage in the progress from conception to operation of a building, facility or structure. the lpds is a framework starting from the project life-cycle, not adding bits on to achieve a comprehensive looking project plan. thirdly, drawing on lc theory and the lpds as an application of that theory, the way building and construction projects are managed can be reconceptualised using the tools and techniques of lean construction. from the new management methods that lc engenders (for example, the activity definition model and set based design), efficiency and productivity gains that have proved to be so elusive under traditional project management in the construction industry might be realised. these efficiency and productivity gains are also what radosavljevic and bennett are seeking. their book puts forward a coherent model of cm and contains an abundance of propositions (25) that are intended as guidance in decision making, that one assumes would also improve performance. it is notable that they present the japanese construction industry as the most advanced in terms of their theory (in providing a total service), and that lc is founded on the toyota production system and the development of lean production in japan. lean is all about management, as womack, jones and roos (1990) keep reminding us, and is the manufacturing philosophy of the age (see fujimoto 2000 and florida and kenney 2000 for the extent of this). while the underlying vision of lc is an industrialised process of delivering construction projects, what lc is focused on is managing processes to deliver better outcomes. clearly there is some relationship between these theories of cm and lc. application of theory radosavljevic and bennett say in their book that it is “a textbook for students and a checklist and guide of best practice for construction managers”, not a research report. how this can be true of a book that explicitly sets out to develop a theory of cm and “to propose a radical new basis for cm research” is deeply mysterious (these quotes from the preface on page xvii) as they go on to look at theory and its potential consequences for industry and research respectively. radosavljevic and discuss the implications of the theory of cm and the idis for clients, design companies and construction companies and strategies. there are separate sections for the different types of construction companies and specialist contractors. they describe: …the practical implications of the theory of construction management for customers and construction companies. the most complete application of the theory which is also the approach that delivers the highest levels of efficiency is a total construction service … other approaches should be regarded as significant steps towards the greater efficiency provided by a total construction service (p. 229). de valence g (2012) ‘a theory of construction management?’, australasian journal of construction economics and building, 12 (3) 95-100 99 this view might not find total industry agreement, many firms are quite comfortable with current industry practices. to argue that “it is understandable to want to use a familiar approach but it ... is worth considering alternatives” (p. 229) rather glosses over the many issues associated with custom and practice that are deeply embedded in the construction industry. the propositions that underpin the theory are also used here to provide “guidance” for decision-making. how practitioners might react to these ideas, and whether and how they are put to use are interesting questions. chapter eleven of their book should get some serious attention from cm researchers. here the authors start with the declaration that traditional project-based cm research be replaced by a “map of every possible construction project based on the reality of cm”. what this actually means is using their key concepts of the number of teams, the quality of their relationships, the complexity and agreed objectives of the project to organize data. this seems an important idea – that cm research has a system of organizing and managing data so comparisons can be made across projects on some other basis than size, type, function and so on. whether this could or should be done following radosavljevic and bennett’s proposals for research is an open question. however, there are two different aspects to this. firstly, their model of construction management sets up a clear research path that should be followed up, and they admit: research data is required which measures each of the key concepts in the theory. related to the map of every possible construction project, this data for many different projects provides the material needed to test the 25 propositions (p. 267). secondly, many of these construction management propositions can be developed into research projects in their own right, and indeed many already have a history of previous publications. for example, team organisation, interaction and communication are all topics in their own right. what radosavljevic and bennett have done, therefore, is to create a framework that a lot of existing cm research can be fitted into, and they have provided greater clarity of context and applicability than hitherto available, and they encourage further research into these topics. that in itself is important, because a few general organizing principles would be very useful in cm. a related point is the data set they envisage could be gathered and put through the model for the five different methods of project delivery. this is not one of the author’s suggestions, because they see these strategies as a choice companies make, rather than as one of the criteria for organizing data. however, using cm strategies with the key concepts seems a logical step to make, and would be a link between traditional cm and their theory. conclusion the upshot of all this is that the theory may turn out to be a significant step forward for cm research, rather than an end point. this is not a criticism, because this is exactly how the development of theories and advancement of knowledge proceeds. the authors have laid out a research agenda and invites testing and further research on their indicators. the claim is that this “would give the cm research community a robust basis for designing and undertaking future research”. there are good reasons for the authors’ confidence that this would advance cm, and equally good reasons to think that there will be a diversity of views on how this could or should be done. this is a debate that would move beyond the well-worn and rather sterile paths of relevance to industry, most appropriate methodology and project typologies. the example research questions radosavljevic and bennett pose are on the elements of the theory: teams, the quality of relationships, performance variability, external interference and agreed objectives, followed by suggestions on research into the idis. because the idi values de valence g (2012) ‘a theory of construction management?’, australasian journal of construction economics and building, 12 (3) 95-100 100 are presented as the basis of strategic decisions on the appropriate cm strategy it would seem that this is the most important area for development. given the state of contemporary cm research this is a discussion we need, although not everyone will be convinced by radosavljevic and bennett method and conclusions. i found a lot to like in their argument, while reserving judgment on whether it is a theory or a collection of hypotheses. many of the ideas are adventurous in a field where much of the literature is cautious, and in places it is ambitious in its view of how the industry could be rather than harking back to some idea of past glories. the overall framework it suggests for organizing cm research with its propositions and delivery strategies is an important and original contribution. there are many statements, declarations, descriptions and indeed propositions that will not get universal agreement but it makes many good points, it has a refreshingly different perspective on both past and future cm research, and it is open to discussion and debate. as any theory should be. references ballard, g., tommelein, i., koskela, l. and howell, g. (2002) ‘lean construction tools and techniques’, in best, r. and de valence, g. (eds.) building in value: design and construction, oxford, butterworth-heinemann, 227-255 de valence, g. (2011) ‘theory and construction economics’, in modern construction economics, de valence, g. (ed.). london, taylor and francis, 1-13 florida, r. and kenney, m. (2000) ‘transfer and replication of organizational capabilities: japanese transplant organisations in the us’, in dosi, g., nelson, r.r. and winter, s.g. (eds.) the nature and dynamics of organizational capabilities, oxford, oxford university press fujimoto, t. (2000) ‘evolution of manufacturing systems and ex post dynamic capabilities’, in dosi, g., nelson, r.r. and winter, s.g. (eds.) the nature and dynamics of organizational capabilities, oxford, oxford university press koskela, l. (1992) ‘application of the new production philosophy to construction’, technical report no. 72, center for integrated facilities engineering, dept. of civil engineering, stanford university, ca, september 1992 koskela, l. (2000) an exploration towards a production theory and its application to construction, espoo, vtt building technology. vtt publication 408 koskela, l., howell, g., ballard, g. and tommelein, i. (2002) ‘the foundations of lean construction’, in best, r. and de valence, g. (eds.) building in value: design and construction, oxford, butterworth-heinemann, 211-225 koskela, l. (2008) ‘is a theory of the built environment needed?’, building research and information, 36 (3), 211-15 porter, m.e., (1980) competitive strategy: techniques for analysing industries and competitors, new york, free press radosavljevic, m. and bennett, j. (2012) construction management strategies: a theory of construction management, oxford, wiley-blackwell, 2012 womack, j.p., jones, d.t. and roos, d. (1990) the machine that changed the world: based on the massachusetts institute of technology 5-million dollar 5-year study on the future of the automobile, rawson associates, toronto, collier macmillan viewpoint training artisans on-site edoghogho ogbeifun, (university of the witwatersrand, south africa) abstract the decline in apprenticeship in both the public and private sectors, the increasing use of subcontractors as well as the uncoordinated approach in the informal sector are contributing factors to the shortage of skilled artisans in the construction industry. artisans‟ training can be introduced and implemented through the adoption of progressive implementation of construction processes commencing work from areas with low skills requirements to areas of high skills demand. the success of this principle hinges on the collaborative effort of the key project stakeholders. the client should be willing to absorb extra cost and delays in the project; the design and contract documentation should facilitate on-site training, and consultants actively guide the contractor and the construction processes to achieve training objectives. the exploratory research method was adopted in this study and research revealed that this principle was used in a project in the uk and in the development of infrastructure for the tourism industry of south africa .it is recommended that the principle be adapted by the public sector for the development of small size infrastructures that can be repeated in many places. this will boost the quality and quantity of artisans, enhance employability, reduce rural urban migration and alleviate poverty. keywords: skilled artisans, on-site training, progressive construction processes, project stakeholders, contract documentation introduction the demands of training artisans on-site in terms of cost, commitment, low initial return on investment and piracy are some of the factors restraining many construction firms from active participation. that notwithstanding, the medium size firms and the informal sector are still engaging in some form of training. the informal sector adopts fragmented training depending on the relationship of the trainee to the independent foremen, their regular team member or the subcontractor. the quality of training is compromised especially if the trainee is outside the close relations of the trainer (stretton, 1981, abdul-aziz, 2001). though the public and the formal sector are not too active in training artisans and the informal sector‟s approach is not coordinated, the approach being experimented by the medium size firms in south africathe progressive implementation of construction processesholds potential solution to the dearth of skilled artisans in the construction industry. the principles involves the active participation of the design team, client and the contractor commencing construction work from areas that require low skill demand and progressing to areas of higher skills demand. the focus of this paper is the propagation of the use of progressive implementation of the construction process in any particular project, commencing construction works from the simple to more complex areas of the project as an effective tool for skill development. the fund for training can be integrated into the contract value and the supervising authorities or consultant australasian journal of construction economics and building ogbeifun, e (2011) ‘training artisans on-site’, australasian journal of construction economics and building, 11 (3) 82-91 83 could double as facilitators, not merely performing their statutory duties. the principle is being used in the development of infrastructures in the tourism industry of south africa. the trend in the construction industry the increase in the use of subcontractor (specialist or labour only contractors) in the construction industry worldwide is posing challenges to the stability of employment and skill development in the industry. during the tripartite meeting of ilo in geneva 2001, entitled,‟ the construction industry in the twenty-first century: its image, employment prospects and skill requirements‟, the use of labour subcontracting and its effects on the status of construction workers featured prominently. evidence from china showed that the proportion of employees in the chinese construction industry declined drastically, from 72 percent in 1980 to 35 percent in 1999, (lu and fox, 2001). interviews conducted among 3,300 construction workers in sri lanka revealed that 82 percent of the skilled workforce and 93 percent of the unskilled workforce are employed on temporary basis, either as casual workers or through labour contractors, (jayawardane and gunawardena, 1998). the picture is not different in the philippines where 85 percent of the estimated 1.35 million wage and salaried workers in the construction industries as at january 2000 were temporary workers or project-based employees (yuson, 2001). two separate reports from india shows that 73 percent of the construction workers were recruited and controlled indirectly and on temporary basis by mistris or jamadars (vaid, 1999). similarly, in bangalore city, the majority of workers in the construction industries are hired as „piece-rateworkers‟ (i.e. casual), with immigrants accounting for 30-40 percent (prayag, 2005). the feature of immigrant skilled workers is also evident in the experience of malaysia. the increase in the workforce engaged through subcontractors rose slightly from 71 percent in 1983 to 74 percent in 1998 (abdul-aziz, 2001); however, the migrant skilled workers rose from 40 percent in 1983 to 80 percent in 1992, (abdul-aziz, 2001). employment in the formal sector of the construction industry in kenya can be said to have stagnated at best, or declined. conversely, there is increase in the informal sector in firms that employ from five to ten employees, (wells, 1999; njeri, 2001). the formal sector in south africa employed over 400,000 in 1993, dropping to 254,000 in 1999. in the same period, employment in the informal sector rose to 243,000 in 1999 (huyssteen, 2001). the indications are clear that for a long time to come, the informal sector will continue to play a more active role in the construction industry. though the terms and conditions of their operation may not encourage active participation in qualitative training of artisans on-site, yet if they adopt the principles of progressive implementation of construction process it will be possible to both improve the quality of the semi-skilled as well as train new artisans. training of artisans on-site apprenticeship is one of the oldest methods of training artisans in construction skills. in earlier centuries, the practice included a five to eight years period of learning under a „master craftsman‟ through an indenture (agreement). the industrial revolution and the economic burden on poor families reduced the popularity of this long period of apprenticeship (schwartz, 1999). the common practice in the twenty-first century, especially, in the informal sector is the abridged form of „on-site‟ training of artisans. the mode of operation, duration and intensity varies from place to place. the practice in the philippines in the early 1980s can be summarised as follows: there is no formal apprenticeship scheme in place, the independent foremen and pakiao (subcontractor) conducts skill training for employees in their gangs; no definite duration, the trainees are often australasian journal of construction economics and building ogbeifun, e (2011) ‘training artisans on-site’, australasian journal of construction economics and building, 11 (3) 82-91 84 relatives of the trainers, therefore no fee is charged; the principle adopted is that of „learning by doing‟ with piecemeal briefings from the trainer, the trainee learns as much as the trainer knows and is willing to pass on to the trainee which is limited by the situations encountered in the project site(s) during the training period; within the period of training, the trainee remains with one master craftsman; three grades of artisans training are generally recognised but there is no definite structure for determining the boundaries of each grade; the foremen determine when a trainee is competent enough to graduate from any particular grade (stretton, 1981). the large firms are no longer making meaningful contributions to skills development in the industry, instead they are accused of pirating the artisans trained by the independent foremen (stretton, 1998). however, a useful departure from the extremes of the independent foremen and the large firms is the role of the medium size construction companies. “they maintain a small permanent workforce consisting of skilled and semi-skilled artisans and other cadre of technical staff continually being developed” (stretton, 1998:331). in the 1980s,the practice of apprenticeship in the south africa construction industry, was hinged on this principle “leerling bouwplaatz”, i.e.” putting apprentice to work on a “real” building project so that they could benefit from building something that would last and yet still undergo on-thejob skills training” (bifsa, 1986). the process was truncated in the 1990s with the exodus of many construction firms. the renewed efforts of the master builders association of the western cape (mbawc) province of south africa towards apprenticeship and general skills development involves structured apprenticeship training and skills development for those with some knowledge of the built environment trades; providing scholarships for engineering and construction related studies at both diploma and degree level and providing practical leadership training through mentorship programme (lee, 2008). the government of south africa, responding to the decline in skills development in both the formal and informal sector, promulgated act, no.97 in 1998 with the aims to develop and improve the skills of “south african workforce”. in april 2000, the construction education and training authority (ceta) was established to influence the course of training and skills development in the construction industry (ceta, 2008). a unique component of the role of ceta to the informal sector is the “recognition of prior learning” (rpl) process. the process recognises artisans who acquired skills outside the traditional learning context, they are enrolled into a form of induction course to orient them and be certified in the appropriate grades, thus enabling them to function adequately in the construction industry (fitchett, 2009). the principle in practice in namibia for training road builders and artisans has some unique features in terms of approach and funding; as summarised below:  the training provider uses the “production method”‟ where the accredited instructors provide on-the-job training in a way that combines the content of unit standard with the work necessary to meet contractual specifications  the road authority contract documents make provision for an amount, being part of the contract value, to be made available, via the contractors‟ monthly payment certificates, for the training of road builders employed by the contractor (keber and thomas, 2007). generally, in both developed and developing countries, the large companies have off-loaded their commitment to skill development to an uncoordinated sector of the subcontractors. it is imperative therefore to harness the potential in this sector along with the medium size construction outfits for the development of skilled artisans. australasian journal of construction economics and building ogbeifun, e (2011) ‘training artisans on-site’, australasian journal of construction economics and building, 11 (3) 82-91 85 timbrel vaulting due to the complexities associated with vault construction using the “timbrel” principle, such projects do not seem to be appropriate experimental projects for training artisans on-site, since it requires a „leap of faith‟ for the uninitiated (mallion, 2008). records shows that during the construction of st john the divine cathedral in new york city, that span 132 feet (40m), the workers progressed at the rate of 18” each day, standing on the previous day‟s work with nothing in front of them but 150‟ drop, completing the work without incident in 15 weeks (herald,1909). however, the uniqueness of the principle, simplicity in procedure, flexibility of substituting local material and the ease of comprehending the art are helping to revive this ancient art (gould, 2008). mastering the art of vault construction, like other masonry arches, supports the assertions of the adobe artisans of egypt that: “if you understand the principles of the arch, you can build anything” (viteri and redabaugh, 2002). vault construction is said to be a mediterranean system by origin, developed and perfected in the catalonia region of spain where records can be traced back to the 15th century, exported to the usa in the 1880s by rafael guastavino (1842-1908), and was in use until 1940‟s (mallion, 2008). the timbrel vault is constructed with thin (light weight) material with limited use of formwork (gould, 2008; fitchett, 2009). the first layer is very important; it is set to the required curvature then the construction progresses simultaneously from all directions/corners in order to maintain equilibrium of forces (fitchett, 2009). the first layer can be laid in either stretcher bond or herringbone pattern with strong adhesive (plaster of paris) and subsequent layers laid to intersect the joints in the previous layers, preferable with cement or quicklime mortar (gould, 2008; fitchett, 2009). for the construction of the pines calyx conference centre and community building in dover kent, the team adopted the progressive principle of construction. the project consisted of two domes spanning 12m each, with a maximum rise of 1320mm. with the assistance of michael ramage from mit, a mini dome, 3m span was built in may 2005 as sample and training avenue for the contractor‟s team .the first full size dome (12m span) was constructed under the supervision of prof. john ochsendorf and three spanish masons. then the technical staff and artisans from ecolibrium solutions ltd, under the supervision of sarah pennell, built the second dome successfully (mallion, 2008). the procedure outlined above help to buttress the proposition of this paper that the skills and confidence of artisan (technical staff) can be improved upon/developed through progressive implementation of construction process starting from simple to complex areas. case study 1: the mapungubwe interpretation centre the mapungubwe national park, under the south african national park (sanpark), occupies the confluence of the three adjoining countries south africa, botswana and zimbabwe. the mandate of the project team was to develop an interpretation centre for the heritage site which should also benefit the host community. a collaboration between the school of civil and environmental engineering, university of the witwatersrand, johannesburg, south africa; massachusetts institute of technology, boston, usa, and the project team lead to the development of local material, „stabilized earth tile‟. a prototype of the vault was constructed under laboratory conditions, tested for suitability of material and the vault performed satisfactorily. training the workforce the „skilled‟, semi-skilled and un-skilled workforce was recruited from the host community and up to a distance of 150km from the project site (prinsloo, 2009). the training process started from the basics: australasian journal of construction economics and building ogbeifun, e (2011) ‘training artisans on-site’, australasian journal of construction economics and building, 11 (3) 82-91 86  masons: were taught about mixing and placing mortar, preventing honey-comb in mortar beds, which lead to cracks and weakness in joints;  carpenters: were taken through the importance of correct measurements, cutting wood pieces to the correct size and shape, be they straight or curved patterns; the importance and use of hollow or solid form work, setting out correct geometrical shapes and adequate supports (formwork/scaffolds). the training process was slow and tedious largely because of the low literacy level of the trainees and the attitudes of the local artisans who felt that the training was rudimentary which seemed to undermined their experiences coupled with language barriers that inhibited effective communication (bellamy, 2009). figure 1 the learning and failure stage construction process realising the complexities of timbrel vaulting and the skill level of the artisan, the project team secured the understanding of the client to start with the construction of the office units. the aims were to test the level of assimilation of training by the artisans and if the soffit of the finished product were not neat enough they could be remedied through plastering. the repeated failures experienced in this section made positive impact, reducing the pride of the artisan and there after they took every instruction seriously (prinsloo, 2009; bellamy, 2009). those who were more experienced built the first layer bonded with plaster of paris while the less experienced were given the task of building the subsequent layers with cement mortar (fitchett, 2009). the progress made in the experimentation on the office area encouraged the project team to commence work on the main project – the interpretation centre. typical of timbrel vaulting, the solid formworks were used only at the entrance arches, strips of plywood sprung from each corner as profiles to guide the artisans. the construction progressed simultaneously from all directions in order to maintain equilibrium of forces. contrary to the “150‟” void in front of the masons who worked on the vault of st john the divine cathedral, the common practice now is to erect platforms or scaffolds in the void in order to reduce the psychological stress on the workers as well as allow construction to progress from below and above the vault. the artisans progressed faster with confidence making fewer mistakes but still under strict supervision, and the seemingly complex project was completed successfully. australasian journal of construction economics and building ogbeifun, e (2011) ‘training artisans on-site’, australasian journal of construction economics and building, 11 (3) 82-91 87 figure 2 corrections taken, construction progressed in different sections figure 3 showing part of the completed mapungubwe interpretation centre australasian journal of construction economics and building ogbeifun, e (2011) ‘training artisans on-site’, australasian journal of construction economics and building, 11 (3) 82-91 88 case study 2: developing private parks/game reserves under the south african national park (sanpark) many of the abandoned private farms/game reserve in south africa are being operated on the platform of public private partnership with private tourist organisations like „conservation corporation africa and wilderness safari‟ (silvio, 2009). the developers are also to adopt the government‟s policy of benefiting the host community and skill development for employability. the unique approach of „conservation corporation africa‟ and their project architect „adventure architecture‟ is to adopt a design philosophy that promotes:  conservation of nature in the settings of each project.  the use of typical african(local) features or material in the construction  improving existing skills or and transfer of skills and  benefiting the host community. in each project, a search is made within the host community to identify persons knowledgeable in any related trades needed for the execution of the proposed project. they are given orientation and guided in the application of the skills in different ways to execute the project at hand. the unskilled labourers discovered with potentials to learn a trade are encouraged and paired with artisans in the particular trade of interest, in what may look like an informal apprenticeship. in the event that no artisan is found within the community knowledgeable in a particular trade, a type of „master craftsmen‟ is brought into the project to train some local prospects on the site (silvio, 2009). this practice is consistent with fathy‟s approach to training to mitigate the cost and long duration of apprenticeship, where master-craftsmen were brought in from elsewhere in egypt on a „contract‟ system for short duration. by not staying long-term they would pass on their skills quickly (fathy, 1976). . figure 4 construction from dream the construction process usually progress from simple areas requiring minimal skill level to complex (finishing) areas that requires high skills levels. the artisans are guided continuously in order to improve their skills gradually as the project progress through the different stages. at the end of each project the artisans with previous knowledge in the trade have improved their skills and can adapt it under different situations, while others have learned enough in their respective trades to make them employable in future. initially investors were apprehensive of this approach; however, their prejudices gradually disappear as the project evolved from stage to stage (silvio, 2009). the finished product has continued to be a tourist delight as it enables visitors to identify with the blend of natural setting in contemporary facilities. some of the projects have won international awards. australasian journal of construction economics and building ogbeifun, e (2011) ‘training artisans on-site’, australasian journal of construction economics and building, 11 (3) 82-91 89 figure 5 the finished product findings the two projects investigated adopted the principle of progressive implementation of construction processes as a means of training artisans on-site, using different approaches but achieved similar results. some of the key findings include:  the skills of the artisans improved progressively as the construction progressed from simple to complex stages;  successful completion of prototype created the necessary encouragement in the workforce, reinforcing their confidence and ability to apply their knowledge appropriately in the later more complex stages of the project;  though the new trainees may not be proficient in their respective trades, yet they possess skill for improved employment;  the success recorded in these training experiments were possible because of the active participation of the project personnelclient, consultants and contractors;  in the mapungubwe project, the collaboration with the academia gave vent to the application of relevant research findings. the above findings are consistent with observations in literature. the technical team responsible for the development of the pines calyx conference centre and community building in dover kent learnt the art of “dome” construction first by observation and then by participation along with experts before they executed the actual construction (gould, 2008; mallion, 2008). gann and senker (1998) advocate two types of partnering in the built environment industry that could foster skills development. firstly, “firms... developing long-term partnering with clients for successive projects or maintenance services” (gann and senker, 1998: 572), this will provide continuity of work and learning opportunities for the trainees. secondly, partnering between organisations to “create a climate of cooperation and problem-solving...identifying skill needs which require specific training...” (gann and senker, 1998: 572). the skills development act (sda) enacted by south africa government requires that employers should “provide formal structure education and training to their workers” (haupt and chileshe, 2008). if these objectives australasian journal of construction economics and building ogbeifun, e (2011) ‘training artisans on-site’, australasian journal of construction economics and building, 11 (3) 82-91 90 are to be achieved, the government of south africa need to complement the act with adequate patronage of the construction industry. conclusion the concept of executing construction projects from simple to complex areas as a tool for training artisans on-site in the construction industry provides a potential solution to the dearth of skilled artisan in the industry. the case studies sighted in this paper clearly demonstrates that the approach is viable. this principle has been tested in few isolated projects; it can be used to execute the development of small public infrastructures like classroom buildings, primary health facilities, police stations, sanitary systems, especially in the rural areas. the designs can be repeated many times with minor alterations to reflect the specific locations (fathy, 1976). the benefits include contractor‟s development, skills acquisition, retaining large sum of project cost within the host community, poverty alleviation and mitigating rural-urban drift. recommendations realising the concern of every stake holder in the construction industry towards skills development, further research should be conducted on developing framework for identifying medium size organisation (consulting/construction) with capacity for training to be harnessed and used for coordinated training. such framework could provide incentives such as preferential procurement policy to ensure continuity of business and active involvement in continuous training of artisans, directly or through mentoring of operatives in the informal sector. references abdulaziz, a.r. (2001) „construction in the eye of the workforce‟, in the construction industry in the twenty-first century: its image, employment prospects and skills requirements. (ed) international labour office, 2001, geneva, p. 167 bifsa (1986) apprentice training in south africa, construction dimensions. december 1986, available at http://www.awci.org/cd/pdfs/8612_b.pdfaccessed08-05-09 construction education and training authority (2008) available at www.ceta.org.za –accessed 07-05-09 fathy, a. (1976) architecture for the poor, university of chicago press fitchett, a. (2009) skills development and employment creation through small public buildings in south africa, school of civil and environmental engineering, university of the witwatersrand, johannesburg, unpublished phd thesis gann, d. and senker, p. (1998) „construction skills training for the next millennium‟, construction management and economics, 16, 569-580 gould, a. and clark. (2008) pines calyx timbrel vault construction. available at http://www.building.co.uk/journals/builder_group/building/2007_issue_46/attatchments/timbrel %20intro%200805new.pdfaccessed 10-05-09 haupt, t. and chileshe, n. (2008) antecedents to training and training practices: key findings from the south africa construction industry, online document, available at http://www.bear2008.org/post/7.pdf. accessed 15-07-09 huyssteen, v. s. (2001) ‘evidence of an increase in the use of casual and subcontracted labour‟, in the construction industry in the twenty-first century: its image, employment prospects and skills requirements. (ed) international labour office, 2001, geneva, p. 167 jayawadane, a.k.w. and gunawardena, n. d. (1998) „construction workers in developing countries: a case study of sri lanka‟. construction management and economics, 16, 521-530 http://www.awci.org/cd/pdfs/8612_b.pdf-%20accessed-%2008-05-09 http://www.ceta.org.za/ http://www.building.co.uk/journals/builder_group/building/2007_issue_46/attatchments/timbrel%20intro%200805new.pdfhttp://www.building.co.uk/journals/builder_group/building/2007_issue_46/attatchments/timbrel%20intro%200805new.pdfhttp://www.bear2008.org/post/7.pdf.%20accessed%2015-07-09 australasian journal of construction economics and building ogbeifun, e (2011) ‘training artisans on-site’, australasian journal of construction economics and building, 11 (3) 82-91 91 kaber, j and thomas, e. (2007) „the training and accreditation of road builders and artisans in namibia‟ in proceedings of the 26 th southern african transport conference (satc 2007), pretoria lee, a. (2008) construction industry learnership has not achieved the desired foundations for skills development, available at http://us-cdn.cremermedia.co.za/assets/articles/attatchments/a2228-ceta.pdf accessed 16-07-09 lu, y. and fox, p. w. (2001) „evidence of an increase in the use of casual and subcontracted labour‟, in the construction industry in the twenty-first century: its image, employment prospects and skills requirements, (ed) international labour office, 2001, geneva, p. 167 mallion, p. (2008) vaulting over the building, green building magazine, winta 08, 50-53 new york herald, 19 sept. 1809 njeri w.i. (2001) „evidence of an increase in the use of casual and subcontracted labour‟, in the construction industry in the twenty-first century: its image, employment prospects and skills requirements, (ed) international labour office, 2001, geneva, p. 167 prayang, a. (2005) a protective net, the hindu business line, available at http://www.thehindubusinessline.com/life/2005/05/13113/stories/2005051300160400.htm 15-0709 stretton, a. w. (1981) the building industry and urbanisation in third world countries: a philippine case study, the university of chicago schwartz, r. (1999), the working class in revolutionary france. men’s occupation. available at http://www.mtholyoke.edu/courses/rschwart/hist255/la/menwork.htmlaccessed 15-05-09 vaid, k. n. (1999) evidence of an increase in the use of casual and subcontracted labour, in the construction industry in the twenty-first century: its image, employment prospects and skills requirement,. (ed) international labour office, 2001, geneva, p. 167 viteri, m. and redabaugh, m. s. (2002) beating the learning curvearches are in, international masonry institute, bethesda, md. available at http://www.masonrymagazine.com –accessed 2206-09 wells, j. (2001) „construction and capital formation in less developed economies: unravelling the informal sector in an african city‟, construction management and economics. 19, 267-274 yuso, a. s. (2001) the philippine construction industry in the 21 st century: is there a globalisation of local construction industry? report for the ilo (sectoral activities department) and for the ifbww. international labour office, geneva interviews bellamy, james. the contractor/project manager, mapungubwe interpretation centre, interviewed on 22-06-09 prinsloo, franz. the project architect, mapungubwe interpretation centre, interviewed on 2305-09 silvio rech. principal partner, adventure architecture and interiors, project architect for conservation corporation africa, interviewed on 11-08-09 http://us-cdn.cremermedia.co.za/assets/articles/attatchments/a2228-ceta.pdf http://www.thehindubusinessline.com/life/2005/05/13113/stories/2005051300160400.htm%2015-07-09 http://www.thehindubusinessline.com/life/2005/05/13113/stories/2005051300160400.htm%2015-07-09 http://www.mtholyoke.edu/courses/rschwart/hist255/la/menwork.htmlhttp://www.masonrymagazine.com/ 502 bad gateway 502 bad gateway nginx 2 viewpoint can project alliance contracts deliver australia’s national broadband network? marianne rose 1 , (the university of melbourne / dla piper, australia) abstract the australian government has commenced an 8-year project to build and operate a new super-fast broadband network. this $43 billion dollar project aims to connect 90% of australians to a 100 mbps broadband service. given the uncertainties associated with the project, this paper argues that an alliance contract structure is a suitable model for the delivery of the national broadband network. introduction: understanding the government’s aspirations to build a fast-paced digital economy a change is taking place in the australian broadband landscape. the australian government has established the company nbn co limited (nbn co) to build and operate a new superfast broadband network. this $43 billion dollar, 8-year project aims to connect 90% of australian homes, schools and businesses to a 100 mbps broadband service (prime minister et al. 2009a, http://www.minister.dbcde.gov.au/media/media_releases/2009/022). however, in the context of a mass infrastructure project can the national broadband network (‘nbn’) be the foundation stone of the digital economy if it is without a contractual model to bind its framework together? this article considers if the alliance contract model can provide a legal framework to enable the deployment and delivery of an optical fibre broadband network to create the highway to australia’s fast-paced digital future. the nbn project is accumulating debt, while demanding resources to ensure the delivery of a ubiquitous optical fibre network. if it succeeds, it will be the largest infrastructure project in australian history; and yet it has no transparent contractual model to allocate risks and responsibilities in the delivery and deployment of the project. in order for the nbn roll-out to succeed, a clear, publicly available contractual framework must be established; one that defines the contractual model to be used, and appropriately allocates risk in order to manage a project of this magnitude. at the time of writing the government has not publicly articulated the contractual model or risk allocation framework it intends to use. instead, the government maintains a view that it will learn as each stage is rolled out (dbcde 2010, http://www.nbnco.com.au/assets/mediareleases/2010/secon d -release-08-jul-10.pdf). this paper submits that the alliance contract model could aid this ambitious project in an area where little to no transparent discussion exists. during the course of this discussion, the historical context, deliverables and contractual structure will be examined to suggest why the alliance contract model would be the most appropriate for the roll-out of the broadband network. it will be contended that the flexible management structure and ability to adapt to changes in scope of works of an alliance structure, which promotes no fixed cost open pricing and based on project costs and overheads, and internally dispute resolution without referral to a court, usually seen in construction projects makes alliances a viable model. http://www.minister.dbcde.gov.au/media/media_releases/2009/022 http://www.nbnco.com.au/assets/media-releases/2010/secon%20d%20-release-08-jul-10.pdf http://www.nbnco.com.au/assets/media-releases/2010/secon%20d%20-release-08-jul-10.pdf australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 69 historical development: foundations of the nbn the nbn falls under the auspices of the department of broadband, communication and the digital economy (‘dbcde’), bentley (2009, p. 15) cites the dbcde as a department striving to create: a world-class australian communications and information technology sector [that] will build on the creativity of our people and the opportunities provided by new technologies to enrich the economic and social wellbeing of all australians. the purpose of the nbn is to provide a technological platform whereby the future of australia’s smart infrastructure is shaped by e-health systems, e-commerce, and a ‘digital education revolution’. the complexity in delivering the fibre optic broadband infrastructure for $43billion in 8 years is primarily the size of the project, and simply whether it can be delivered on time and within budget. the historical context of the nbn and the current regime in 1997, the australian telecommunications industry was deregulated through the passage of the telecommunications act 1997 (cth), and part xib and xic of the trade practices act 1974 (cth). these acts removed competition restrictions placed on carriage services providers and encouraged the supply and promotion of innovative and responsive telecommunications services to consumers. with the public listing of telstra in 1997, the australian telecommunications landscape became synonymous with the monopoly wholesaler. it is telstra that owns the ubiquitous copper network that presently services australians with telephony and internet. as part of the 2007 election campaign the then opposition leader, kevin rudd included in his political platform a proposal for a nbn. this proposal competed with the incumbent liberal government’s $958 million australia connected package. under this package, the howard government awarded the optus and elders joint venture, opel networks pty ltd (‘opel’) a contract to connect 1 million rural and remote premises with metropolitan comparable broadband services (optus 2007a, http://www.optus.com.au/aboutoptus/about+optus/ media+centre/media+releases/2007/elders+and+optus+to+build+rural+and+regional+broa dband+network ). following the australian labor party’s win in the 2007 federal election, this contract was promptly withdrawn when the new government came to power. immediately, the new government commenced a request for proposals (‘rfp’) to build a comprehensive broadband network. a number of candidates submitted proposals, including telstra, whose submission was rejected because it did not comply with the terms. however, this process was abandoned in april 2009 on the advice of the independent panel of experts because no suitable candidates offered value for money. despite the rfp’s termination, the government proceeded to fast-track negotiations with the tasmanian government for the construction of the nbn in tasmania. this was because of the independent panel of experts advice that tasmanians were faced with significant disadvantages when accessing high-speed broadband (prime minister et al. 2009b http://www.minister.dbcde.gov.au/media/media _ releases/2009/023, prime minister et al. 2009c, error! hyperlink reference not valid.). interestingly, the decision to terminate the rfp process coincided with the deterioration of the global economy and one can question whether the rfp participants’ could have succeeded under those conditions. the termination of the tender led to the creation of nbn co. with the establishment of nbn co, the broadband network would be built on behalf of the government and operated as a wholesale-only fibre network (liew 2009, p. 19). this network would be designed to service 90% of the population with fibre-to-the-premises (‘fttp’) coverage; enabling australians to enter the fast-paced digital future. http://www.optus.com.au/aboutoptus/about+optus/%20media+centre/media+releases/2007/elders+and+optus+to+build+rural+and+regional+broadband+network http://www.optus.com.au/aboutoptus/about+optus/%20media+centre/media+releases/2007/elders+and+optus+to+build+rural+and+regional+broadband+network http://www.optus.com.au/aboutoptus/about+optus/%20media+centre/media+releases/2007/elders+and+optus+to+build+rural+and+regional+broadband+network http://www.minister.dbcde.gov.au/media/media%20_%20releases/2009/023 http://www.minister.dbcde.gov.au/media/media%20_%20releases/2009/023 australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 70 with the government’s announcement that nbn would undertake the project, it commissioned mckinsey-kpmg to examine the projects viability through an ‘implementation study’ (dbcde, 2010). at the same time, the liberal party dominated senate select committee on the national broadband network that was established to inquire into the project. the short timeframe in which the project and nbn co were brought to life, and the vast scope of work demanded under the nbn project, has seen developments occur on an apparently ad hoc basis and with a lack of operational planning (senate select committee on the national broadband network 2010d, p.9). similarly, the contractual framework was cloaked in confidentiality and remains largely unaccountable or referenced by either the implementation study (dbcde, 2010) or the senate select committee (select committee on the national broadband network 2010d). despite the dynamic history surrounding the project, the current regime may suggest some preferences for a contract model that is flexible in relation to change and costing and is non-adversarial. telstra’s monopoly and the financial heads of agreement with the government under the current regulatory regime, telstra provides the majority of broadband service by means of telephone exchanges and copper phone lines. it is the antiquated copper line system that the optical fibre will replace as the means of delivering high-speed broadband to consumers. with telstra having monopoly control of the wholesale infrastructure and therefore power over the quality, maintenance and provision of the majority of the wholesale services, this structure has led to a lack of competition and underinvestment. the common example provided is that this under-pricing of access created a disincentive for optus to invest in its own hybrid fibre-coaxial (‘hfc’) network (liew 2009, pp. 19-20). instead, optus chose to utilise the telstra copper network for less than the price of upgrading its own network. the limited competition undermined the incentive for having australia-wide market penetration and exacerbated the continuance of an expensive and relatively slow broadband network. telstra owns significant assets and infrastructure, comprising of ducts, pits, poles and backhaul. in order to reduce costs for the broadband build, it was in the government’s interests to negotiate with telstra to gain access to this infrastructure. although, the government indicated it was willing to ‘go it alone’ (dbcde 2010, pp. 397-398) if it could not reach a commercially and operationally viable agreement, on 20 june 2010 the rudd government surprisingly announced that it had entered into a financial heads of agreement with telstra worth $11 billion. this agreement preceded the sudden announcement 4 days later that julia gillard was the new labor leader and prime minister of australia. how this chain of events will affect the nbn project continues to unfold. however, prior to the deal being negotiated, the predominate suggestion was that if telstra cooperated with nbn co then $8 billion in project costs could be saved. this amount was broken down into a saving of $5 billion for the build to use the ducts and dark fibre, plus incentive payments of $2.5 billion to migrate customers to the nbn network (select committee on the national broadband network 2010e). interestingly, this assessment appears to be based upon a presumption about the quality of the copper network despite the government’s comments that information about the quality of the network is still subject to discussions under a commercial agreement (select committee on the national broadband network 2010d, pp.47, 74-75). the heads of agreement suggests that telstra will receive $9 billion in compensation for cooperating with the nbn development (lynch 2010, p. 30). the compensation provides for telstra to decommission its network and to migrate its customer traffic onto the nbn. it appears that just over half of this figure will account for the reuse of existing fit-for-use infrastructure, such as backhaul fibre, pits, ducts and conduits the ceo of nbn co, mr mike quigley (nbn co, 2010b,error! hyperlink reference not valid. australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 71 http://www.nbnco.com.au/assets/media-releases/2010/nbnco-media-release-telstra-headsof-agreement-20-jun-10.pdf) emphasised that: while there is a considerable amount of negotiation and contractual work to go, we believe this agreement is a significant step forward to creating a more competitive telecommunications industry. this subtle acknowledgement that the contractual framework remains unfinished was rapidly followed up with the announcement on 24 june 2010 that 21 companies had been named to tender for the design and construction of the project (wilton 2010, p.3779). the implementation study and the senate select committee’s review of the viability and risks of the nbn project the government commissioned implementation study (dbcde, 2010) by mckinsey-kpmg was released on 6 may 2010, a little over a year since a government media release announced the plans for the nbn. the implementation study was disseminated only one week prior to the planned release of the senate select committee’s report into the feasibility of the project. instead, the senate select committee was compelled to delay its report until 17 june 2010, (select committee on the national broadband network 2010d). both these reports were designed to analyse the risks and benefits of the nbn project. the implementation study’s ‘conservative’ analysis estimates that the project could be rolled out over 8 years with a projected cost of $42.8 billion; this figure is reduced from the government’s initial estimate of $43 billion. it goes on to recommend that nbn co could provide fttp coverage to 93% of premises while the 7% of premises that fall outside the fibre footprint would be services by fixed-wireless and satellite services, using at least two ka-band satellites. suggesting an additional 3% of premises could access the optical fibre network within the projects estimated cost (dbcde, 2010). in contrast, the adversarial senate select committee highlights that the government and nbn co, in its delivery of the project, have made some significant and potentially irreversible decision on the network architecture and product offering. it also suggested that as in tasmania, industry stakeholders, potential customers and telecommunications analysts are being left without information or guidance on key aspects of the plan (select committee on the national broadband network 2010e, p.9.), especially in relation to how the project will be delivered and risks managed. unsurprisingly, the liberal-dominated senate select committee was critical of the government’s plan emphasising that the: implementation study is an exercise in retrofitting a justification for the government’s commitment rather than adequately explaining how the nbn can and/or should be implemented (select committee on the national broadband network 2010e p 9). neither study comments in detail about the lack of contractual transparency surrounding the model, both seemingly accepting nbn co would provide this, despite their scope being to evaluate government policy, review the decision to implement the project and conduct a cost-benefit analysis (select committee on the national broadband network 2010d, p. 8, e, p.9). however, before a contract model can be chosen, it must first be considered what needs to be built. nbn today just shy of one year on, nbn co confirmed on 1 april 2011 that it was suspending the tender process in the view that terms and prices were unacceptable after four rounds of http://www.nbnco.com.au/assets/media-releases/2010/nbnco-media-release-telstra-heads-of-agreement-20-jun-10.pdf http://www.nbnco.com.au/assets/media-releases/2010/nbnco-media-release-telstra-heads-of-agreement-20-jun-10.pdf australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 72 negotiations (nbn co 2011c, http://www.nbnco.com.au/news-and-events/news/nbn-colooks-for-greater-value-from-construction-tender.html). around the same time on 12 april 2011 the national broadband network companies act 2011, which provides the regulatory framework for the nbn came into force. instead nbn co reached agreement with silcar to design and construct the deployment of optic fibre for $380 million over the next two years (nbn co 2011b, http://www.nbnco.com.au/news-and-events/news/nbnco-silcar-reachagreement-to-deliver-value-for-money-fibre-rollout.html). shortly thereafter, on 23 june 2011, nbn co and telstra announced they had signed the definitive agreement to enable the roll out of the nbn, subject to accc and shareholder approval on 18 october 2011 (telstra 2011, http://www.telstra.com.au/abouttelstra/download/document/tls795-nom-emvoting.pdf). the same day nbn co announced it had also reached agreement with optus, whereby optus would pay approximately $800million over time to migrate optus’ hfc customers to the nbn (nbn co 2011a, http://www.nbnco.com.au/news-and-events/news/ nbn-co--optus-sign-binding-agreement.html). despite the regulatory framework, high level agreements and the release of two major government reports, the lack of information available in the public domain suggests that nbn co is no closer to articulating a transparent and viable contractual framework for the roll out of the nbn. layering the foundations: how the nbn works in order to physically build and then provide broadband applications and services to consumers, contractual structure and consideration needs to be applied to the nbn project. what work needs to be delivered and deployed to build the broadband network in terms of delivering a fast broadband service to consumers, the nbn will need to build and deliver a working physical network of optical fibres across the country. for the consumer, this deliverable will be experienced as fast internet and multi-user applications on a scale unseen before in australia. to deliver this, nbn co and service providers will need to invest in infrastructure and services that will allow the data packets of information to be delivered at fast speed to the end-user. part of the contractual framework yet to be clarified is who will be responsible for the design and deployment of this infrastructure that enables the data packets of information to reach the end-user? this section will look the physical infrastructure requirements needed to deliver the information to the homes and businesses of australians. layering the physical infrastructure the infrastructure required to build the network commences with the building of a physical network to deliver communications and computer services across the broadband network. this infrastructure comprises a number of ‘layers’. the bottom layer, or ‘layer 1’, is the primary physical layer that incorporates the ‘dark fibre’. this layer incorporates the physical deployment of the ducts, trenches and poles across the network. the physical infrastructure that will be built, or utilised from telstra, is anticipated that have a lifecycle of 30-60 years (dbcde 2010, p. 47). it is this layer that needs to be contracted and built to enable the end services to be delivered. the optical fibre network proposed by the government will allow laser light to be shone down thin glass or plastic strands. the second layer, 'layer 2', is the active equipment that lights the fibres. this is where the active electronic components carry the intelligent ‘bits’ of information, the base unit of data measurement for computers and the internet, across the fibre via an ethernet connection (dbcde 2010, p. 155). the bit is the code that enables computers to calculate, write and store information. although further layers exist, for the purposes of this discussion the last layer is layer 3. this is the network layer that provisions the fibre that allows data to be transmitted between nodes enabling retail services, such as the internet, to be supplied to the end-user. http://www.nbnco.com.au/news-and-events/news/nbn-co-looks-for-greater-value-from-construction-tender.html http://www.nbnco.com.au/news-and-events/news/nbn-co-looks-for-greater-value-from-construction-tender.html http://www.nbnco.com.au/news-and-events/news/nbnco-silcar-reach-agreement-to-deliver-value-for-money-fibre-rollout.html http://www.nbnco.com.au/news-and-events/news/nbnco-silcar-reach-agreement-to-deliver-value-for-money-fibre-rollout.html http://www.telstra.com.au/abouttelstra/download/document/tls795-nom-em-voting.pdf http://www.telstra.com.au/abouttelstra/download/document/tls795-nom-em-voting.pdf http://www.nbnco.com.au/news-and-events/news/%20nbn-co--optus-sign-binding-agreement.html http://www.nbnco.com.au/news-and-events/news/%20nbn-co--optus-sign-binding-agreement.html australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 73 by recommending that nbn co only offer layer 2 bitstream services (dbcde 2010, pp. 26 29), it will be the role of retail service providers (‘rsp’) to provide equipment to consumers to allow for meaningful end-user application such as voice, video and broadband internet. however, the government envisages that nbn co will have the capacity to provide layer 3 services, mostly in relation to wireless and satellite market, to consumers. to design and build these layers, nbn will need to tender and contract a number of participants. it appears likely it will also incorporate the use of telstra’s existing network. to build the physical network, these contracts will need to be coordinated with contracts that provide the fibre-to-the-premises (‘fttp’) to the home or business to ensure that rights and obligations to provide a working end service are complementary rather than competing. fttp ensuring the network reaches the premises the nbn is being designed as a fttp network. this means that the optical fibre will terminate either at the home or living space, the fibre-to-the-home (‘ftth’) or at the boundary of a building, the fibre-to-the-building (‘fttb’), such as in the basement of a multi-dwelling units (‘mdu’). this means the optical fibre cable network that reaches the premises will allow multiple homes and business to share local area fibre, through the use of gigabit passive optical network (‘gpon’). this will enable one computer to send data to another, and will enable an end-user, simultaneously, to use phones, computers and highdefinition television (dbcde 2011d, http://www.nbn.gov.au/for-households/why-is-it-impor tant/). gpon connecting the fibre to the premises there are two methods that allow for the delivery of fibre into a consumer’s home or business; gpon and point-to-point. gpon can be used to connect up to 32 or 64 houses in a neighbourhood. this is achieved by connecting a single fibre to a side unit in a street and then splitting the light into fibres that directly connect to a person’s home. in contrast, pointto-point connects individual fibres directly with each premises and runs from the main exchange to smaller exchanges in a street. the active electronic equipment in the mini exchange can allow approximately 100 premises to be connected. it is likely that the nbn will utilise a mixture of both methods despite gpon being considered the more cost effective option because it minimizes the amount of fibre used, thereby saving costs. it is likely that point-to-point would be more appropriate for businesses and high density residential areas because it allows for high speed delivery (heydon 2009d, error! hyperlink reference not valid., dbcde 2010, p. 192). until such time as the contractual documents are transparently available, there will remain limited clarity surrounding the integration and deployment of the physical infrastructure around australia that is required over the next 8 years to implement this project. the construction methods required for this integration will need not only to consider customer needs but differing geography, weather conditions and technical solutions, to name a few concerns. to clarify how nbn co will deliver the service to the consumer will require a contract structure that is flexible in relation to variations and risk management, open to how costs are calculated and not prone to competing legal claims about responsibility during the build. building the network what work needs to be delivered to provide broadband to consumers? nbn co will not be providing all the fibre and related infrastructure under the construction — its role is more limited. this means it is paramount to clarify the contractual and risk structure, because even though nbn co intends to offer the fibre service between the point of interconnection (‘poi’) and the end-user’s premises, this does not explain who is http://www.nbn.gov.au/for-households/why-is-it-impor%20tant/ http://www.nbn.gov.au/for-households/why-is-it-impor%20tant/ australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 74 responsible for ensuring the service works. by providing the poi, nbn co will allow the rsp and wholesale service provider (wsp) to connect to the network, allowing the transport and application of content, such as email, to be provided to consumers. it is nbn co’s intention that services will cease at the poi and the end-user will connect to the network with the use of the backhaul services of existing rsps and or wsps (select committee on the national broadband network 2010d p. 52). nbn co will then service the fibre serving area (‘fsa’), which runs from the end-user’s premises to a fibre access node (‘fan’). the fan or fibre exchange houses the active equipment, and its function is analogous to the copper network. this facility will store the active equipment that provides the network services to the fsa. the remainder of the network will be serviced by infrastructure owned and provided by the rsps or wsps. the two principle users of backhaul are rsps and wsps who deliver the ‘value add’ to consumers. backhaul capacity is essential to delivering the retail broadband services because it is the means available to connect the service provider’s network to the point of service delivery, for example, the connection of the copper network exchanges to mobile towers. however, to activate the service to a premise, nbn co would be required to lay fibre down the street, bring the fibre to the side of the building; this final cable run is called the drop. the optical network terminal (‘ont’) is a device that allows optical fibre to deliver different connection types, such as telephony, internet, television, and is powered in a similar way to a dsl modem. nbn co (or a nominated contractor) would install an ont either side of, or inside, a building. in order to connect the premises to fttp network nbn co needs to enter the relevant land and install the drop cable and ont. once the ont is live, the rsp can activate the services. this will allow telephones, computers, and other end-user devices to be serviced by ultrafast broadband (dbcde 2011d). this infrastructure will require a vast amount of construction and resources, and also carries with it the underlying assumption that optical fibre is the superior technology of choice, and the offer of increased speed and bandwidth will drive the australian public to take up the nbn. seemingly unquestioned is whether this will remain the case as new technology or applications emerge with increasing rapidity. a flexible contract model is required to ensure variations that allow new information to be quickly and cost efficiently translated into an agreement between nbn co and various nominated contractors. it remains publicly unclear how the tender process will be undertaken and how these bids will be able to cost and quote for the work because there seems no ability to quote a lump sum fixed price for the work required under the project. there is added uncertainty as to how this would be rolled out around australia, particularly if physical and manual resources are scarce. the implementation study has not answered questions such as whether the same contractor is responsible for the trenching and the computer functioning, and who is responsible for the delay if the telephony is faulty or not provisioned under the customer services guarantee (‘csg’). this leaves open the question of how the deliverables are packaged and provided. likewise, the issue of liability remains unresolved because no transparent discussion has taken place concerning who is responsible for problems that arise out of the design, the deployment of fibre or the integration of computers onto the network. while the physical and practical delivery of the project highlights the need for a flexible contract model that allows for variations and does not demand a fixed sum, there remains an absence of contractual detail to clarify the type of contract that would suit these needs. contracting for the nbn: can alliance contracts support the deployment and delivery of the nbn? in the context of the nbn, this large infrastructure project requires contractual mechanisms to support the deployment and delivery of the project. by being flexible in the manner it manages people and scope changes, by containing the price of the project and assets through the procurement of goods and services, and by internalising disputes to reduce lengthy and costly court proceedings, contracts are best able to contain risk and deliver the australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 75 project on time. in the absence of a transparent contract structure, a viable framework to deliver the nbn project would be the alliance contract model. the panacea of alliancing there has been a recent increase at the commonwealth and state level in the use and encouragement of alliancing to deliver major complex projects. this encouragement of the use of alliancing, and its core concepts of flexible management, design change, pricing and dispute resolution, provide an alternate to traditional forms of contracting and is the reason why it is worthy of discussion as an alternative contract model for the nbn. while alliancing falls into two distinct categories, ‘pure’ project alliances and ‘impure’ strategic alliances, it is project alliancing that has been envisaged by this article as a promising solution for contracting under the nbn. why the project alliance model supports the nbn’s objectives the brief of nbn co is to design and build a ubiquitous optical fibre broadband network. the project alliance model is an optimal framework under which to contract the nbn because it overcomes three key hurdles that may hinder the project: 1. the risk of fundamental change to design requirements causing disunity, delay and increased cost to the project 2. fixed cost for work performed where the scope of work may be uncertain, and 3. resolution of disputes through the courts that may cause delay and increase costs. these three hurdles are not conducive to the government’s aspirations for the nbn and could be countered in an alliance agreement through: 1. flexibility to adapt to change of requirements and through shared responsibility 2. open-book compensation, and 3. non-adversarial dispute resolution. these features under the project alliance model are beneficial for a project like the nbn because a lack of flexibility to vary or change the scope of the project will not allow participants to learn as they go without being penalised for variations. similarly, a lack of coordinated management will mean participants fail to take collective responsibility for risks, and opportunities, associated with the project. likewise, a fixed price contract model means that price competitiveness will overshadow project outcomes. this means that the aims envisaged by the government under the project will be overshadowed by tenders that are cost minimal compared to outcome practicable. moreover, in the absence of a mechanism to control lengthy and costly disputes over rights and obligations, disagreements should be managed internally to ensure that project delay and taxpayer costs are minimised. three illustrations of how alliancing may be advantageous to the nbn framework the three reasons highlighted above of flexibility, open-book accounting and no disputes, are by no means the only hurdles the project will need to overcome. however, in the absence of a contract model these three aspects may be desirable grounds on which to consider the suitability of the project alliance contract model. flexibility to adapt to change of requirements and share responsibility when considering flexibility, discussion turns to the sharing of collective responsibility between the parties for risk. the success of this project may depend on the ability of participants to vary the scope of the contract design and integrate their teams to distribute risk accordingly. australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 76 contracts typically define the scope of the project. the role of nbn co will require different methods of establishment, structure and operation to be undertaken and altered as the needs of the project dictate. this means that the alliance project will need to incorporate a contractual mechanism that will allows each specific project to be varied to suit the design needs, size, location and culture of participants. compared to other large-scale projects, the nbn is unique because the roll-out of the nbn is a repetitive project, tailored to the geographical needs of the location. it will need to manage the legacy copper network and the migration of consumers from telstra to nbn. the work required to deploy fibre or build a wireless tower is similar and the roll-out will take the form of a street-by-street, town-by-town process. it will allow the opportunity to trial new deployment techniques over time, and also presumes that a large number of civil works constructors and equipment vendors will want to be part of the project – which will drive compensative tension, improve productivity and bring down costs. an alliance contract could also reduce the duplication of general administration and supervision costs that nbn co will face. this is because there is no duplication of the services or document control because there are no separate client or contract teams with whom to liaise. a contributor to this reduction in cost is the improved cooperation between designers and builders, who can coordinate their work together on the design and construction drawing thus reducing examination hours. by integrating participants, nbn co could spend less time on site, reduce the materials used and improve the quality of the site by eliminating the need for large project teams at site inspections. if the government and nbn co utilised the alliance model, participants of this project would share governance and management decisions on a ‘best for job’ basis. the difficulty in gauging success will ultimately turn on whether individual team members fit together. this is a difficult question that is hard to quantify as team environments will change over time through natural attrition. however, by relying on ‘management and remuneration structures [to compel participants to] adopt(ed) alliance-style behaviours, but with a less radical approach to risk assumption and liability’ (chew 2004, pp. 323-324) a flexible and cooperative contract structure is designed. this would allow nbn co to offer an integrated management structure that utilises a board, management team and development project team to resolve reporting, management and dispute resolution issues. participants could then be remunerated using performance-based on key performance indicators (‘kpis’) mechanisms. this structure could allow the incorporation of an obligation for participants to cooperate and act in good faith. this is consistent with the government’s tender initially being released to 21 participants, because it recognises that the winning participants would initially need to engage with each other if the construction was to complement the government’s goal of learning from one another. similarly, it would also suit the silcar agreement and silcar's subsequent negotiations with subcontractors. for example, latent conditions may exist where nbn co asks contractors to trench new cabling areas where it cannot access telstra’s pits and trenches. this is a risk that the contractor would normally be required to solely assume. contractors may not be amenable to that risk where trenching is required at multiple locations with unknown latent risks. by sharing risk responsibility, the contractor has the comfort of knowing they will not be adversely cost affected and nbn co would know that there would be a provider willing to undertake the work. the decision to allow this would be based on unanimous consideration taken by a jointly managed project management team that is comprised of members who are chosen and allocated for the tasks on a best-fit basis. disputes can then be resolved within the alliance by escalation up the leadership chain. this style of management would limit costs through participant and open-book accounting and provide no recourse to litigation except in cases of ‘wilful default’. australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 77 open-book compensation the 100% open-book compensation model overcomes the dilemma of how participants cost and quote for work where there is no lump sum price certainty or assess-ability because of project conditions, such as the geographical changes under the nbn. the alliance model provides another means to cost price by removing the need for a lump sum fixed price under the contract. under an alliance contract, project cost transactions would be validated by an independent auditor, and compensation would be determined by the three limb principles of open-book compensations. the first limb is that project costs and project specific overheads are reimbursed. this is based on an audited scale of actual cost, which means that any costs for rework are included in this price. these costs are completely open and auditable amounts. they include the costing for the delivery schedules, quality and performance. the second limb ensures that a fee is provided to cover corporate overheads and a ‘normal’ profit. the third limb allows for ‘pain’ and ‘gain’ to be equitably distributed. this means that depending on how the project compares to pre-agreed targets then parties are committed to share in any profit or loss. meanwhile, non-owner participants’ loss would normally be limited to corporate overheads and normal profit. non-adversarial resolution of disputes since the late 1980s, disputes have been viewed as an endemic part of the construction industry. a risk the nbn faces is where disputes arise concerning whose responsibility it is to undertake an action. for example, regardless of the quality of the contractual drafting, questions might arise surrounding the responsibilities between the participants to ensure the seamless integration of the design, trenching, laying of the fibre, assimilation of computers, packaging of the service and functioning of computers. without something beyond the contract to ensure the end deliverable of fast broadband to consumers is provided, the project could collapse under the pressures of litigation. for a project of this scale, something more than contractual drafting might be required; it may need good faith that fosters an environment where non-adversarial resolution of disputes and cooperation is encouraged. the alliance model is such a mechanism because it encourages disputes to be managed internally and only allows for a limited right of action between the parties. project alliancing adopts a more commercially and legally robust approach to the ideas behind partnering (jones 2001, p. 155). it seeks to align commercial considerations with a ‘no blame, no dispute’ culture (jones 2001, p. 155; thomas 2007, p. 329). the advantage of a project alliance is that it is specifically designed to share the benefits of the contract amongst the parties to it. this modern method to design, contract and maintain would suggests that parties benefit under this contractual structure because participants commit themselves to what would otherwise be unachievable. this is because consultants and contractors put their corporate overheads and profits at risk in return for the promise that exceptional achievements will bring exceptional rewards from the client. invariably, the client guarantees to pay the direct costs incurred by the consultants and contractors. however, while the above has illustrated the possible advantages of the alliance model for the nbn project there remain a number of hurdles to overcome. can the disadvantages that permeate the project alliance model be surmounted? there is a perception that this style of contracting engenders a lack of certainty from the government, in costing and probity by diminishing participants' natural rights to go to court. this section will briefly consider of the disadvantages of the project alliance contract model and discuss whether these obstacles can be overcome. the relational style of project alliances the ‘relational’ style of the project alliance model may make it less appealing from the government’s perspective. this is because there is no perceived tendering on price. it is also in stark contrast with the tender process that appears to have commenced for the five australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 78 first release sites and the second release sites. an alliance contract would be subject to similar criticism to the ppp process; that clients spend money during the tendering process to clarify the costing because there is no fixed price. there is also the potential for perceived collusions amongst the tendering parties and a lack of value for money because it is difficult to cost the project. while these are valid concerns, they can potentially be overcome by a well-considered alliance and a shorter tendering period. while this time and cost saving can potentially be undermined by high training costs to coach the participant in the process — provided participants are willing and able to accept the distribution of risks within the alliance culture — the contract structure can be better understood and managed because participants know what is required of them. in addition, there is an indication that this relational style may find favour with nbn co, and vicariously the government, because there appears to be a high level of engagement and commitment between participants so far, most notably in the government’s initial and active role in creating nbn co to design and manage the project, rather than accepting any of the original tenders. cost to establish a team an additional disadvantage is that there may be significant costs required to establish an integrated team structure where team members are chosen on a ‘best for job’ basis. this means that the success or failure of the job can turn on the dynamics of the team, as well as the succession of planning structures that are in place to account for natural workforce attrition. the idea behind this principle is that a culture is established that encourages and complements the outcomes of the project. this is a difficult problem to overcome because culture is intangible and may not be developed despite workshops and training. however, like all alliance agreements, with diligence, foresight and planning it would be possible to manage this risk in return for the rewards of a flexible business model. probity notwithstanding the integrated structure of a team, the accountability and transparency of this method may create a probity issue for government. in part, this has already been the subject of comment from the implementation study and the senate select committee, although concerns remain that the majority of this work may be in-house by nbn co. this suggests that probity concerns may lie not with the type of contract model but rather with the transparency of nbn co. this could be overcome by ensuring a suitably qualified probity auditor is engaged, financial audits of 100% open-book is undertaken, a public process and tender is held, and costs and targets are validated. open-book compensation despite the three-limbed approach to cost management, direct costs may be difficult to manage with an open-book approach. despite best efforts to meet targets, there may be difficulty in limiting direct costs, and the government would typically pay these amounts to the participant. likewise, when monitoring costs, low costs must be maintained to ensure they are not at the expense of quality, particularly where the infrastructure is being designed to last for approximately 30-60 years. however, this could be overcome provided the agreement contains a 'fit for purpose' clause. this means that the participants would be required to rectify the work after the completion of the project, without increasing the direct cost of the work. it would then be up to nbn co to reasonably adjust the risk-reward curve to ensure it is the participant and not the project that carries the risk. is it legally binding? the criticism of the alliance model is that if legal liability is excluded, there may be no intention to create legal relations. this is because without a legally enforceable right, performance of the contract could be considered illusory where a participant fails to perform an obligation or discharge a duty. it has also been suggested that this mechanism is an attempt by participant’s to oust the jurisdiction of the courts, and that the ‘no blame, no dispute’ clause might compromise a participant's professional indemnity insurance australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 79 (abrahams & cullen 1998, p. 35). this seems to be a simple analysis of what is a highly sophisticated and complex agreement, where the parties expect to be held to the bargain. notwithstanding the concerns raised about the court’s jurisdiction, the court should not consider these clauses to be a collapse of the intention to contract. rather, while the participants may not have the same bargaining power, they can be considered to have equivalent levels of business acumen and professional legal advisors to consider the risk allocation when negotiating the agreement. ross (2010, p. 13) contends that parties do not waive or deny recourse to their natural rights so long as an alliance is properly structured and maintained, because the integrity of the mechanism to resolve legal disputes does not become a concern. why the project alliance model could achieve the nbn’s objectives the project alliance model complements the nbn’s objectives because it encourages participants to focus on a shared business outcome: the completion of a fast and affordable broadband service for all australians. it could achieve this by providing an innovative and unique way to overcome the difficulties particular to this project. it could achieve this by considering the three aspects of the nbn, concerning flexibility of managerial style and scope changes, open-book accounting and no disputes. the alliance model suggests a contractual approach that shares responsibility encourages solutions to accommodate variations, absorbs costs by sharing risks and motivates participants through the use of good faith to resolve disputes in a non-adversarial environment. alliance projects are reliant on setting expectations, working together to overcome each party’s strengths and weaknesses, and a shared mutual goal. for the nbn project to succeed, all participants must work cooperatively towards the government vision of providing high-speed, low-cost broadband to all australians. the participants will need to be willing to share the risks and rewards if they are to bring the project in within time and under cost. project alliances ‘…reflect(s) an emphasis on co-operation and dispute avoidance and reinforce the parties' objective to collaborate and develop innovative solutions for the success of the project without the threat of being sued.’ (abrahams & cullen, 1998, p. 35) by reflecting the behaviours that align with the nbn, an alliance contract would support the government’s view and enable the project to be delivered on time and budget. while, the evolving nature of the nbn project will influence the contractual requirements, the alliance model is a contract whose behaviours coincide with the outcomes desired in the development of the broadband network. it supports the government’s aspirations in three ways: first, by promoting flexibility, this would encourage collective responsibility on the part of contractor participants and suppliers to work together to resolve problems and share decision-making. this means that even when the project is faced with difficulties such as design variations required because of changing risk such as different topography, these risks would be absorbed into the project to avoid increasing the target cost or delaying project completion. this could drive innovation and solutions that may reduce risk and increase reward. moreover, because all participants would be equal the alliance model would encourage decision-making on a ‘best for job’ basis. second, because all transactions are open-book, the costs are not fixed or included as estimates based on projected profit. the expenses are real and demonstrable. this would encourage innovation from the participants because in order for them to make a profit, and develop relationships to encourage further business contracts, they would have to find solutions that are auditable and cost effective. supported by a style of open communication to encourage open cost accounting, this in turn would encourage good faith in relationships and trust as alliance behaviours. these behaviours in turn appear to replicate some of the australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 80 government’s preferences for the project; such as integrating new techniques and lessons learnt into the projects development (dbcde 2010, pp. 10-11). third, because alliance contracting suggests an alternate way to view disputes, through inhouse management, rather than by reference to the courts, a different dynamic is created that demonstrates shared control, for shared outcomes. these three aspects can be managed under the alliance model, because alliance contracts encourage flexibility and shared responsibility. it is these behaviours, elicited by an alliance contract, which illustrates its unique compatibility with the aspirations of the government’s nbn project. the alliance contract model can provide the legal framework to enable the deployment and delivery of an optical fibre broadband network that will found the highway to australia’s fast-paced digital future. in this context, the use of alliance contracts would support the government’s nbn aspiration to ‘fundamentally transform the competitive dynamics of the australian telecommunications sector’ (conroy, 2009, iii). references abrahams, a. and cullen, a. (1998) ‘project alliances in the construction industry’, australian construction law newsletter, vol. 62 bentley, p. (2009) ‘the digital economy dance: getting into step with government policy’, online currents, vol. 23 chew, a. (2004) ‘alliancing in delivery of major infrastructure projects and outsourcing services in australia – an overview of legal issues’, international construction law review, p. 319 conroy, s. (2009) minister for broadband, communications and the digital economy, national broadband network: regulatory reform for the 21 st century, discussion paper dbcde (2010) national broadband network implementation study, department of broadband, communication and the digital economy dbcde (2011d) why is it important?, department of broadband, communication and the digital economy, http://www.nbn.gov.au/for-households/why-is-it-important/, accessed 12 september 2011 heydon, g. (2009d) gpon v point to point computer world http://www.computerworld.com.au/article/324177/gpon_vs_point_point, accessed 12 september 2011 jones, d. (2001) ‘keeping the options open: alliance and other forms of relationship contracting with government’, building and construction law, vol.17 liew k 2009, ―next generation broadband regulation: nbn co. and the government’s new role in the market’, communications law bulletin, 29 (3), 19-21 lynch, g. (2010) ‘telstra wrings $11 billion out of nbn co pact’, communications day, vol. june, p. 3767 national broadband network companies act 2011 (cth) nbn co (2011a) nbn co and optus sign binding agreement, media release, http://www.nbnco.com.au/news-and-events/news/nbn-co--optus-sign-bindingagreement.html, accessed 12 september 2011 nbn co (2011b) nbn co & silcar reach agreement to deliver value-for-money fibre rollout, media release http://www.nbnco.com.au/news-and-events/news/nbnco-silcar-reachagreement-to-deliver-value-for-money-fibre-rollout.html, accessed 12 september 2011 http://www.nbn.gov.au/for-households/why-is-it-important/ http://www.computerworld.com.au/article/324177/gpon_vs_point_point http://www.nbnco.com.au/news-and-events/news/nbn-co--optus-sign-binding-agreement.html http://www.nbnco.com.au/news-and-events/news/nbn-co--optus-sign-binding-agreement.html http://www.nbnco.com.au/news-and-events/news/nbnco-silcar-reach-agreement-to-deliver-value-for-money-fibre-rollout.html http://www.nbnco.com.au/news-and-events/news/nbnco-silcar-reach-agreement-to-deliver-value-for-money-fibre-rollout.html australasian journal of construction economics and building rose, m (2011) ‘can project alliance contracts deliver australia’s national broadband network?’, australasian journal of construction economics and building, 11 (3) 68-81 81 nbn co (2010a) nbn co announces next rollout locations, http://www.nbnco.com.au/assets/media-releases/2010/second-release-08-jul-10.pdf, accessed 12 september 2011 nbn co (2011c) nbn co looks for greater value from construction tender, media release, http://www.nbnco.com.au/news-and-events/news/nbn-co-looks-for-greater-value-fromconstruction-tender.html, accessed 12 september 2011 nbn co (2010b) nbn co and telstra reach heads of agreement, http://www.nbnco.com.au/ assets/media-releases/2010/nbnco-media-release-telstra-heads-of-agreement-20-jun-10.pdf , accessed 12 september 2011 optus (2007a) elders and optus to build rural and regional broadband network, media release, http://www.optus.com.au/aboutoptus/about+optus/media+centre/media+releases /2007/elders+and+optus+to+build+rural+and+regional+broadband+network, accessed 12 september 2011 prime minister, premier of tasmania and minister of broadband (2009b) tasmania first to receive superfast broadband, media release, http://www.minister.dbcde.gov.au/media /media_releases /2009/023, accessed 12 september 2011 prime minister, treasurer, minister for finance and minister for broadband (2009a) new national broadband network, media release, error! hyperlink reference not valid., accessed 12 september 2011 prime minister, and minister for broadband (2009c) tasmanian nbn co limited established, media release, http://www.minister.dbcde.gov.au/media/media _releases/2009/075, accessed 12 sep 2011 ross, j. (2010) ‘introduction to project alliancing (on engineering and construction projects), sydney, 30 april 2003 select committee on the national broadband network (2010c) answers to questions on notice, the senate of the parliament of australia, question no. 3, 15 april select committee on the national broadband network (2010d) final report, the senate of the parliament of australia, p. 9 and ch.3 [3.1]-[3.60] select committee on the national broadband network (2010e) fourth interim report, the senate of the parliament of australia, p. 73 telecommunications act 1997 (cth) telstra (2011) notice of annual general meeting, explanatory memorandum and shareholder voting form, http://www.telstra.com.au/abouttelstra/download/document/tls 795nom-em-voting.pdf accessed 12 september 2011 thomas. t. (2007) ‘alliance contracts: utility and enforceability’, building and construction law, vol. 23, 329 trade practices act 1974 (cth) wilton, p. (2010) ‘it’s business as usual in comms despite the spill’, communications day, june, p.3779 1 ba/llb (hons). this article is based upon a paper the author submitted to the melbourne university masters of law subject, infrastructure delivery a (13 september 2010) http://www.nbnco.com.au/assets/media-releases/2010/second-release-08-jul-10.pdf http://www.nbnco.com.au/news-and-events/news/nbn-co-looks-for-greater-value-from-construction-tender.html http://www.nbnco.com.au/news-and-events/news/nbn-co-looks-for-greater-value-from-construction-tender.html http://www.nbnco.com.au/%20assets/media-releases/2010/nbnco-media-release-telstra-heads-of-agreement-20-jun-10.pdf http://www.nbnco.com.au/%20assets/media-releases/2010/nbnco-media-release-telstra-heads-of-agreement-20-jun-10.pdf http://www.optus.com.au/aboutoptus/about+optus/media+centre/media+releases%20/2007/elders+and+optus+to+build+rural+and+regional+broadband+network http://www.optus.com.au/aboutoptus/about+optus/media+centre/media+releases%20/2007/elders+and+optus+to+build+rural+and+regional+broadband+network http://www.minister.dbcde.gov.au/media%20/media_releases%20/2009/023 http://www.minister.dbcde.gov.au/media%20/media_releases%20/2009/023 http://www.minister.dbcde.gov.au/media/media%20_releases/2009/075 http://www.minister.dbcde.gov.au/media/media%20_releases/2009/075 http://www.telstra.com.au/abouttelstra/download/document/tls%20795-%20nom-em-voting.pdf http://www.telstra.com.au/abouttelstra/download/document/tls%20795-%20nom-em-voting.pdf research techniques in project management a human perspective of contractor prequalification bassam michael baroudi (school of natural and built environments, university of south australia) mike metcalfe (school of management, university of south australia, australia) abstract the contractor prequalification topic has had much written on it over the last two decades. in the past it has been primarily viewed in terms of the appropriate selection of contractors for construction projects. there has been extensive research interest into the functional and process driven aspects of contractor prequalification. however, there has been little research taking a more holistic view of contractor prequalification in terms of the human aspects that surround it. hence, gaining a wider appreciation on how prequalification systems affect the major stakeholders seems warranted. the use of soft systems thinking allowed for an indepth and contextual analysis of prequalification issues. this necessitated unstructured indepth interviews to be carried out with senior industry practitioners. sifting through their respective experiences allowed for an alternative view of contractor prequalification systems, a very human perspective to emerge. the research suggests that viewing prequalification systems from a human perspective provides a fuller picture of their true benefits and limitations. this could then translate into better prequalification design. keywords: prequalification, human aspects, soft systems introduction contractor prequalification is a common client prerequisite for construction companies. russell and skibiniewski (1988) define prequalification as involving the use of criteria by a client to screen contractors in order to determine capabilities in respect to performing building works. sir michael latham‟s (1994) review of the uk building industry presented a number of issues in respect to improving procurement practices via prequalification systems. the construction industry development agency‟s (cida, 1994) work in australia also contributed to prequalification systems development. many have since seen the need for appropriate prequalification systems. for example, prichard (2000) offers that prequalification systems allow clients and contractors to concentrate on the tendering process rather than be weighed down by issues of suitability and competency. it seems that prequalification systems have constantly advanced as clients seek to reduce their construction project risk. however, previous research has tended to focus more on process than people. this research serves to redress this situation. cheng and li (2004) suggest that without a proper contractor selection process project performances will be affected. as such, accurate assessments are needed to evaluate contractor attributes against client requirements. however, singh and tiong (2005) contend that selecting contractors involves multi-criteria decision making which is influenced by human subjectivity and uncertainty. furthermore, el-sawalhi, eaton, and rustom (2007) suggest that people often use past experiences within their reasoning and problem solving. sonmez, holt, yang and graham (2002) add that humans are not machines and therefore quite often make intuitive decisions. they also suggest that people prefer to offer opinion in linguistic rather than numerical terms which creates ambiguity in decision making. nga and luub (2008) put forth that decision makers use intuition, experience or predictive judgment in relation to selections. hence, people in the system can possibly be affected by erroneous assumptions and bias. ng (2001) suggests that experiential human judgment is relied on in prequalification systems due to the difficulty and cost in obtaining and assessing contractor information. therefore prequalifiers need to have the appropriate knowledge and experience to assess this information. australasian journal of construction economics and building baroudi, b m and metcalfe, m (2011) ‘a human perspective of contractor prequalification’, australasian journal of construction economics and building, 11 (2) 60-70 61 prequalification is often viewed in client terms. however, it would be worthwhile for clients to consider the viewpoints of other stakeholders. jennings and holt (1998), minchin and smith (2001) and mills (2005) research moved away from focusing on client perspectives without acknowledging contractor sentiment. for example, mills (2005) found that the perceived importance of various selection criteria between client and contractor differs greatly. furthermore, ng, skitmore and smith (1999) found that various consultants‟ perceptions of which selection criteria were important differed significantly to the client and each other. as such, industry stakeholders were shown to think differently in regard to the importance of various selection criteria. this diversity of thought should be appreciated. it also suggests that industry people emanating from different disciplines are possibly biased towards their own objectives. broader stakeholder involvement allows for a greater understanding of prequalification systems and how they affect people. prequalification systems typically use many types of criteria to assess contractor suitability. palaneeswaran and kumaraswamy‟s (2000) “rrc attributes”, representing responsiveness, responsibility and competency, were designed as initial filtering criteria and touched on some of the more human aspects. also, palaneeswaran, ng and kumaraswamy (2006) found that hong kong public clients used criteria such as management capability, organisation and communication. pongpeng and liston (2003) identified technical ability criteria as carrying a high degree of importance and lam, hu and ng (2005) found that a contractor‟s technical approach was closely related to the degree of innovation displayed during construction. hence, a contractor‟s construction knowledge not only gives a client confidence in their capability but also in their capacity to suggest new ideas adding greater value to a project. furthermore, this could relieve the client and design team of cumbersome decision making relating to technical issues on site. ogunsemi (2006) found that the amount of contractor‟s work to be subcontracted out was an important selection criterion for clients. this indicates a growing realisation that prequalified contractors are only as good as their subordinate contractors. topcu (2004) found that uk government authorities rated selection criteria highlighting poor business dealings by contractors quite highly. the criteria in relation to fraudulent action, previous disbarment and contract failure all featured as very important. furthermore, minchin and smith (2001) offer integrity criteria which relates to whether company officials have any convictions in respect to their business activities. they described this as a “disqualification” factor. al-harbi (2001) adds that criteria discovering unethical techniques are grounds for instant elimination from assessments. lo, krizek and hadavi (1999) identified a number of problems that inadequately designed prequalification systems create. these included inappropriate behaviour via possible collusion and improper practices. these types of issues give the prequalification environment another dimension albeit on the negative side of human actions. prequalification systems can affect competition in the marketplace. li, foulger, and phillips (2008) suggest that prequalification can limit the number of available tenderers creating reduced competitive behaviour from those invited to tender. ngai, drew, lo and skitmore (2002) say the two prime factors affecting the degree of competition are the number of contractors able to tender a project and market conditions at the time. hence, prequalification systems need to appeal to capable contractors particularly in boom times. jennings and holt‟s (1998) research uncovered that larger contractors felt that prequalification systems with stringent multi-criteria selection decision making improves their chances of winning contracts. however they did also find that contractors are generally dissatisfied with prequalification possibly leading to minchin and smith (2001) assertion that there are good contractors who elect not to participate. wong (2004) points to the degree of sophistication of some assessment methods make them difficult for client use. furthermore, minchin and smith (2001) contend that a problem australasian journal of construction economics and building baroudi, b m and metcalfe, m (2011) ‘a human perspective of contractor prequalification’, australasian journal of construction economics and building, 11 (2) 60-70 62 with prequalification is that it adds to client and contractor workloads. in current times where more outputs are increasingly sought from fewer resources this becomes an issue. mangitung and emsley (2002) add that there is a need to reduce repetition, duplication and subsequent wasted resources brought about by industry prequalifications. they suggest centralisation of prequalification systems through a third party as a possible solution for contractor assessments. palaneeswaran and kumaraswamy (2005) found that designer/builder prequalification systems face difficulties in various areas including those of transparency and non standard practices. ultimately, it would seem that prequalification systems need to fulfil their objectives whilst being non burdensome and fair on the people involved. the rationale behind contractor prequalification appears valid however the above suggests that many experts believe that prequalification systems still harbour significant problems. furthermore, holt (2010) points out that during the last two decades research into contractor selection has focused more on decisional processes and criteria. thus, a more holistic soft systems approach that takes a broader human perspective of prequalification could provide new ideas for prequalification design. research methodology in this research, pragmatic or soft systems thinking is proposed for use as the interpretation applied to prequalification. checkland (2000) says that systems thinking can be a quantitative, positive or interpretive method. in this research, it is intended to be used in a qualitative and interpretive manner; as a thinking tool. the reason systems thinking is considered a suitable means of interpretation is mainly because of the researchers‟ interest in the perceived relationships or interactions between prequalification and people within the construction industry. systems thinking is about the relationship between elements. moreover, systems thinking presents itself as a way of thinking more holistically about a problem situation. this was the intent of this research. system approaches allow complex problems to be viewed in a more holistic fashion allowing one to examine the relationships between elements. daellenbach (2003) discusses how these approaches have the ability to examine the greater system or focus in on a particular subsystem. metcalfe (2006) suggests that systems thinking can help change the way that people think about issues by providing different dimensions to analyse situations. systems approaches allow observers to determine where the boundaries are drawn and what elements reside within a system as compared to what elements reside outside a system, i.e. the environment. soft systems approaches allow for a more flexible and open interpretation of events. schoderbek, schoderbek and kefalas (1990) explains how open systems can look at importing inputs from the environment so as to convert them into useful outputs. this is done via the transformation processes that serve these systems. zulauf (2004) suggests that systems thinking allows people to concentrate on organisational dynamics rather than just focus in on particular situations. by considering the interrelationships (or connectivities) and thinking cross-functionally better results may be derived. she contends that one can increase their leverage by taking a strategic view of the situation prior to attacking the fundamental issues. research technique this research has chosen a qualitative interpretive method. flick, von kardorff and ines (2004) contend that qualitative techniques generate knowledge such as that held by experts. hence, the research questions will ask construction industry experts (i.e. clients, contractors and consultants) to convey their thoughts on prequalification systems. it was thought that not much would be achieved by attempting to quantify or average the collected data. this is because deeper human insights and alternative possibilities were being sought. moore (2000) points out, the use of qualitative research can lead to deeper understandings of australasian journal of construction economics and building baroudi, b m and metcalfe, m (2011) ‘a human perspective of contractor prequalification’, australasian journal of construction economics and building, 11 (2) 60-70 63 issues and their causes. since this research is seeking a more holistic human view of prequalification, not a reductionist analytical one, a qualitative method was adopted. the use of in-depth semi-structured interviews was adopted as the primary tool for the research. such methods are seen as providing a rich source of information from experts. skinner, tagg and holloway (2000) argue that research involving management issues can be difficult as the area can be both complex and messy. they contend that the use of qualitative research in these situations offers a richness and depth of understanding that quantitative methods fail to deliver. fontana and frey (2003) view the interviewing method as something that creates active interactions between two or more people towards “negotiated contextually based results”. bouma and ling (2004) see in-depth interviews as allowing the participant to express their thoughts or the way they feel. they also argue that it gives participants the ability to give their own perspectives on what they believe to be important. wright (1996) found in-depth interviewing techniques particularly useful on senior managers. he also contends that techniques which are “less directive” or semi-structured allow interviewees to apply their expertise as well as provide their attitudes, needs and ideas. this will assist in uncovering broader thought on prequalification issues. hickey and davis (2003) contend that in-depth interviews provide an understanding of people‟s behaviour as well as giving some context to situations. further to this, they say that semistructured interviews also allow interviewees to suggest reasons behind particular forms of behaviour. in-depth interviewing might thus be considered to provide for a greater appreciation of situations than other alternative research methods. interview survey sample a broad range of construction industry practitioners were selected for interviewing. they came from both the public and private sectors within the state of south australia. the interviewees included clients, contractors and consultants. these were industry practitioners coming from both public and private organisations. they included senior personnel from government agencies, corporations, contractors, project management consultancies and architectural firms. care was taken to ensure that all participants were highly experienced with prequalification systems and their operation. twenty five prospective interviewees were invited to participate, twenty three accepted. note that formal university ethics approval was required prior to approaching interviewees. the time spent with interviewees ranged between one and two hours each with this amount of time deemed sufficient to discuss relevant issues. ticehurst and veal (2000) suggest that in depth interviews should typically take at least a half an hour and can often take several hours. flick et al (2004) point out interviewers should be aware that expert interviewees can be under intense time pressures. thus it was thought that any more than two hours would overly impose on participants‟ time. note that whilst some questions related to subcontractors these stakeholders were not included in the interviewing process as this was considered outside the scope of the study. participant information was gathered via a digital recorder set up at the commencement of each interview. consent was gained prior to the use of the recorder. notes were also taken during interviews to highlight points of interest. the key points were tabulated after each interview. the tabulated information was collated into common themes with participant identifications noted as applicable. the recorded information was professionally transcribed into a typed format. this provided a large volume of information for assessment. a combination of scrutinising the tabulated key points and the interview transcriptions extracted the required information. results and discussion the research uncovered many important alternative perspectives of prequalification. the findings have been grouped below under the areas of relationships and communications, equity and fairness, skills development and professionalism, and creativity and innovation. australasian journal of construction economics and building baroudi, b m and metcalfe, m (2011) ‘a human perspective of contractor prequalification’, australasian journal of construction economics and building, 11 (2) 60-70 64 these groupings could be thought of as alternative systems within the prequalification environment. this is because they contain perspectives that are different to the more prevalent conceptions of prequalification. the following results and discussions are derived from the in-depth conversations with interviewees. relationships and communications the issues of prequalification relationships and communications were quite prominent in the discussions. the common view was that clients wanted to develop good relationships with contractors and their teams. the same was said back by contractors. prequalification was said to open up a forum to build such relationships. this in turn opens the way for effective communications between the various people involved. a prequalifier from a major public client had a very positive view on their relationships describing their contractor base as “our family of contractors”. the idea of relationship building via prequalification does not feature in previous literature. better client contractor relationships can only enhance procurement and subsequent processes. the same prequalifier also said that prequalification assists in keeping their contractor base well informed. their view was that a prequalification register allowed them to do that by creating a target group to aim at. this form of well directed communications creates positive outputs for all concerned and could possibly alleviate contractor misconceptions or fears that commonly arise in project procurement. while this would seem valuable it may need further attention as contractor opinion tended to lean towards communications being inadequate. the value of fostering good relationships was seen to extend outwards in many ways. it was said that prequalification encouraged contractors to not see each project or contract in isolation. in other words when a project ends the client‟s relationship with the contractor doesn‟t end. being connected to the prequalification environment maintains this bonding relationship. such a situation is thought to derive possible benefits such as improved communications, greater transparency and reduced adversarial behaviour. for example, a public sector client put forth an example of a project not performing as well financially as expected by the contractor. having a relationship bonded by prequalification may have the contractor thinking twice before approaching the client for extra money via various contractual means. it was said the contractor would think “we‟re going to grow with them; we‟re not going to lose out.” so in this case the client will not have to defend claims for extra payment. hence, prequalification possibly encourages contractors to take a longer term view of their contracting relationships and therefore modify their behaviour. other ramifications for prequalification relationships appear to exist within contractor suspensions or disqualifications. a prequalifier from a major public housing department pointed out “i‟ve always said you can‟t improve a builder unless he‟s working with you.” his thinking was that suspensions or disqualifications do not improve behaviour in any case as the people involved are not in the learning environment to modify their behaviour. all that is being done is isolating people and organisations, which is punishment. this would not seem to be the right approach to improve the client‟s contractor base and associated relationships. the authors suggest that a better way forward would be to provide effective and timely feedback communications to these contractors. government prequalifiers particularly commented that they offered feedback to improve future contractor performances. it is thought moving away from penalising contractors creates a better environment for solid relations. furthermore in smaller marketplaces, keeping as many contractors as possible prequalified would seem essential to competition and resourcing projects. a prequalifier working with a major public client said that they frequently engage with industry bodies to gauge the feelings of prequalification stakeholders. this form of engagement was described as providing one of their main feedback mechanisms. it was said that by maintaining these forms of liaisons clients and their prequalifiers can quickly pick up if there are grumblings within the construction community. it does appear that there is a australasian journal of construction economics and building baroudi, b m and metcalfe, m (2011) ‘a human perspective of contractor prequalification’, australasian journal of construction economics and building, 11 (2) 60-70 65 genuine resolve to build stronger industry relationships with prequalification being a significant factor. equity and fairness whilst the foundations of prequalification are based within suitable contractor selection it could be said that there was also a systems purpose to create just and equitable outputs for those who participate. many of those interviewed talked of prequalification as providing a “level playing field.” the importance of this issue within our research sample seemed to be much greater than that reflected in previous research. however, it should be noted that this feature did not come without its own problems. contractors remarked on the further need for transparency within formalised assessment processes. they felt that they were possibly not getting adequate consideration or at least not being informed appropriately. as one contractor commented “oh, it‟s smoke and mirrors and they probably won‟t tell you because they don‟t want that in the public domain so no one can challenge it.” it was openly admitted by one prequalifier that scores awarded when judging contractors are generally made on “gut feelings” but having a panel of judges made for a reasonable consensus. furthermore, another prequalifier indicated that the submitted contractor information itself is improving but the bigger concern is how this data is interpreted and the emphasis that can be drawn from that. the issue of subjectivity in decision making is well covered in past literature. however, it tends to lean towards the difficulty in selecting the most suitable contractor rather than how to foster equitable outcomes. this could be explained by the client being more concerned with selecting an appropriate contractor than fairness within the system. another comment from a private sector project management consultant involved in prequalification assessments indicated that they had considerable latitude to exercise decisions that they would not be held accountable for later. the findings do raise some doubts in respect to the fairness of prequalification assessments on contracting people. a negative output of prequalification systems was found to lie in the perception of contractor victimisation. that is some contractors felt that they were being victimised by the prequalification process. a prequalifier with a public client said that some people think that they have done a good job within their prequalification application via the information they had provided. however, these contractors have to be told that their credentials are not as strong as they would like to think. hence, this type of outcome produces resentment with applicants expressing their bitterness. in fact, prequalifiers themselves held fears that disgruntled contractors would go over their heads, in some cases as far up as the responsible government minister. these types of human issues seem very novel in light of past research. one contractor questioned prequalification‟s fairness when many of the softer human attributes were to a large degree missing from standard selection criteria. he mentioned the aspects of contractor honesty, integrity, and fairness as not getting adequate consideration for selection on forthcoming projects. the literature did report on some forms on these criteria although that was more about disadvantaging poor contractors than rewarding good contractors via these criteria. a public sector respondent possibly points to why industry does not pay more attention to contractors‟ personal qualities. he commented that the construction industry is dominated by people who have a technical objective background. hence, some of the softer, more qualitative sociological concepts do not sit very easily in the context of this environment. further research that addresses contractor personal qualities would seem worthwhile. australasian journal of construction economics and building baroudi, b m and metcalfe, m (2011) ‘a human perspective of contractor prequalification’, australasian journal of construction economics and building, 11 (2) 60-70 66 skills development and professionalism the discussions revealed that prequalifiers, particularly those in the public sector, had a strong view of having to balance short term project requirements and long-term industry needs. the public sector sees itself as a long term user of industry services and hence developing the construction industry and its people is considered significantly important. from this perspective prequalification systems can be seen as a mechanism to transform people within the construction industry. as such, governments can possibly use prequalification to drive various improvements for the industry and those that are serviced by it. this invariably creates a more productive and economically beneficial industry environment. it was evident that public sector respondents viewed prequalification as significantly contributing to ongoing training and development within industry. this was said to be for both trade and professional skills, the latter being an area which is increasing in prominence. the major concern appeared to be with the abilities of small to medium sized business. these organisations and the people involved tend to make up the greater part of construction environment. as one public sector respondent put it, the construction industry has “got a long tail of very small businesses and a small number of very large businesses.” it was said that prequalification had a strong emphasis on trying to improve the capabilities of small and medium businesses. furthermore, a public sector prequalifier commented that prior to prequalification a lot of smaller businesses were failing because they might have been very good technically but they didn‟t have the basic management competencies. there seemed to be reasonable support from client sources that prequalification had reduced the failure rate in small to medium businesses. this area seems important yet was not reflected in past literature. the authors suggest that improving the skills of people in these businesses will lead to better outputs such as contractors that run profitable long term businesses. contractor responses in general were very supportive in respect to prequalification driving the development of their people. the proviso was that it had to be taken seriously as a broad management system rather than just a way for getting more work. one contractor said “it‟ll assist me or encourage me to invest a bit more here, to think strategically, to think more carefully about the people i employ, about the training and development of those people”. it would appear that prequalification makes managers look more closely at their businesses. this extends to them introducing new systems and procedures and reviewing them as need be. it seems that prequalification can take some credit in respect to continuous improvement of staff and associated systems. the issues of subcontractor capability and development were also raised. a public client respondent referred to subcontractors as the ones which are most vulnerable to failure due to a lack of management skills. he suggested that a system such as prequalification can put a framework around them, to help them, lift them and identify their issues. unfortunately, it was found that subcontractor participation in prequalification was at very low levels. past research did note that a problem existed with good contractors opting not to participate but this research indicates that low subcontractor participation seems to be the greater issue. the authors have gathered that the low participation rates in client systems seem to come from subcontractor apprehension, exclusion, general apathy or even collusion against taking part. a positive output of prequalification was that once contractors became prequalified they took great pride in that fact and guarded their ratings very highly. this was mentioned by a public sector prequailfier. hence, people working in the contracting field do derive substantial satisfaction from their achievement. prequalification was also seen as having the potential to increase and promote professionalism within building organisations. these types of issues are worthy of consideration by both clients and contractors and were not found within the prequalification literature. furthermore, both an architect and a contractor said that australasian journal of construction economics and building baroudi, b m and metcalfe, m (2011) ‘a human perspective of contractor prequalification’, australasian journal of construction economics and building, 11 (2) 60-70 67 prequalification systems have reduced the traditional professional role of architects in the contractor selection process. hence, it appears that prequalification systems may have contributed to diminished power and authority for architects within this area. creativity and innovation prequalification systems were generally seen as being very rigid in nature with prospective contractors having to conform to them without reservation. it was said that such systems tend to stifle people putting ideas forward and shackles creativity at an early stage within construction projects. it was brought up by both client and contractor respondents as an issue of concern. garnered perspectives showed two dimensions to this prequalification problem. one dimension concerned affording contractors creative flexibility and the other dimension allowing clients innovative freedom and some discretion. both dimensions exist within the same boundary, the same environment. contractor creativity comes in the form of new ideas. as one private sector client put it “they might be offering a metre but they‟re only going to show you a millimetre”. he went on to say that many contractors fear that if they present innovative ideas at the project prequalification stage this information will be passed onto other prospective contractors. hence, contractors can be very guarded until they are assured of some return. it was said in the literature that a contractor‟s technical prowess could lead to innovative outcomes on site. although this would be welcomed it was surmised from the findings that the benefits from innovative input could be more broadly harnessed. as such, early prequalification processes and discussions have to be structured in an appropriate way. providing systems that develop trust creates a free flowing exchange of information allowing for possible design, production and economic benefits. this can only occur in a more flexible type of prequalification system where contractors are encouraged to present new ideas regarding specific projects. this could also foster feelings of project inclusiveness and “ownership” at an early stage. the other dimension looks at providing client organisations with opportunities to be innovative. for example, there is within the industry client systems that “piggy-backed” off other more established prequalification systems. this means that if a contractor is already prequalified with a recognised system they may only need to respond to the client‟s more specific project requirements. a positive output easily identified is the reduction of burdensome prequalification workloads on people. the notion of prequalification “piggybacking” seems a novel approach although the literature did raise using a third party for prequalifications which could possibly deliver similar outcomes. another novel idea as practised by a large public client was the pairing up of contractors via the prequalification process for projects. by giving contracting people opportunities to work in tandem it was found that they could actually synergise, develop and grow together. organisational capability and economic benefits would appear to result. a further example of innovation involved a private sector client discussing a strategy of clients taking on greater risk. this was in regard to creating market tension by allowing emerging contractors in so as to develop these people. this suggests that clients and prequalifiers can actually influence their environment rather than just be influenced by it. flexible systems that encourage creativity and innovation are highly desirable and could produce improved project outputs. a public sector respondent commented that introducing some policy discretion into prequalification systems would assist. conclusion the research found that prequalification systems are basically seen as a useful management system by industry practitioners. the process of evaluating contractors has been the main thrust of past thinking. this has involved clients sifting through the myriad of contractors on offer in any particular marketplace. however, there is another perspective of australasian journal of construction economics and building baroudi, b m and metcalfe, m (2011) ‘a human perspective of contractor prequalification’, australasian journal of construction economics and building, 11 (2) 60-70 68 prequalification that has received little attention. that is one which highlights the greater human perspective. this paper has focused on this perspective. the use of a soft systems approach and the in-depth interviewing of a wide range of experienced stakeholders were deemed beneficial. the stakeholders included clients, contractors and consultants which allowed for the fostering of alternative viewpoints. the research purposely set out to use soft systems ideology to stimulate broader thinking in respect to prequalification systems. this allowed for the identification and examination of the more human types of prequalification issues and a comparison of past researchers‟ findings to the current findings. the current findings were seen to have both positive and negative aspects but overall there seemed to be possibilities within building better relationships, creating more equitable systems, developing people and seeking improved creative solutions. in conclusion, identifying the more human aspects presented by prequalification systems provides some useful insights for the construction industry. it is hoped that the findings serve to inform industry of the human ramifications attached to prequalification practices in the current environment. a better understanding in this area could improve the design of prequalification systems so that broader benefits could be realised from these systems. acknowledgements the authors wish to express their gratitude to dr. david ness for his contribution to this research. references al-harbi, k. m. al-s. 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(2004) „systems thinking: you can be more proactive‟, executive excellence, 21 (7), 13 book review book review managing performance in construction leonhard e. bernold and simaan m. abourizk, wiley, uk, 2010, i – xix, 1 393 plus indices, instructors companion site, isbn 0470171642 (hardback) aud 160.00, nzd 180.00 £ 85.00, € 100.00 performance of a construction project, a portfolio of construction projects, a company involved in construction, the regional and national construction sector, and the international construction sector has been a topic for research discourse for many decades. in recent years, the debate was reignited in the united kingdom by the 1998 “rethinking construction” report developed by sir john egan 1 . in 2004, teicholz sparked this discussion by highlighting decline in construction productivity in us by graphically capturing the “construction and non-farm labour productivity index” from 1964 to 2004 2 . egan and teicholz set in motion research focussed upon the importance of measuring performance of the construction sector at various levels; focussing more on the output to the gross domestic product of a nation. spatial and temporal comparison, of the typically comparison resistant, construction sector was forged as a topic of research. however, little renewed attention has been paid to the development of new tools, models, methods and approaches for measuring construction performance at the workface level. the textbook entitled “managing performance in construction” fills this important gap by providing a textbook for construction project management students and a handbook for construction professionals to measure performance in the field. with a rich combination of traditional textbook material, simulation software, innovative website, and an exhaustive list of references the book offers a complete source of guidance on this topic. the authors by combining productivity and effectiveness, and by discouraging a productivity only view, present a compelling business case for a holistic performance management system in construction. while keeping the workface view point the authors encourage an encompassing view of performance that includes the process level and the supply chain level. in the first chapter the authors describe the current state of the industry by discussing implications of advanced digital modelling techniques, sustainability and eco-efficiency metrics, modern communication technologies, and other latest developments in construction equipment technology. the authors argue that even in this changing landscape measuring performance is extremely important. the second chapter in the book provides an overview of productivity and effectiveness, bringing forward the concept of performance management. while productivity is defined as a ratio of output and input; efficiency is defined as the reduction of input for the same number of output. the chapter, in addition to describing basic productivity measurement techniques, provides work-flow view of a process to capture the concept of performance measurement. a highlight of the chapter is the description of a control mechanism based on the first proportional process control procedure developed in 1789. the process involves measuring one or several output parameters to allow real-time feedback to a controller resulting in automatic generation of directives to adjust input to achieve targeted output and then modification of input flow parameters. with the help of several construction examples the authors provide insight into the concept of value-adding and non-value adding tasks. the chapter also discusses lean principles in the context of construction processes. the third chapter entitled “cornerstones of efficient site operations” discusses the linkages between construction process, works breakdown structure and organization breakdown 1 egan, j. (1998) rethinking construction: report of the construction task force, london: hmso. 2 teicholz, p. (2004) "labor productivity declines in the construction industry: causes and remedies." aecbytes viewpoint, issue 4 april 14, 2004. australasian journal of construction economics and building sawhney, a. (2010) book review, australasian journal of construction economics and building, 10 (3) 80-81 81 structure. with the help of examples important linkages between a construction process and supply chain of the construction company are highlighted. chapter four and five are dedicated to the description of discrete-event simulation in construction. modelling and simulation of construction processes and operations is described in detail. with the help of real-world examples modelling of construction production systems is detailed out. a casestudy of tunnel construction is used to describe how simulation can be used for assessing, modelling, and simulating real-life projects. using simphony as a template based simulation toolkit numerous examples of construction productivity measurement and improvement are provided including steps needed for process and supply chain synchronization. topics of knowledge management, learning organization and core competencies are described in detail in chapter six. in this chapter the generic work competencies for the twenty-first century are outlined. in the seventh chapter the authors describe in brief issues related to worker health and safety. job stress and physical and emotional stress are touched upon in this chapter. the eighth chapter covers fundamentals of human motivation. maslow’s, herzberg’s, and vroom’s work on human motivation are described. chapter nine deals with performance factors of leaders and teams. by answering questions likes “is a manager a leader” the authors have described leadership skills needed to effectively manage construction projects and construction companies. the managerial grid model; theory x and theory y; fiedler’s contingency model; burn’s transactional and transformation leadership model; and hersey-blanchard situational theory are discussed in this chapter. techniques for measuring emotional intelligence, team dynamics, group dynamics, and high-performance teams are described. an interesting topic in this chapter is related to creativity. attributes of a creative individual, left-brain and right brain collaboration, and convergent and divergent thinking are discussed in detail. chapter ten presents the importance of communication and communication systems for improving construction performance. historical roles of architects and engineers in construction are revealed. introduction of two-dimensional and three-dimensional computer aided design coupled with the growth of the internet have produced some useful mechanisms for communication on construction projects. with the advent of online contentmanagement and collaboration services communication on construction projects has been significantly impacted. the authors describe a pervasive system in which rfid tags, sensors, sensor networks, wireless networks, local area networks, and other information and communication technologies are deployed in unison to provide the right information at the right time to the right person on a construction site. the last chapter combines all the various concepts, methods and theories presented in earlier chapters to provide a holistic performance management system. it is shown that managing performance is more important than measuring performance. at the organization level this translates into the balanced scorecard approach. performance measurement and management at the supply chain level, process level and task level is described in this chapter. using performance measurement and management as the key concept this book brings together a plethora of ideas and connects them. it makes a strong case for construction companies to pay attention to productivity and effectiveness simultaneously. with over 450 pages and well over 400 references this book is a single source of extensive knowledge on managing construction performance. professor anil sawhney school of the built environment, university of technology sydney title page a conceptual approach to studying the organisational culture of construction projects thayaparan gajendran, (the university of newcastle, australia) graham brewer, (the university of newcastle, australia) andrew dainty, (loughborough university, uk) goran runeson, (university technology of sydney, australia) abstract studying the culture of project organisations requires a robust theoretical framework, which provides a platform for generating understanding. it is proposed that cultural analysis frameworks are most effectively conceptualised from multiple philosophical and multimethodological positions. the goal of the present paper is to describe a cultural analysis framework for studying construction project organisations, based on a synthesis of the culture literature. four key aspects underpinning organisational cultural frameworks are explored: the paradigms used to conceptualise organisational culture, the methods by which individuals represent and assess cultural dimensions, the cultural perspectives assumed by the observer when defining and describing culture, and the managers’ orientation toward culture in their organisations. the proposed framework comprises three synthesised cultural philosophical positions: integration-technical, differentiation-practical and fragmentationemancipation. these philosophical positions span the polar extremes defining the cultural paradigm continuum, which and when combined provide researchers and organisational managers with a sound foundation from which to study the culture of project organisations. keywords: culture, cultural analysis, project organisation, integration, fragmentation introduction attention to cultural issues in the construction industry, both in the form of permanent and temporary project organisations, has gained significant momentum in recent times (fellows 2010). moreover, the increasing internationalisation of construction also warrants better understanding of cross-national cultural practices (tijhuis and fellows 2012). industry reviews (e.g. latham 1994; egan 1998) have cited culture as an impediment to the industry’s functioning and wellbeing. in the light of such reviews, researchers have focused on studying issues perceived as being connected to culture with the view to improving industry performance. however, the tendency to treat culture solely as a variable that can be manipulated for improvement is not an amenable enough conceptualisation of culture to shed meaningful insight into the ills of the construction industry (green 2011). the culture as a variable within an organisation or project, the ‘functional’ paradigm, is amenable to control and thereby could contribute to organisational performance. evaluation of selected literature reveals that the key motivation of cultural studies in construction was to develop empirical understandings of the impact of culture upon different construction industry issues, to assist with some form of performance improvement. although performance focus is critical for organisational development, studies focussing solely on manipulation of culture for performance improvement will not develop adequate and meaningful understanding of project organisations (alvesson 2002). one of the cultural research issues focused on since the nineties is managing the adversarial attitudes arising out of procurement (cheng et al. 2004; walker et al. 2001) and contractual (phua & rowlinson 2003) approaches to improve the landscape of the construction industry. impact of the differences in the cross-national cultures on construction organisations (pheng & yuquan 2002; ling, ang & lim 2007; zou et al. 2007; ankrah, proverbs, & debrah 2009) is another key research issue that is focused on project australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 2 improvement. cultural studies also centre on developing an understanding of professional cultures (ankrah & langford 2005), including behaviour of professions (liu & fellows 2008) and ethical disposition of professions (liu, fellows & ng 2004). cultural issues associated to improved knowledge transfer in project organisations (brochner, rosander & waara 2004), topologies of corporate culture of construction firms (igo & skitmore 2006) and motivational aspects in the construction workplace (smithers & walker 2000; hartmann 2006) have also been studied. in the same period, influence of culture on ict system implementation (anumba et al. 2006) and construction safety (root 2005; nielsen 2007) was explored. most of the above studies, although having mobilised various methodological approaches, essentially seek to understand, or change, cultures (cheung et al 2011; price & chahal 2006) for improved performance of project organisations; a position closely associated to the functional paradigm. despite the empirical contributions of these recent studies to the understanding of the impact of culture in project organisations, it can be argued that use of a non-functional approach (adriaanse and voordijk 2005; rooke, seymore & fellows 2003, 2004) to study culture, could provide an attentive lens. essentially, researchers assume a philosophical position(s), explicitly or implicitly, when conducting cultural studies. their position(s) will influence the choice of methodologies employed to assess culture. as way of example, research that uses existing frameworks such as hofstede’s cross-cultural analysis framework (see hofstede 2010) and carmon and quinn’s competing values framework (2006), are grounded in functional paradigm. although proven popular, these frameworks are set in a pre-determined singular philosophical position, offering limited flexibility for researchers wishing to combine multiple philosophical positions. moreover, nakata (2009) suggests that it is time to look beyond hofstede for constructing alternative cultural frameworks for global marketing and management. this paper offers a conceptual ‘cultural analysis’ framework that serves dual purposes in analysing organisational cultures. firstly, it simplifies and guides cultural studies of organisations, providing a framework against which cultures can be defined, evaluated and understood. secondly, it assists in designing a suitable cultural assessment approach, from multiple cultural philosophical positions, to study cultures in practice. it will be argued that a more in-depth and comprehensive understanding of organisational cultures within construction project organisations can be garnered from such a cultural analysis approach. cultural assessment: a background complicating this cultural framing is the fact that a single definition of culture does not exist, and the characteristics of culture have not yet been consistently agreed upon. despite this lack of agreement, consistent efforts have been made in recent years to transcend the intellectual debate through a broad conceptualisation of culture (e.g. martin, frost & o’neill 2004) focusing on the underlying assumptions, beliefs and values (referred to as ‘cultural manifestations’) of groups. these factors are transmitted as cultural meanings that guide the way a group thinks, feels and acts. the culture of an organisation can then be characterised, based on to what extent the ‘underlying beliefs’ are shared and other associated cultural manifestations within a group and among groups (schein 2004; alvesson 1993a, 1993b, 2002). the level of harmony or ambiguity will be reflected in the environments in which the group(s) operates. cultural analysis accommodates multiple philosophical positions, allowing researchers to engage with culture by drawing on differing theoretical standpoints (martin 2004). this paper constructs such a synthesised cultural analysis framework by drawing from a number of philosophical positions, an approach which assists in the investigation of cultures as part of project organisations. initially, two cultural paradigms, ‘functional’ and ‘non-functional’, are australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 3 discussed to explain the fundamental difference in the way culture is conceptualised in organisational studies. various levels of cultural manifestation are identified, including their characteristics and how they represent organisational culture, resulting in a number of definitions of culture being presented. the discussion then leads to three cultural perspectives: integration, differentiation and fragmentation, that conceptualise culture according to the ways in which cultural manifestations are shared in organisations. the three cultural philosophical orientations (a) technical (b) practical and (c) emancipatory, are introduced in order to illustrate how each perspective tends to deal with culture. finally, these three perspectives and orientations are synthesised to form a cultural analysis framework, philosophical positions that provides a unique and comprehensive approach to studying specific project organisations. culture in organisations: a review of the cultural paradigms the literature on organisational culture shows an enormous variation in the conceptualisations, definitions and approaches of research, due to the influence from various disciplines and schools of thought (alvesson 2002; martin, frost & o’neill 2004; rousseau 1990). philosophical conceptualisations of culture are generally divided between; (a) the concept of real, objective and functionalist ‘out there’ phenomena (davis 1985; deal and kennedy 1988; denison & mishra 1995; ouchi 1981; peters and waterman 1982) and (b) a non-functional paradigm for thinking about the social world or social reality in organisations (smircich 1983b, 1985; smircich & calas 1995; morgan 1980; alvesson 1987; denison 1996). the difference in cultural research methodologies is underpinned by the expected outcomes of cultural studies; that is, whether the outcomes are ‘context specific’ or ‘generalisable to the population’. generally, researchers who ascribe to quantitative research (e.g. statistical inference, large sample sizes, reliability and validity measures) seek generalisable cultural analysis outcomes. however, researchers who undertake qualitative research and context specific analysis (e.g. ethnography) argue that the goal of cultural analysis is to provide an interpretative frame within a cultural context (martin 2004). these methodological divisions are also reflected in conceptualisations of organisational culture. as indicated previously, these concepts are divided into two polar categories—the functional and non-functional view, as smircich (1983a: 354) describes below: some researchers give high priority to the principles of prediction, generalisability, causality, and control; while others are concerned by what appear to them to be more fundamental issues of meaning and the process by which organisational life is possible. arguably, combining these perspectives through a blend of both approaches offers a more complete understanding. although this raises issues around the commensurability of the knowledge that they respectively generate, such a suggestion is broadly in line with wider assertions as to the need to mobilise multiple perspectives in project management research in the pursuit of ‘middle range’ theories (söderlund 2004; green and schweber 2008). culture as a variable vs. root metaphor: the difference between functional paradigm and non-functional paradigm viewing culture as a variable subject to conscious manipulation, provides a simplified and functional approach to cultural understanding. from this perspective, it is possible to manage culture and to link culture to organisational performance implying a causal relationship. researchers who embrace the ‘variable’ view of culture rely on a traditional functionalist framing of social reality, approaching culture as one variable among many others (communication, organisational structure, strategy, etc.) in an organisation. this australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 4 approach also asserts that organisational operations are embedded in cultural symbols (e.g. rituals, values or norms) and that through the modification of member behaviours, changes in organisational outcomes can be achieved. therefore, studies of culture that adopt this view propose that culture is linked to organisational performance. moreover, positive virtues, attitudes and behaviours are claimed to be useful in achieving corporate goals and these relevant dynamics can, and should, be manipulated for corporate performance (deal and kennedy 1988; ouchi 1981). in the functional view, instrumental reasons dominate the discussion of culture, with the emphasis on economic growth, advancement of technology and the exploitation of nature (deal and kennedy 1988; ouchi 1981; ouchi & wilkins 1985; wilkins 1983; wilkins & ouchi 1983; o’reilly, chatman & cadwell 1991). according to alvesson (2002), this has led to research on corporate culture, which focuses on values that directly relate to the organisation’s effectiveness and state of success. he argues against equating the ‘strong’ cultures, which are characterised as advantageous to firms, to those ‘valuable’ cultures that foster ‘good’ performance in general (e.g. values supportive of excellence, team work, profitability, honesty). the consequence of the functionalist approach is that culture is reduced to those limited aspects that are perceived to influence organisational efficiency. researchers who avoid such notions of a causal link between culture and organisational performance argue that this view is simplistic and seriously underestimates the theoretical potential and value of culture (alvesson 1993b, 2002; meyerson 1991a, 1991b, 1994; meyerson & martin 1987; geertz 1975). they favour a non-functional approach to culture whereby culture is ‘thickly’, or more comprehensively, described. such ‘thick descriptions’ do not merely attempt to explain human behaviour, but its context as well, such that the behaviour becomes meaningful to an outsider. this notion of ‘thick descriptions’, originally coined by clifford geertz to describe his ethnographic methodology (geertz 1975), has gained widespread recognition in the social sciences and beyond. in organisational studies, this paradigm supports the study of the informal aspects of organisations—aspects that may be obscured, paradoxical and contradictory. thus, such descriptions offer radically differing perceptions of culture and its consequences within organisations, as has been revealed within a project context (de bony 2010). contrary to the view that culture is something that an organisation can possess and command, proponents of the ‘root metaphor’ view stress that the organisation is itself a culture, or a collection of cultures. this philosophical position has its roots in anthropology and sociology (geertz 1975). the proponents of a ‘root metaphor’ approach argue that cultures are organisations—whereby culture is a context in which social events, behaviours, and institutions materialise. smircich (1983a, p 348) describes this approach below: culture as a root metaphor promotes a view of organisations as expressive forms, manifestations of human consciousness. organisations are understood and analysed not mainly in economic or material items, but in terms of their expressive, ideational, and symbolic aspects. according to this view, the social world is constructed by people and reproduced by the networks of symbols and meanings that people share (burrell & morgan 1979). the root metaphor conceptualisation of culture emphasises a more general understanding of, and reflection upon, cultural settings. advocates of the root metaphor approach oppose the view that organisational effectiveness can be attained through direct cultural manipulation, as this fails to address the negative features of peoples’ behaviour such as resistance to change. those who adopt this approach shun simplistic, objectivist, functionalist views of culture which link culture to performance, preferring a practical/blended conceptualisation of culture. such a perspective has been mobilised in project management research with respect to managing cultures (see marrewijk 2007; marrewijk et. al. 2008). australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 5 cultural manifestations the two key paradigms of culture described above are also associated with certain cultural manifestations and definitions. manifestations are a critical component of the conceptualisation of culture as they are the aspects that enable culture to be felt, o bserved and deciphered. the literature suggests that culture can be assessed via different levels of cultural manifestation (e.g. shallow to deep). the level of manifestation also impacts on the ability to decipher and study culture. marrewijik (2007) and cheung, wong and wu (2011) have discussed the use of cultural manifestations in relation to project management research and emphasised the need for using appropriate manifestations to decipher culture. levels of cultural manifestations researchers hold varying views on the manifestations that represent culture. this has led to the classification of cultural manifestations into a number of levels, each based on how deeply and accurately they decipher cultures. hofstede (1998a, p. 479) indicates that: culture is a characteristic of the organisation, not individuals, but it is manifested in and measured from the verbal and/or non-verbal behaviour of individuals—aggregated to the level of the organisational unit. the cultural model in figure 1(a), developed by hofstede et al. (1990, 2001), identifies symbols, rituals and heroes as manifestations. he believes that these manifestations are exposed or brought to the surface by practices adopted by organisations. however, he proposes ‘value’ as a deep manifestation of culture and uses it to decipher cultures (hofstede 1998a; hofstede et al.1990). schein (2004) identifies a number of attributes that are used to describe culture. they include observed behavioural irregularities, group norms, espoused values, shared meanings, root metaphors, formal rituals and celebrations. however, schein (1984, 2004) articulated all attributes into three levels of cultural manifestations, namely ‘artefacts’, ‘espoused values and beliefs’, and ‘underlying assumptions’. a model developed by rousseau (1990), figure 1(b), is consistent with schein’s model, but identifies two more layers of cultural manifestations, namely ‘behavioural norms’ and ‘patterns of behaviour’. figures 1(a) & 1(b) different layers of cultural manifestations proposed by hofstede et al. (1990) and rousseau (1990) a: adopted from hofstede et al. (1990, 2001) b: adopted from rousseau (1990) australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 6 it is believed that artefacts, such as patterns of behaviour and behavioural norms, are the more visible parts of culture. values (that is, espoused values) are generally reflected in the goals and strategies of an organisation. the underlying assumptions/beliefs generally represent unconscious or taken-for-granted perceptions or beliefs. taken-for-granted assumptions are powerful and deep-seated, and are thus more difficult to detect than espoused values. based on their philosophical position, researchers employ different cultural manifestations to decipher culture. use of cultural manifestations in the assessment of culture the most appropriate manifestations to use to decipher culture are highly contested within the literature. early popular cultural studies (deal & kennedy 1988; peters & waterman 1982; ouchi 1981) focused on the outer layers of manifestations, such as artefacts and patterns of behaviour, and linked culture to organisational performance. these studies favour the ‘functional-variable’ paradigm of culture. schein (1993, 2004) and rousseau (1990), however, have stressed the importance of in-depth understanding, labelling artefacts as ‘superficial’. indeed, schein (1984, 1990, 2004) discourages the analysis of organisational culture through the ‘visual artefacts’ of the constructed environment (e.g. the architecture, technology, office layout, dress code, behaviour patterns, public documentation, employee orientation and stories). alvesson (2002) also agrees that employing artefacts in cultural analysis can be misleading. for example, he suggests that trying to understand organisational culture by studying the coffee breaks, dress code, and meeting arrangements, may not give the best insight into culture. both schein (2004) and alvesson (2002) argue that the surface level cultural data are easy to obtain but difficult to analyse and decipher. although this level of analysis describes behavioural patterns, it does not explain why a group behaves in a particular way. to explain why the artefacts and patterns of behaviour have certain characteristics, studies need to analyse the underlying assumptions/beliefs and values. therefore, it is suggested that a study of culture should focus on the underlying, or ‘taken-for-granted’ assumptions and orientations, rather than the customary behaviour of a group of people. understanding the underlying assumptions will enable identification of the reasons for conflict, ambiguity and self-contradiction in organisations and groups (meyerson & martin 1987; alvesson 1993b). extracting deep and inner layers of manifestations generally involves ethnographic methodologies and interviews with key members of an organisation (morse & richards 2002; schein 1993). cultural perspectives and orientations in addition to manifestations of culture, there is also a range of cultural perspectives that emerge from the paradigms of culture. the cultural definitions can be clustered into three cultural perspectives integration, differentiation, and fragmentation as proposed by martin (1992, 2002, 2004) that span the two extreme intellectual cultural paradigms. the three perspectives act to distinguish cultures based on how cultural manifestations are shared among the unit/organisation (the ‘shared nature of culture’). the cultural definitions, by associating cultural perspectives, also differ based on their view of how cultural manifestations should be, or are, shared within a cultural unit (martin 2004). in revealing organisational cultures, it is important to give attention to the role of the cultural perspectives as they provide an account of the mind-set or belief influencing different forms of cultural studies. the kind of cultural understanding developing in the project management domain is deeply rooted in the way the cultural studies are designed; essentially, which of the above perspectives is adopted by the researchers. the key aspects that distinguish the three cultural perspectives are; how culture is shared, how boundaries are conceived, and how ambiguity is associated in organisations. australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 7 in addition to the perspectives, culture literature also discusses three types of cultural orientation to demonstrate approaches; technical, practical and emancipation, that organisations employ to intervene with culture. these three cultural orientations distinguish intervention approaches e.g. ‘control’ to manipulate culture or ‘emancipate’ to transform cultures based on the assumptions of how cultural manifestations should be shared among the unit/organisation (alvesson 2002). shifting from technical and practical, to emancipation orientations also relates to a move from ‘culture is controllable/pro-management of culture’ to ‘culture is not controllable/anti-management of culture’ (alvesson and willmott, 1992). a philosophical framework for cultural analysis based on the above discussion, it is clear that the most effective cultural analyses attempt to decipher culture from deeper manifestations and assess whether they are consistent (shared) or inconsistent (not shared) with other cultural manifestations in organisations. project organisational culture can be comprehensively described as follows: culture is a set of deeply held beliefs or underlying assumptions possessed by the individuals that make up groups in organisations, which provide a means to understand the values, behaviours and artefacts exhibited by the group. the underlying cultural beliefs that manifest themselves in groups in an organisation may be in harmony (shared) or in conflict (unshared), sometimes displaying apparent ambiguity, paradox or contradiction. the level of harmony or ambiguity among beliefs, values, behaviours and artefacts will impact upon the emergent culture and shapes organisational environments in which the group operates. in support of the above cultural description, a cultural analysis framework, developed as part of a synthesized outcome of this review, identifies three philosophical positions in relation to conceptualising, interpreting and managing culture. overview of the conceptual framework for cultural analysis the framework presented in table 1 presents three philosophical positions from cultural studies: integration-technical, differentiation-practical and fragmentation-emancipatory. in essence, two philosophical paradigms proposed by smircich (1983a) are aligned to martin’s three cultural perspectives to provide a platform on which to build a cultural analysis framework. three cultural perspectives, namely integration, differentiation, and fragmentation are used to explain how culture is conceptualised and how cultural environments are described. the alignment of smircich’s paradigms with martin’s concept of cultural perspectives will assist in interpreting cultural environments and the outcomes of cultural analysis. martin (1992, 2002) smircich (1983a) willmott (1997) knights & willmott (1987) alvesson (2002) hofstede (1998a) schein (2004, 1993) rousseau (1990) cultural perspective cultural paradigm cultural orientation cultural manifestations integration culture shared across entire unit differentiation culture shared by parts of the unit fragmentation culture may or may not be shared culture as variable (functional  culture as a root metaphor (non-functional) technical removal of formal irrationality practical removal of misunderstanding emancipatory removal of socially unnecessary suffering artefacts (symbols, rituals, heroes) patterns of behaviour behavioural norms espoused values underlying assumptions/ beliefs table 1 cultural analysis of organisations: a synthesis and research framework australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 8 in table 1, three types of cultural orientations outlined by willmott (1997) and alvesson (2002) are aligned with martin’s (2002, 2004) three perspectives of culture the three cultural orientations, namely technical, practical, and emancipatory are used to explain how to manage or make meaning of cultural environments. the first orientation relates to the functional/variable paradigm while the last relates to the non-functional/metaphorical paradigm. along with these cultural positions, differences also emerge in the manifestations used to decipher culture and the ontological/methodological approach taken to assess culture of project organisations (hofstede 1998a; schein 1993, 2004; rousseau 1990). perspective/ attributes integration differentiation fragmentation relationship to manifestation consistency exists among cultural manifestations. various levels in the hierarchy display similar viewpoints. culture is monolith, integrated and homogeneous consistency and inconsistency among cultural manifestations exists at different levels. this promotes differentiation and diversity at group and individual level. lack of clarity of consistency or inconsistency among cultural manifestations. degree of consensus organisation wide consensus on issues among all members of the organisation. culture as shared across the organisation consensus exists within subcultures but not between them. culture as shared within groups but not across an organisation issue-specific consensus and confusion among individuals. overall lack of consensus. culture unshared in the organisation orientation to ambiguity excludes ambiguity. culture is defined in a way that denies ambiguity. it assumes that culture is about agreements because values are shared. channels ambiguity to outside subculture. culture is often emphasised by disagreements. acknowledges ambiguity. ambiguity is accepted as inevitable and continues. it is part of the usual way of doing business. perspectives/ attributes integration differentiation fragmentation orientation/ attributes technical practical emancipatory focus the focus is to identify and manipulate cultural variables to generate the intended culture. the focus is to generate and interpret symbolic communication to assist cultural understanding the focus is to expose domination and exploitation aspects of a culture process the emergence/ management of culture is influenced by a ‘calculation’ process that enhances prediction and control the emergence/ management of culture is influenced by an ‘appreciation’ process that improve mutual understanding the emergence/ management of culture is influenced by a ‘transformation’ process that develops more rational social relations outcome the outcome of this orientation is the removal of formal irrationality in organisations the outcome of this orientation is the removal of misunderstanding the outcome of this orientation is the removal of socially unnecessary suffering orientation/ attributes technical practical emancipatory figure 2 three philosophical positions on culture: a snapshot (martin 1992, 2002; willmott 1997; alvesson 2002) the cultural analysis framework presented in this study linking the three cultural perspectives (martin 2002) to manifestations (denison 1996; hofstede et al. 1990; schein 1990) and to paradigms (alvesson 2002; smircich 1983a) provides a comprehensive basis to analyse culture. this framework can be employed to study a cultural situation whereby the cultural environment is conceptualised through harmony (integration), conflict between groups (differentiation) and webs of ambiguity, paradox, and contradiction (fragmentation). conceptual blind spots in each of these perspectives on culture (for example, the integration view is blind to ambiguities, and the fragmentation and differentiation views are blind to that australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 9 which most cultural members share) are dealt with when a study is approached with a combination of all three perspectives (martin 2002). figure 2 (an elaboration of table 1) summarises the essence of the cultural descriptions attributed to the three cultural perspectives, while linking them to cultural orientations. the following discussion compares and contrasts the alternative philosophical positions and synthesises a cultural analysis framework. the above conceptualisation of culture can also assist in designing the empirical component of a study. this can assist in developing research instruments (e.g. survey questions, observations, and interview) by identifying the boundaries of theoretical constructs and the sample selection by identifying the members and physical scope of the units of analysis. moreover, these conceptualisations can assist in identifying the appropriate blend of methods to study the relevant constructs. this framework could enable researchers to contextualise their research direction and practicing managers to contextualise the proposed solutions to problems. it is argued that all three philosophical positions identified in the framework play a role in finding practicable solutions to construction industry problems (see gajendran and brewer 2007). the following section characteristics of project organisations as a base to discuss the application of the cultural analysis framework to study culture in construction. the integration-technical philosophical position although studies in construction culture have not argued for an explicit unitary project culture, they do seek to develop and extend shared culture by the way of focusing on integration within organisations. researchers have assumed this position in an attempt to remove irrationalities in the construction process and seek improved project outcomes. both in construction (e.g. baiden, price & dainty 2006; dainty, briscoe & millett 2001a; london 2008; winch 1989, 2001; winch, ushani & edkins 1998) and mainstream literature (e.g. berggren, soderlund & anderson 2001), there is a focus on the need for greater integration across project organisations to deal with fragmentation. these studies generally focus on coordination and monitoring of the diverse groups of participants and their operations in a construction project, proposing systems to monitor the progress made towards the achievement of the stakeholders’ goals. moreover, they suggest that shared expertise is a key characteristic of an integrated team, promoting free sharing of information among different units and developing the ability to predict project time and costs accurately. therefore, integration-technical position is assumed in studies that focus on fragmentation within teams, firms and across project supply chains, in order to promote aligned and improved project outcomes. integration perspective the ‘integration’ perspective belongs to the functional paradigm. it seeks to understand the shared cultural manifestations in an organisation that hold it together, i.e. the ‘glue’ that holds different and diverse groups together in an organisation (alvesson 2002). therefore, ‘integrated’ perspectives favour definitions of culture that view cultural manifestations as shared across an organisation/unit in its entirety, where ambiguity is non-existent or ignored. from this perspective, culture is considered as something that is shared by, or is unique to, a given group or organisation. the opposing ‘fragmentation’ perspective, belonging to the non-functional paradigm, argues that organisations, by nature, are paradoxical, hindering development of a unitary shared culture. it assumes that organisations cannot exist without ambiguity and that any ambiguity should not be ignored. in many studies that support an integration view, culture is associated with peoples’ customary behaviour and their habitual ways of seeing the world (wilkins 1983; schein 2004). in this way, schein (2004, p. 17) characterises culture as australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 10 a pattern of shared basic assumptions that was learned by a group as it solved its problems of external adaptation and internal integration, that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think, and feel in relating to those problems. schein (1984, 1993, 2004) further suggests that groups learn culture by forming ‘shared assumptions’; they solve problems through interpreting and acting upon the environment while integrating internal operations. in a similar vein, wilkins (1983, p. 26) proposes culture primarily as the ‘givens’ or the taken-for-granted and shared assumptions that people make about how work is to be done and evaluated and how people relate to one another (…) the way we see the world is applied unthinkingly as the underlying assumptions develop, and most others in the organization or the unit also apply it in the same manner so it does not get challenged. davis (1984, p.1) further argues culture is ‘the pattern of shared beliefs and values that give members of an institution meaning, and provide them with the rules for behaviour in their organization.’ in essence, any idealistic organisational integration studies will be rooted in the belief that a project organisation should develop a shared understanding aiming for a unitary culture, implying that the lack of such shared understanding is a problem. it is argued that supporting integration in organisations, through modifying rules of behaviour will deliver strong cultures that enhance organisational profitability (kotter & heskett 1992; peters & waterman 1982; denison & mishra 1995; latham 1994; egan 1998). although the integration perspective, in terms of a unitary culture, is not widely endorsed by cultural researchers, using tools to manage cultures for enhanced performance is popular. culture–performance link most of the proponents of the integration perspective propose that culture can be used as a ‘tool’ to improve the performance of an organisation. some argue that many of these studies use outer layers of cultural manifestations (refer figure 1) to interpret culture (simircich 1983, alvesson 2002). for example, deal and kennedy (1988) focus on interpreting the shared espoused values of top management (e.g. mission statements) and ouchi (1981) focuses on studying the shared formal or informal practices such as communication or decision-making. popular literature on organisational culture in the 1980s generally subscribes to this integration perspective, relating ostensible artefacts, symbols and stories to the generation of organisation-wide consensus of cultures and values (barley 1983; schein 1984; martin 2004; schein 2004). significant proportions of cultural studies relating to project organisations also make culture-performance links (see cheung, wong and wu 2011; ankrah, proverbs and debrah 2009; andersen 2003; zhang and liu 2006; baiden and price 2011). the unconscious attraction to adopt the ‘integration’ perspective in project cultural studies resonates from the argument for more integrated projects, which is closely associated to achievement of performance gains. moreover, the position that culture is controllable and can be manipulated for performance gains, conforms to the popular view and offers the appeal of tangible outcomes from cultural studies. some critiques of integration perspective in synthesis, the integration perspective may employ varying ‘cultural manifestations’ to decipher culture. however, its essence is in the consistency of cultural manifestation and the consensus about basic beliefs among the members of the group. there is also a tendency to focus on the leaders of the group as the creators and interpreters of the group’s culture (schein 1983; meyerson & martin, 1987). alvesson (2002) argues that the integration australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 11 perspective has a bias towards the positive functions of culture, that culture is controllable and has causal links to organisational performance. the image of organisations presented in an integration perspective (an image of organisation-wide harmony and homogeneity) is difficult to sustain, given the prevalence of real-life paradoxes, inconsistencies, disruptions, conflicts and ambiguities in contemporary organisations (martin 2004; meyerson 1991 a & b). indeed, one of the key criticisms of this perspective is the linear approach it takes to framing culture; including an over-reliance on symbols as functional elements of the organisation and the use of moral judgement to identify ‘good’ and ‘bad’ cultures (alvesson 2002). the integration perspective views any deviation from the ideal culture as a problem, which needs to be fixed. it is argued that inconsistencies (or subcultures) exist due to poor communication and, therefore, all that is required to remedy the lack of integration is a clear, shared understanding of the organisation’s vision/mission, careful supervision and a better performance measurement regime. the critiques of integration are overshadowed by the ‘fragmentation perceptive’ that evades moral judgements on culture and acknowledges paradoxes and ambiguity as an integral part of organisations. of course, not all integration studies deny deviation from the unitary culture (see wilkins 1983; schein 2004) and they take an intermediate position between integration and fragmentationthe ‘differentiation’ perspective. some cultural studies in project management (e.g. ankarah and langford 2005) favour the ‘differentiation’ perspective by focusing on sub cultures. although they shy away from arguing for a unitary culture within an entire organisation, they may assume unitary culture within each sub culture. technical orientation to culture the intention of a technical orientation is to fulfil the role of rational instrument to enhance prediction and control of functions in an organisation. this orientation focuses on the identification and manipulation of variables that are perceived to impact on an organisation’s performance (martin 2002; alvesson 2002; willmott 1997). therefore, most of the ‘technically-oriented’ literature on culture is optimistic, believing that managers can control the values of their subordinates to achieve effective behaviour—viewing culture as a resource for effective managerial action. for example, ouchi and wilkins (1985, p. 462) observed that organisations use the integrated notion of culture as a rational instrument to solve problems. therefore, culture is designed by senior management to profile the employees to fit the organisation’s espoused values. willmott (1997) states that the ‘technical’ cognitive orientation is based on ‘empirical-analytic science’, one that removes all aspects of formal irrationality from organisations, denies ambiguity and seeks to develop organisation-wide shared understanding. the expected outcome of ‘technically’ orientated intervention is to create an integrated culture. therefore, the technical orientation aligns with the integration perspective. although cultural studies in organisations do not explicitly assume technical orientation, their approach to culture is influenced by removal of irrationality (see young and pheng 2008; wong, wong and heng 2007; höök and stehn 2008; price and chahal 2006). argument for the integration-technical philosophical position although studies in construction culture have not argued for an explicit unitary project culture, they do seek to develop and extend shared culture by the way of focusing on integration within organisations. researchers have assumed this position in an attempt to remove irrationalities in the construction process and seek improved project outcomes. there is a focus on the need for greater integration across project organisations to deal with fragmentation in both construction (e.g. baiden, price & dainty 2006; dainty, briscoe & millett 2001a; london 2008; winch 1989, 2001; winch, ushani & edkins 1998) and mainstream literature (e.g. berggren, soderlund & anderson 2001). these studies generally focus on coordination and monitoring of the diverse groups of participants and their australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 12 operations in a construction project, proposing systems to monitor the progress made towards the achievement of the stakeholders’ goals. moreover, they suggest that shared expertise is a key characteristic of an integrated team, promoting free sharing of information among different units and developing the ability to predict project time and costs accurately. the differentiation-practical philosophical position differentiation perspective the differentiation perspective, unlike the integration perspective, accepts some level of diversity (in shared assumptions, or consensus) in the member groups of an organisation. that is, cultural manifestations are shared within sections of an organisation. therefore, the emerging cultural environment is ‘differentiated’an intermediate philosophical position between ‘integration’ and ‘fragmentation’ perspectives. consequently, ‘differentiated’ perspectives favour definitions in which cultural manifestations are shared within parts of an organisation (e.g. departments, groups etc.) and are unitary within those units/groups. in this perspective, ambiguity is acknowledged but confined to the subgroups (e.g. smircich 1983b; denison 1996; mills 1988; schein 1996; martin 2002). for example, denison (1996) suggests that values, beliefs and assumptions are the roots for the deep structure of organisations. meanings are established through socialisation that produces a symbolic world. this leads to the stable or fragile nature of culture based on the cognition and action of individuals. mills (1988) supports this view and suggests culture in an organisation is based on defined conditions, which could foster contradictions and conflict among segments. each segment, however, develops a shared understanding of the cultural manifestations. smircich, (1983b p.56) suggests culture is shared within a group based on how they develop a worldview: in a particular situation the set of meanings that evolves gives a group its own ethos, or distinctive character, which is expressed in patterns of belief (ideology), activity (norms and rituals), language and other symbolic forms through which organisation members both create and sustain their view of the world and image of themselves in the world. the development of a worldview, with its shared understanding of group identity, purpose, and direction is a product of the unique history, personal interactions, and environmental circumstances of the group. the differentiation perspective also acknowledges cultural variations within an organisation through growth or new ventures, and engagement with groups who are geographically dispersed and technically/functionally varied. therefore, as the age and size of the organisation grows, or makes connections with outer entities, differentiation occurs (gregory 1983). this view argues for the recognition of subcultures; however, it holds that subcultures have unitary or consistent shared understanding. schein (1990, p. 117) describes this perspective as follows: (…) once the group has many subcultures, its total culture increasingly becomes a negotiated outcome of the interaction of its subgroups. organisations then evolve either by special efforts to impose their overall culture or by allowing dominant subcultures that may be better adapted to changing environmental circumstances to become more influential. clearly, it is difficult to establish whether this perspective falls directly under the functional or non-functional paradigm, as research from both the integration (functional) and fragmentation (non-functional) paradigms acknowledge aspects of the differentiation paradigm, with some restrictions. the differentiation paradigm offers pragmatism pragmatic position in enabling researches to position their study between the extreme ideological views (that is ‘integration’ and ‘fragmentation’). australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 13 boundaries and subcultures in the differentiation perspective the differentiation perspective promotes the view that organisations are generally composed of a diverse set of subcultures that share some integrating elements of a dominant culture. the mix of sub cultures will depend on the nature of the environment in which the organisation operates and its internal composition (martin, sitkin, and boehm, 1985). in this view, an organisation is described as a collection of subcultures based on arbitrary boundaries. these boundaries, from a cultural point of view, are not defined in legal or formal terms but are based on identification, interaction and the development of shared meaning and ideas (alvesson 2002). the commonly used boundaries in cultural studies are physical location (e.g. head office, site, precast yard, etc.) and bodies (people are embodied with culture and they carry it) (santos & eisenhardt 2005; moore & dainty 2001). parker (2000) sees the origin of subcultures in different sources: spatial/functional (geographical location of work function ), generational, (age and length of time in the organisation) and occupational/professional training. hofstede (1998b), schein (1993) and jones (1983) identify a number of sub cultural classifications. schein (1996) characterises three types of subcultures, namely: operator, engineer, and executive and discusses the tensions between them. hofstede (1998) identify three sub cultures, namely professional, administrative, customer interface, along the six dimensions (process vs. results, employee vs. job, parochial vs. professional, open vs. closed, loose vs. tight, normative vs. pragmatic). the three subcultures discussed by jones (1983) include product, bureaucratic and professional. kumaraswamy et al. (2002) identified organisational, operational, professional and individualistic sub-cultures in the context of construction project organisations (c.f. ankrah, proverbs and debrah 2009). according to meyerson (1994) different professions generate distinct ideologies due to the embodiment of different cognitive and symbolic systems producing different rules, conventions and meanings. the ideologies and approaches of the different professional subsystems come into contact when they work interdependently within organisations and as the actions and interpretations of their members negotiate and create order. as behaviours, interpretations, and justifications become adopted, they create an order that constitutes the particulars of that subculture, which reconstitutes the institutional system in a particular time and context. this explains the dynamic and complex sub-cultural taxonomies that emerge in construction organisations. martin (2002) argues that some literature assumes that the boundaries of a collective coincide with the boundaries of a culture. for example, an organisation’s culture is coincident with the boundaries of that organisation. however, this view is considered to be problematic as most collectivities may be holding boundary roles, temporary or virtual roles, etc. in the context of a project, boundaries of architectural, engineering, quantity surveying and contracting firms and their cultures may not provide a clear separation on how their cultures engender the culture of a project organisation. the virtual communication does, to some extent, express a culture without bodily contact between group members. moreover, temporary workers also violate traditional assumptions concerning subcultures in organisations, displaying an ambivalent relationship to the project and the associated organisation(s) (usdiken, soxen & enbiyaoglu 1988). evidently, the boundaries of cultures and project organisations cannot be simply equated or clearly defined; boundaries need to be viewed as dynamic and changing. in effect, boundaries have significant impact on emergent sub cultures in project organisation, at least from professional (see ankarah 2005; liu, fellows and ng 2004; akiner and tijhuis 2007, operational (see lansley and riddick 1991), and geographical boundaries (see bony 2010; pheng and yuquan 2002; toor and ogunlana 2008). in australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 14 addition, the temporary nature of project organisations elevates the tendency for more dynamic and transient boundaries (turner and muller 2003; turner 2006). the emergence of new and hybrid procurement arrangements generates different natures of boundaries in each project, specifically from an operational point of view. ultimately the inherent nature of the project environment poses significant challenges in developing a coherent and static understanding of sub cultures, pointing cultural studies towards the fragmentation perspective. ambiguity and conflict in differentiation earlier discussion on boundaries highlighted the acknowledgement of the presence of inconsistencies as well as consistencies in cultural manifestations among sub cultures. therefore the differentiation perspective does not totally deny ambiguity in project organisations. instead, it channels ambiguity and conflict to subcultures, so that each subculture responds to a small part of the organisational complexities and uncertainties. the differentiation view acknowledges that subcultures may conflict with the dominant organisational culture or may be orthogonal to a dominant culture, reflecting differences in functional, national, and occupational or project affiliations. a ‘conflict and claims culture’, partly arising from ambiguity, is an area that has concerned the construction sector. most studies channel conflicts arising from ambiguities to sub cultures: such as client, contracting, quantitative surveying, estimator sub cultures (see rooke, seymour and fellows 2003; loosemore 1999a; ankrah and langford 2005). the ambiguity focus of these studies remains on those sub-cultural aspects that are ostensible. research assuming differentiation perspective is not too far removed from the oversimplifications of the integration perspective. consistency and clarity still predominate within a culture, and ambiguity is only prevalent among subcultures. in essence, the differentiation perspective in cultural studies arises from the view that cultural manifestations are shared within subgroups, but shared among partly among the groups. therefore, cultures are not considered monolithic, but are treated as a collection of subcultures (martin 2004; schein 2004; ankrah, proverbs and debrah 2009). in the differentiation view, multiple sources influence culture generation rather than an individual leader, as in the integration view. this creates multiple subcultures that share common histories or assumptions within an organisation (martin 2004). studies on the differentiation perspective have revealed that in an organisation, tensions could exist between subsystems of subcultures; for example: managers versus site workers, young versus older workers, consultants versus contractors, contractors vs. sub-contractors (awakul and ogunlana, 2002). the attraction to adopt this perspective in cultural studies resonates from the argument for managing boundaries and national/professional cultures for enhanced project understanding. more specifically, to deal with conflicts (that may arise from ambiguity) between different groups of members in project organisationsthat is to deal with different sub-cultures. the belief that sub-cultures are controllable and can be manipulated for aligning the interests of the project organisation, offers the appeal of tangible outcomes from cultural studies, as in the integration studies. however, the nature of the project organisational environment, particularly the complex transient boundaries and uncertainties, advocates conceptualising culture of organisations from the fragmentation perceptive. although, extreme non-functional fragmentation studies do not believe in the existence of any form of shared culture within organisations, most studies shy away from this extreme stance. the practical orientation to culture the ‘practical orientation’ to culture does not take an optimistic view of culture as technical orientation. moreover, it does not advocate that managers can control the values of their australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 15 subordinates to achieve effective behaviour (alvesson 2002). by acknowledging misunderstanding, this orientation accepts ambiguity and intends to remove it through symbolic communication. this non-functional orientation to culture contests the idea that management effectiveness can be attained through cultural manipulation and emphasises the importance of generating a more holistic understanding and reflection of an organisation’s life. by assuming this emphasis, a ‘practical orientation’ to studying organisations involves observing and interpreting organisations through ‘appreciation’ rather than ‘calculation’ (willmott 1997). this orientation, therefore, aligns with the ‘differentiation’ perspective on culture (martin 2002). in the differentiation perspective ambiguity is acknowledged, but confined to the subgroups and sub cultures (martin 2004). here, meanings are established through socialisation that produces a symbolic world and leads to the stable or fragile nature of culture that fosters contradiction and conflict among subcultures. the aim of the practical orientation is, ‘to achieve common interpretations of situations [for] coordinated action’ (smircich 1983a, p. 351) and associates closely with removing misunderstanding among sub cultures in an organisation to achieve coordinated action. the ‘practical’ orientation recognises and appreciates ‘questions of interpretation and description’ and explores the inter-subjective experience of organisation thus removing unnecessary misunderstandings in organisations. practical orientation, addressing communication issues to improve information flows (and thereby attempting to reducing misunderstanding), is widely adopted in construction project management (see phua and rowlinson 2003; loosemore and muslmani 1999; ochieng and price 2010). argument for the differentiation/practical cultural position research assuming this position focuses on improving communication in the construction process and to minimise misunderstandings. studies acknowledging the elusiveness of total integration and aiming for partial integration with selected firms, tiers, or groups that fall into this cultural position. this position can be argued for studies dealing with (e.g. professional, trade, informal groups) sub-culture of groups, lack of collaboration and trust among groups and those seeking understanding of communications between different sub-cultures (ankrah, and langford, 2005; loosemore and muslmani, 1999). these studies can assist in improving understanding between sub-cultures that lead to conflict mitigation and enhanced project collaboration. the fragmentation-emancipation philosophical position fragmentation perspective the third key perspective of organisational culture studies is ‘fragmentation’ (martin et al. 1983; meyerson and martin 1987; martin, 2004). this approach views culture as a disorder that contributes to dysfunctional aspects in organisational life—thereby, this approach aligns with the ‘non-functional’ cultural paradigm (alvesson 1993b, 2002; meyerson 1991a, 1991b; feldman 1991). the fragmentation perspective accepts ambiguity, rather than denying or channelling it, and views organisational culture as inherently ambiguous leading to ‘fuzziness’ in organisational life (meyerson, 1991a, 1991b; alvesson 1993b; sveningasson & alvesson 2003). the fragmentation approach to culture is described aptly by meyerson (1991a p. 256) who notes that ‘culture was the code word for the subjective side of organisational life (…) its study represented an ontological rebellion against the dominant functionalist or “scientific’ paradigm”.’ ignoring this perspective in organisational studies according to meyerson (1991b) means ‘to dismiss the [informalities and] ambiguities in favour of strictly what is clear and shared. [this] is to exclude some of the most central aspects of the members’ cultural experiences and to ignore the essence of their cultural community’ (p. 131-132). recent literature in construction management has raised attention to the subjective informal, australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 16 aspects of project organisations (see chan & raisanen 2009; marrewijk 2008), highlighting the potential of such a perspective in developing a better understating of project organisations. meyerson (1991b, p.131-132) argues that, in reality: ( …) members do not agree upon clear boundaries, cannot identify shared solutions, and do not reconcile contradictory beliefs and multiple identities. here culture is characterised as a web, where individuals are nodes in the web–temporarily connected by shared concerns to some nodes and not to others. when a particular issue comes to the surface, certain nodes and patterns of connections become relevant. the emerging patterns of connection in an organisation will consist of agreements, disagreements, and ignorance. most importantly, from this perspective the inherently active and dynamic nature of culture is made apparent. the characteristics of project organisations resemble some of the above features. particularly, construction projects are characterised as loosely coupled systems with transient boundaries. in each project a web of temporarily connected organisations forms a project organisation to deliver a product or service (see turner and muller 2003; dubois, and gadde, 2002). although members of organisations are connected via a transient web, they believe they belong to a culture. meyerson (1991b, p.131-132) also argues that organisations: (…) share a common orientation and overarching purpose, face similar problems [e.g. project goalsdelivering a project within the established cost and timeframe with desired quality, while making profits], and have comparable experiences. however, these shared orientations and purposes accommodate different beliefs and incommensurable technologies, these problems imply different solutions, and these experiences have multiple meanings (…) thus, for at least some cultures, to dismiss the ambiguities in favour of strictly what is clear and shared is to exclude some of the most central aspects of the members’ cultural experienced and to ignore the essence of their cultural community. primarily, meyerson’s view is that organisational members do not necessarily display a high level of shared understanding, but can still share cultures through common orientations and purposes which accommodate different beliefs and ambiguities. unlike the ‘integration’ perspective, awareness of ambiguity is not experienced as a temporary stage during an organisational change process; rather, ambiguity is seen as a permanent state—'the way things are’. it is argue that this perspective adds a sound basis to cultural analysis of organisations by acknowledging ambiguities could be inherent and perpetual in organisations (meyerson & martin, 1987; martin 2002; alvesson 2002). therefore, cultural manifestations are not necessarily shared across or within sections of the organisation, creating a cultural environment that is ‘fragmented’. the approach fundamentally challenges the dominant idea that a culture (subculture) is a clear and known entity that creates unity and harmony within an organisation (or a group within it). in this perspective, irreconcilable interpretations are simultaneously entertained, paradoxes are embraced and the lack of a shared/integrated set of values is accepted as normal. here, relationships between manifestations are characterised by a lack of clarity caused by ignorance or complexity. any attempt to design organisational processes to resolve irreconcilable conflicts in organisations is regarded as a temporary and superficial ‘smoke screen’. the confusion emanating from inconsistent viewpoints and disagreements makes it difficult to draw cultural and subcultural boundaries. the boundary around the organisation then becomes amorphous and permeable, as various ‘feeder’ cultures from the surrounding environments fade in and out of attention (martin 2002). the difficulty in articulating the ever-changing patterns and ambiguities of culture makes the fragmentation perspective the most difficult to conceptualise (martin 2002). fragmentation australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 17 studies see ambiguity as the defining feature of cultures in organisations. as such, martin (2004) argues that understanding ambiguities should be the central component of any st udy of culture. however, the very nature of the fragmentation approach has resulted in very few researchers adopting it as a framework for organisational studies, due to its emphasis on uncertainty, contradiction and confusion and for acknowledging that some ambiguities cannot be eliminated (martin 2004). those who embrace the fragmentation perspective could argue the interpretations of the recommendations proposed by industry reviews (e.g. latham 1994 and egan 1998), in terms of embracing integration by controlling, manipulating and predicting cultures to address construction industry issues, is fundamentally flawed. this does not mean cultures cannot be changed. here, cultures are transformed via emancipation that liberates members from exploitation by making them aware of their traditionally held unconscious values. therefore, this perspective discredits the practice of manipulating and controlling cultures. defining ambiguity and sources of ambiguity in organisations and projects, managers frequently emphasise an informal, family-like community spirit. however, everyday practices and relationships often deviate from this ideal (alvesson 1990). in most instances, the term ‘organisational culture’ conjures the image of an organisation as being: typically unitary and unique, characterized by a stable set of meanings (…) arguably [however] cultural manifestations are far from always neatly organized, values not easily ranked and cultural ideas may be unsystematic and incoherent.(alvesson 2002, p. 145) meyerson (1991a) argues that in some cultures, boundaries are not agreed, shared solutions are non-existent, and members do not reconcile contradictory beliefs and multiple identities. this leads to lack of clarity in organisations with ambiguity as a figure (or antifigure) that emerges from this context. two types of ambiguities are identified in the literature, arising from:  a lack of clarity whereby ambiguity is felt as an internal state and occurs due to the absence of information once the information is available it vanishes; e.g. incomplete drawings/specifications could lead to ambiguity with respect to how a detail should be constructed. this kind of ambiguity is removed when the required information becomes available. however, not supplying the information within a reasonable period of time could lead to conflict and subsequent litigation (meyerson, 1990; meyerson & martin, 1987).  irreconcilable contradictions – in which ambiguity is the result of conflicts between individuals (or groups) which embrace two or more meanings that are irresolvable. e.g. irresolvable contradictions could emerge when a client and contractor attach different meaning to a product, process or situation (meyerson, 1990; meyerson & martin, 1987). in organisations, there is both unity and division in work relations depending upon the complexity of the surrounding environment, group membership and the degree of ambiguity in organisational rules and policies (see ankrah, and langford, 2005). although the fragmentation perspective is considered to be important, some researchers question the extensive use of this perspective, as fragmentation could be interpreted as no culture in an organisation (alvesson 2002). one could argue that fragmentation could be one of the perspectives for exploring cultures in organisations in the construction industry. however, construction organisations are underexplored from this perspective. adoption of this perspective could provide a meaningful approach to understand culture in construction. australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 18 the emancipatory orientation the ‘emancipatory’ cognitive interest is based on ‘critical science’ and intends to develop more rational social relations through realisation (alvesson 2002; knights & willmott 1992; willmott 1997). the focus of this mode is the exposure of domination and exploitation, therefore, it takes a ‘transformation’ orientation. that is, it endeavours to make members of a group aware of the emancipatory approach to investigate the negative features of organisational life and to develop an understanding of, and to counteract, the taken -forgranted beliefs and values that exploitation and domination that characterise relationships in their culture, while encouraging them to transform the way they operate. one outcome of this mode of analysis concerns the removal of ‘unnecessary suffering’ in organisations (willmott 1997). the main focus imposes limits on actions and interactions. this orientation provides insight into organisational life by grasping the traditional patterns and the repressive aspects of culture and may contribute to liberating the organisation from its traditional cultural environment. it includes understanding irreconcilable tensions between opposites, sometimes described as ironies, paradoxes, or contradictions (martin 2002). ambiguity studies, generally, view such occurrences as normal and salient, and part of the organisation’s function. this orientation, therefore, aligns with the ‘fragmentation’ perspective on culture in that ambiguity is acknowledged as an inherent part of an organisation, and views organisational culture as inherently ambiguous leading to ‘fuzziness’ in organisational life. therefore, the organisations face contradictions and paradoxes (e.g. through information conflicts, un reasonable risk exposure) contributing to unnecessary suffering of members. such suffering, from a construction point of view, includes the culture of claims, litigation, unsafe practices and other forms of exploitation etc. by liberating the members of the organisation from taken for granted assumptions, unnecessary suffering can be minimised. although the emancipatory approach does not relate to business results directly, it nevertheless, influences people in relation to their ways of constrained thinking and acting. therefore, the purpose of emancipatory cultural studies is about liberating human potential or, more defensively, illuminating the obstacles to emancipation. encouraging critical reflection on beliefs, values and understanding of social conditions becomes the prime task of this cultural orientation. this orientation is underexplored in construction project management. argument for the fragmentation-emancipatory cultural position clearly, when culture is discussed in the project literature, fragmentation is most often associated with transient boundaries, ambiguity and conflicts. however, studies of project organisations cultures based on a fragmentation emancipation position are not common in construction. the complex characterisation of culture along with no explicit link between project performance enhancements makes this perspective unattractive. nevertheless, burgeoning interest can be sensed in certain elements of these approaches in studying issues such as conflicts (e.g. awakul & ogunlana 2002; loosemore, nguyen & denis 2000; rooke, seymour & fellows 2003), disputes (e.g. loosemore 1999a, 1999b), claims (e.g. rooke, seymour & fellows 2004), and general fragmentation emanating from industry structure, information and attitude (marrewijk et al 2008). this position does not believe that culture can be fully manipulated or controlled to achieve desired outcomes; rather cultures are transformed by emancipation. change management literature suggests that managers are neither in total control of cultures nor without any influence for transforming cultures. moreover, acknowledging that some of the initiatives to remove irrationality are smoke screens that are not sustained with timebut rather seek solutions acknowledging paradox and chaos can provide a new range of initiatives in projec t management. this means, empowering members of a culture to transform traditionally held australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 19 beliefs resulting in exploitative outcomes into new egalitarian beliefs producing co constructed outcomes. there is a need for future cultural studies to explore this perceptive and to understand the process of cultural transformation in inherently fragmented organisational contexts. contextualising cultural analysis in construction organisations this paper argues that cultural studies can adopt a single philosophical position or mix of positions. the characterisation of organisational issues to be studied is fundamental to identify a suitable cultural position(s) to conduct meaningful cultural studies. it is arguable that the worldview (e.g. objectivist-subjectivist) of the researchers/managers/authors characterise the way in which the organisational issues are approached. however, adopting the pragmatism view using multiple or mixed research methods (creswell and clark 2007) enable to maintain a balance among different ideologically extreme worldviews. construction organisations are inherently unique and fragmentedsubjected to boundaries and multiple stakeholders (lam et al. 2007; rahman & kumaraswamy 2005; gajendran 2010). the stakeholders play a critical role in characterising the culture: by having organisational goals that are not shared across the project organisation, stakeholders can create unnecessary boundaries between members and, thus, bring fragmentation (usdiken, soxen & enbiyaoglu 1988; cox 1996; cox & thompson, 1997; walker & wing 1999; dainty, briscoe & millett 2001a, 2001b). indeed, hansfield and nichols (1999) point to poor alignment of organisational cultures as the factor adversely affecting integration, a point broadly supported in the literature (see baiden, price & dainty 2006; dainty, briscoe & millett 2001a; voordijk, meijboon & haan 2006). studies into project organisations have proposed numerous initiatives for integration, to address the ills caused by fragmentation (see latham 1994 and egan 1998). extensive focuses on removal of irrationality or manipulation of culture to improve performance may not yield the expected outcomes. by nature, construction project organisations are paradoxical and contradictory, generating ambiguity and leading to conflicts (chan and raisanen 2009; marrewijk et. al. 2008). such inherent characteristics of project organisations, e.g. paradoxes, boundaries, and ambiguity cannot be totally eliminated; rather, project organisations need to be studied and managed within those constraints. it is important to note that implementation of any initiatives or solutions to deal with fragmentation are also subject to the fragmentation of the construction industryto some extent beyond the control of organisations. not contextualising the cultural studies without appropriate acknowledgment to inherent fragmentation could lead to failed or ineffective outcomes. therefore, with any integration initiative, due consideration needs to be given to the project characteristics that generate fragmentation, in order to facilitate more effective integration (or reduction of fragmentation) (charoenngam et al. 2004; chatman & jehn 1994). conclusions theoretical perspectives should drive project management practice as much as empirical enquiry. although cultural studies have mobilised various methodological approaches in the project management domain, the point of departure for this research is that they have predominantly been conceptualised within the ‘functional’ paradigm, and driven by empirical inquiry. these approaches invariably treat culture as a feature of an organisation or project, which is amenable to conscious control and manipulation towards performative outcomes. moreover, these offer limited flexibility by prescribing a singular philosophical position from which to observe culture. in contrast, by reviewing cultural studies literature as applied to organisations this paper has synthesised a robust theoretical platform for understanding the culture of projects and organisations. it concludes that when investigating cultural environments adopting the ‘non-functional’ paradigm: facilitates the better understanding of individuals’ behaviour within group settings, therefore allowing project participant behaviour australasian journal of construction economics and building gajendran et al. (2012) ‘a conceptual approach to studying the organisational culture of construction projects’, australasian journal of construction economics and building, 12 (2) 1-26 20 to be contextualised within a temporary project organisation, and; provides a richer, more compelling explanation of project performance/outcomes as an emergent feature of the complex network of relationships that is inherent in project organisations. this paper presents a conceptual framework that serves dual purposes. firstly, it simplifies and guides the cultural analysis of organisations, providing a framework against which cultures can be defined, evaluated and understood. secondly, it reveals the three philosophical perspectives (integration, differentiation, and fragmentation) and three orientations (technical, practical and emancipation), which necessarily underpin all cultural analyses. this paper suggests that a hybrid functional/non-functional cultural analysis framework will be more effective, allowing researchers and practicing managers to identify and operate from one or more possible positions. in this way they can embrace a pragmatic approach to the study of organisational cultures, using both positivist and subjectivist methods to obtain authentic outcomes. references adriaanse, a. and voordijk, h. 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(2007) ‘an overview of the chinese construction market and construction management practice’, journal of technology management in china, 2 (2), 163-176 influences on women’s choices of careers in construction: a south african study influences on women’s choices of careers in construction: a south african study kolosa madikizela, (cape peninsula university of technology, south africa) professor theo haupt, (director building and construction science, mississippi state university, usa) abstract this paper analyses the factors influencing the choices of careers in construction by south african women. the literature on challenges which influence women’s choices of careers in construction was reviewed and questionnaires were conducted with multiple samples, including construction organisations, construction students and professional women working in construction. the study found that women have a role to play in the construction industry and that they can build successful careers within the sector. however, it was not easy given the various barriers to entry such as gender-based discrimination against them, the harsh work environment of the construction site, the lack of sufficient knowledge about the industry itself and the shortage of successful women in construction as role models. there was evidence of discrimination and sexual harassment. all these factors impacted negatively on the choices of careers in construction by south african women. this study makes a contribution to our understanding of the factors that have marginalised women in a male dominated industry and provides some indication of approaches to attract more women into the sector. it is hoped that it will stimulate debate about how the low representation of women in construction can be addressed and how construction careers for women can be promoted and encouraged and that the resource pool will be enlarged given the prevalent acute skills shortage in the industry. keywords: sex discrimination, education, gender, built environment, career choices, culture, cultural background. introduction women encounter pervasive gender issues in their chosen careers which require specific strategies to deal with them (phaahla, 2000). in particular, they need to contend with gender role stereotyping which is the belief that a set of traits and abilities is more likely to be found among one sex than the other (schein, 1978). women have been defined as inferior to men and therefore, they are assigned the position of minors in both public and private spheres of life (national gender policy framework, 2003). further, they arguably accept secondary roles without hesitation (mathur-helm, 2005). although women constitute the major segment of the south african population they account for only 33.3% of the labour force. gender inequality in the workplace is underpinned by job segregation and perceived roles associated with gender groups (commission on gender equality, 1999). more specifically in the construction industry with the number of women presently low, the implication is that individuals, the industry, and ultimately the community all suffer the consequences of only fully utilizing the potential of one gender. women are therefore, a wasted resource (mathurhelm, 2005). however prevailing attitudes suggest change will not be easy because the dominantly male makeup of the construction industry is a deterrent to women who fear isolation, discrimination and harassment should they pursue careers in that sector. the nature of the workplace culture in construction is critical in explaining the underachievement of women in construction careers. this culture militates against their equal progression through the somewhat exclusionary and discriminatory environment that characterises the sector. women without an in-depth knowledge of the cultural influences on construction careers soon become disillusioned with the discrimination and the lack of opportunities for australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   2 themselves. they are regarded by males as added competition for the limited promotional opportunities that exist and experience entrenched sexism (bennett, davidson and gale, 1996). consequently, attitudes of males are adversarial and confrontational. further, many young men still believe women are both physically and psychologically unsuited to construction work, despite paying lip service to the notion that “women can do anything” (thompson, 1996). typically young people start contemplating their career choices around the age of 16 or in their last years of high school. gender-based career stereotyping makes it particularly difficult for young girls to establish their own career choices or to diverge from the career choices that their parents dictate. a sense of isolation is another reason for high defections with women having little chance of meeting other women working in construction. education at school level is only part of the battle to recruit more women into the construction industry. male builders need to accept women in the building workplace (thompson, 1996). there is a relationship between higher education and the employment choices of women (phaahla, 2000). women tend to congregate in areas seen as traditional outlets for female employment. female staff and students are typically drawn to faculties such as the humanities, education and the social sciences. generally women do not make up large numbers in technology and applied science areas of study. consequently, the jobs available to women are limited due to social and economic reasons. the position of women is further exacerbated by the fact that gender in south africa is also racially and culturally segmented, creating inequalities that are race-bound. white and black women have extremely different levels of experiences regarding job and development opportunities (mathur-helm, 2005). while more enlightened senior management staff may have recognised the undesirable and debilitating effects of an entrenched male culture, there was little evidence to suggest that there had been any significant erosion of it within the ranks of middle managers, employers or employees (greed, 2006). women are still regarded as secondary to men in south african business culture (mathur-helm, 2005). there is a view that women do not show leadership potential and behave differently from traditional male leaders (mathur-helm, 2004; guppy and rick, 1994). according to johnson (1999) they are emotional and cannot shoulder responsibilities. what women do is rarely defined as leadership given that masculinity is an implicit construct of leadership (kloot, 2004). the south african definition of gender equality is guided by a vision of human rights which incorporates acceptance of the equal and inalienable rights of all men and women (kornegay, 2000). indeed, the rights of women need to be seen as human rights. in the bill of rights of the south african constitution “equality” is specified and enshrined (the republic of south africa, 1996). section 9(3) of the constitution provides that no one may unfairly discriminate directly or indirectly against anyone on any grounds such as, for example, race, gender and culture. this prohibition on discrimination is an integral part of processes to achieve social justice in south africa. gender equality, therefore, requires that the underlying causes of discrimination are systematically identified and removed in order to give women and men equal opportunities in every sphere of life. according to the ilo: in short, the economic integration of women, which comes only when market barriers are lowered and women are given an equal chance to attain decent work, remains a necessity for economic development and a worthy goal in its own right (2008:4). in south african society women historically faced the burden of unpaid household labour in addition to income generating work. a rigid and uncompromising organisation of working hours and environment prevented them from performing well considering that they needed to take time off for childcare and other family responsibilities (ellison, 2001 and wilson, 1998). often these demands reduced their chances of full-time paid employment. furthermore in australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   3 terms of the south african employment equity act of 1998, labour market discrimination arises when employers make decisions about employees for reasons that are not related to genuine work requirements (republic of south africa, 1998). discrimination appears most obviously when an employer focuses on irrelevant personal characteristics instead of work performance or merit and women have to work extra well and hard to gain any prospect of promotion. unfortunately women have not been benefitting from government policies and legislation to advance their careers (mathur-helm, 2005). there is, therefore, no correlation between policy and practice. the generally accepted and popular image of construction is that of a male-dominated industry requiring brute strength and tolerance for outdoor conditions, inclement weather and bad language (fielden et al., 1999). women, therefore, have three choices, namely to be successful by behaving like men, fail to adapt to the culture and leave, or by not acting like men to remain in unimportant positions (bennett, davidson and gale, 1996; sachs, chrisler and devlin, 1992). according to agapiou (2002), the image and perception of an industry were significant factors in determining career choice in their study. furthermore the construction industry is perceived as being the epitome of crisis, conflict and masculinity manifesting in the unsociable, confrontational behaviour that discourages women and ethnic minorities from considering construction as a meaningful career. the industry had an industry–wide problem with ‘image’, which made both men and women reluctant or uninterested in the industry (gale, 1994). haupt and smallwood, (2005) in their study found south african students had very limited knowledge and understanding of the construction industry. according to fielden et al., (1999) the general lack of knowledge and information about the industry, the career opportunities it can offer and what qualifications are offered, further compound the problem of the low representation by women in the sector. parents, teachers and school children generally believed that jobs in the construction industry were limited to bricklaying, joinery, painting and decorating. against the background that issues of gender equality have been extensively studied in advanced economies but less so in countries with less advanced economies, this paper highlights the findings of a study conducted in south africa to examine the factors that influence the career choices of women with emphasis on the construction industry. the study examined the interconnection between gender, culture, religion, masculinity and the unattractive image of the construction industry and the career choices of women in south africa. in particular, it provides insight into the popularity of careers in construction among women relative to other industrial sectors. it explores the prevalence of discrimination against women in construction and its overall impact on their final career choice preferences. methodology a purposive sampling approach was adopted to gather data on the research topic. construction companies, construction students, and professional women working in construction were surveyed using self administered questionnaires. data was encoded and analysed using spss. the views were canvassed of a convenience sample of 1,435 industry practitioners, 141 first and final year construction students and 17 professional women from the gauteng and western cape provinces where arguably most construction activity in south africa generally occurs. the industry survey included 11 questions on aspects of gender practices and policies within their organizations. the student and professional women survey instruments included 83 and 33 statements respectively to which respondents were required to respond typically using a 5-point likert scale of agreement. australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   4 industry survey the industry sample was comprised of 1,435 participants in construction workshops held in all 9 provinces in south africa over a 12 month period. the profile of the sample is shown in table 1. industry participation % province % architect 8.0 eastern cape 16.2 contractor 19.6 free state 5.5 engineer (consultant) 21.3 gauteng 15.7 manufacturer 1.5 kwazulu-natal 23.8 private sector client 5.8 limpopo 3.5 public sector client 19.4 mpumalanga 5.9 project manager (consultant) 7.6 northern cape 4.0 quantity surveyor (consultant) 7.0 north west 3.0 co-contractor 3.6 western cape 19.2 supplier 1.0 many provinces 3.4 other 5.4 total 100.0 total 100.0 average annual turnover % average annual employment % <r1million 16.4 <10 30.6 >r1million <r5million 25.4 >11<50 25.9 >r5million <r20million 18.8 >50<100 8.6 >r20million 39.4 >100<250 8.2 total 100.0 >250 26.7 total 100.0 table 1 industry sample profile it is evident that the sample comprised mostly consulting engineers (21.3%), contractors (19.6%) and public sector clients (19.4%) who operated mostly in kwazulu-natal (23.8%), western (19.2%) and eastern cape (16.2%) provinces of south africa. most participants had average annual turnovers greater than r5 million. further, almost all (95.7%) employed on average less than 50 workers per annum. from table 2, it is evident that 90.5% of the sample employed less than 10 females on average per annum in their organisations. table 3 confirms that women are mostly employed to perform secretarial (69.1%) and administrative (42.5%) roles. where they were employed on construction sites they were mostly employed at the level of labourers (31.2%). number % employment category % <10 90.5 yes no >10<50 5.2 secretarial 69.1 30.9 >50<100 0.9 management (administration) 42.5 67.5 >100 3.4 unskilled (labourers) 31.2 68.8 total 100.0 skilled (artisans) 19.9 80.1 supervisory 17.3 82.7 semi-skilled (operators) 16.2 83.8 table 2 average annual employment of females table 3 employment categories of females relative to being asked about the prevalence of certain gender-based issues and practices in their respective organisations almost all respondents reported that females were afforded australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   5 the same rights, benefits and opportunities as males (92.2%). similarly, most of them reported that separate facilities such as toilets and ablutions were provided for females (83.2%) and that females were afforded equal advancement and promotion opportunities (87.6%). however, substantially less reported that funding was available targeted at improving the status and qualifications of female employees (51.1%), written gender equity policies were in place (44.5%), and gender-based educational material was provided to employees (27.8%). notably, a large proportion of almost 25% of respondents did not know what the situation was in their organisations relative to gender-related issues and practices. issue yes % no % don’t know % same rights, benefits and opportunities as males 92.2 3.1 4.7 separate toilet and ablution facilities provided 83.2 14.9 1.9 equal advancement and promotion opportunities 87.6 4.9 7.5 paid same rates of pay (wages and salaries) as males 69.2 7.3 23.4 visible management endorsement of non-discriminatory practices, gender-based education programs and information 65.2 18.5 16.3 simple, clear and unambiguous communication of gender equity policy 55.2 22.7 22.1 available funding targeted at improving status and qualifications of female employees 51.1 25.0 23.9 written gender equity policy in place 44.5 34.9 20.6 provision of gender-based educational material 27.8 50.0 22.2 practices that might be regarded as discriminatory because worker was female 8.8 64.3 26.9 table 4 gender-based issues relative to observed gender-based discriminatory practices (8.8%) respondents cited examples of these as follows, namely: • decision not to award a tender to a woman because of skepticism; • engineers undermine me and threaten to work me out; • no ablution facilities provided on site; • female engineers had to be accompanied to rural sites due to danger. comments suggestive of prevailing attitudes towards females in construction included: • too many unqualified females are appointed to top positions; • [gender] equity is not a priority for management; • heavy construction work negatively affects women’s reproductive organs; • nature of industry has not encouraged women to apply; • construction sites are not suited to women; • family responsibilities interfere with their [women’s] progress; • fellow workers are shocked at my [woman] excellent performance. student survey while the validity of the views of students has been questioned (ross and elechi, 2002), their views need to be considered given that they are one of the three cooperative partners in the cooperative construction education model (haupt, 2003). the student sample was drawn from two major universities in the western cape and gauteng provinces, namely the australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   6 university of johannesburg (55.3%) and the cape peninsula university of technology (44.7%). the sample was constituted as follows, namely • junior (1st and 2nd year) students 43.6% (males=31.2%; females=51.2%); and • senior (3rd and 4th year) students 56.4% (males=68.8%; females=48.8%). institution % program % cput 44.7 construction management 37.5 uj 55.3 quantity surveying 60.8 total 100.0 civil engineering 1.7 total 100.0 year /level of study gender junior 43.6 male 61.0 senior 56.4 female 39.0 total 100.0 total 100.0 table 5 student sample profile from table 5 it is evident that most (60.8%) of the students were quantity surveying majors, 37.5% were construction management majors, and the remaining 1.7% civil engineering majors. in terms of gender, males dominated the sample. the impact of discrimination students were presented with five statements relative to gender-based discriminatory practices in construction to which they needed to respond on a five-point scale of agreement where 1=totally disagree, 2=disagree, 3=neutral, 4=agree and 5=totally agree. the means of their responses are presented in table 6. sample males females rank statement mean sd mean sd mean sd 1 women on construction sites are not respected to the same extent as men 3.5 1.2 3.2 1.2 4.0 0.9 2 women are likely to be sexually harassed on site 3.4 1.2 3.4 1.3 3.4 1.1 3 the fact that there are more male professionals in construction intimidates women 3.1 1.1 3.3 1.1 2.8 1.0 4 women are more suited to administrative than production functions on site 2.9 1.3 3.4 1.2 2.1 1.1 5 female students are intimidated by the male students in classes 2.2 1.2 2.2 1.2 2.2 1.1 table 6 discrimination against women in the construction workplace the sample means suggest feelings of neutrality about issues of discriminatory practices except for disagreement about intimidation of female students by their male counterparts in class. both male and female students agreed similarly that women were likely to be sexually harassed on site. they also disagreed that female students were intimidated by male students in their classes. however, female students agreed more strongly that women on construction sites were not respected to the same extent as men and were more negative about being intimidated by there being more male professionals in the industry. while males tended to agree, women tended to disagree that women were more suited to administrative australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   7 than production functions on site. there were linear relationships between the gender of students and their responses to issues of discrimination. the spearman’s correlation coefficient of 0.353 at the 0.01 level (2-tailed) suggests that females were more likely to agree that women on construction sites were not respected to the same extent as men. similarly, a correlation coefficient of -0.457 at the 0.01 level (2-tailed) suggests that they were more likely to disagree that women were more suited to administrative than production functions on construction sites. further, the weak correlation coefficient of -0.188 at the 0.05 level (2-tailed) suggests that they were more likely to disagree that they were intimidated by there being more male consultants in the industry. the mann-whitney tests suggested that responses were significantly gender-biased relative to women not being respected on construction sites to the same extent as men and women being more suited to administrative than site production function on construction sites. this finding was reinforced by the kolmogorov-smirnov test statistics. the chi-square tests suggested that that the association was not the result of chance and that there was some association between gender and responses to issues of discrimination. male (%) female (%) discrimination impacts careers in construction negatively resulting in them rather choosing other careers 49.2 50.8 discrimination creates a sense of being inferior 56.5 43.5 discrimination results in less women in construction industry 0.0 100.0 because of discrimination women tend to avoid construction and stick to the conventional careers such as nursing 39.3 60.7 men think they can do all things whereas even women can do men’s work 0.0 100.0 most women become unsure of the available choices in the industry and end up dropping out of construction 39.3 60.7 table 7 impact of discrimination against women on career choices table 7 shows the split by gender of responses to each of the issues about discriminatory practices in the sector. more than half of the respondents (females) reported that discrimination impacted negatively on construction career choices resulting in women choosing careers in other sectors. further, a similar proportion of the sample (males) suggested that discrimination created among females a sense of being inferior to their male counterparts. only females reported that discrimination resulted in less women being employed in construction and that men thought they were the only ones who could do all things. similar proportions of the sample (females) reported that because of discrimination women tended to avoid the sector and were unsure of the career possibilities in construction. the impact of the low representation of women sample males females rank statement mean sd mean sd mean sd 1 an increased number of women in construction will contribute to the improvement of skills shortage in the construction industry 3.5 1.1 3.3 1.1 3.8 0.9 2 the low employment of women in construction contributes to the skills shortage in the construction industry 3.2 1.2 3.0 1.2 3.6 1.1 table 8 impact of women on skills shortages australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   8 the sample means suggest agreement about the impact of women on skills shortages. however, female students agreed more strongly that increased numbers of women would reduce the skills shortage and that the low employment levels of women in the sector actually contributed to the existence of the skills shortage. however, there was a statistically significant correlation albeit weak between gender and student responses to the impact of the low employment of women in construction to the skills shortage in the industry. the spearman’s correlation coefficient of 0.275 at the 0.01 level (2-tailed) suggests that females were more likely to agree that this was the case. similarly, a correlation coefficient of 0.230 at the 0.05 level (2-tailed) suggests that they were more likely to agree that increased numbers of women in the industry would contribute to a reduction in the skills shortage. relationship between culture, historical background and career choice rank question yes (%) no (%) unsure (%) s (n=171) 20.6 64.0 14.7 m (n=104) 20.3 60.8 19.9 1 do you believe that cultural beliefs will influence the success of your career in the construction industry? f (n=64) 19.6 71.7 8.7 s (n=171) 44.9 42.6 12.5 m (n=104) 50.0 35.1 14.9 2 do you believe that the cultural differences between males and females influence their career choice? f (n=64) 30.4 58.7 10.9 s (n=89) 52.3 31.8 15.9 m (n=52) 54.1 23.0 23.0 3 if yes, do you believe that this influence contributes to the low representation of women in construction f (n=37) 50.0 40.6 9.4 s (n=89) 45.2 43.3 10.6 m (n=52) 42.4 42.4 15.3 4 if yes, do you believe that this contributes to the prevalence of discrimination against women who have entered the construction industry f (n=37) 48.4 45.2 6.5 table 9 relationship between cultural beliefs, career choice and career success from table 9 there are no apparent significant differences between the views of males and females on the influence of culture and historical background on their potential career success. however, a greater proportion of females disagreed that cultural beliefs would influence their success (71.7%) and that the cultural differences between the sexes would influence their choice of career (58.7%). while, women generally tended to have more negative or positive views, there were no significant statistical correlations between gender or year of study and responses about cultural and background influences. influences behind career choices students statements males (%) females (%) opportunities in the industry 27.2 11.5 looking at something i constructed makes me feel good – passion 8.5 0.0 fascinated by beauty of buildings 13.6 8.6 my background and family members 15.3 11.5 the fact that there were few women 0.0 20.0 to challenge the perception that construction is for males 0.0 22.9 successful women in construction 1.7 5.7 table 10 influences behind construction career choices australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   9 table 10 shows the relative proportions in the sample of males and females who responded to the statements on the influences behind choosing careers in construction. it is evident that males were more likely to be influenced by opportunities in the industry (27.2%), background and family members (15.3%), and fascination with buildings (13.6%). on the other hand, females were more likely to be influenced by the challenge presented by the male dominant nature of the industry (22.9%) and the paucity of women employed in the sector (20.0%). statement male (%) female (%) nothing 30.8 26.7 poor working conditions 15.3 10.0 poor safety and risk 11.5 6.7 money 7.7 3.3 discrimination against women 0.0 13.3 lack of understanding of career opportunities in construction 7.7 6.7 negative image of the construction industry 5.7 26.7 lack of employment in construction 3.8 3.3 sexual harassment done by men 0.0 6.7 table 11 influences behind not selecting careers in construction similarly, table 11 shows the proportion of the sample by gender who responded to the statements on the influences for not choosing careers in construction. the findings suggest that nothing would deter both males (30.8%) and females (26.7%) from pursuing careers in construction if that was their choice. however, males were more likely to be deterred by poor working conditions (15.3%) and the poor h&s performance and risk management records (11.5%) of the industry. females were more likely to be deterred by the negative image of the industry (26.7%), discrimination against women (13.3%) and poor working conditions (10.0%). using a three-point scale where 1= low, 2=medium and 3=high, students were asked to rate the influence of careers in other sectors over construction. sample male female rank influence mean sd mean sd mean sd 1 the dangerous nature of the construction work 2.3 0.7 2.3 0.7 2.4 0.7 2 challenging work environment 2.3 0.7 2.4 0.7 2.3 0.8 3 the inability to work and have influence in a male dominated industry 2.3 0.7 2.3 0.7 2.3 0.7 4 male dominance of the industry 2.3 0.7 2.3 0.8 2.2 0.7 5 the seemingly discriminatory environment of the construction industry 2.2 0.7 2.2 0.7 2.3 0.7 6 knowledge of the construction industry 2.2 0.7 2.2 0.7 2.2 0.7 7 the masculine and unattractive image of the construction industry 2.0 0.7 2.0 0.8 2.0 0.7 8 career expectations and financial prospects 2.0 0.8 2.1 0.8 2.0 0.7 table 12 influence of career choices in other sectors over construction the results in table 12 suggest that the challenging work environment, dangerous nature of construction, inability to work and influence a male dominated industry, male dominance of the industry, discriminatory working environment and lack of knowledge of the industry were australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   10 rated as being medium to high influences on other women choosing careers in other sectors instead of construction analysis of student survey findings by year of study the responses of students were further analysed to determine the impact, if any, of the year of study on their responses. however, there were no statistically significant correlations between year of study and student responses save for a weak linear negative relationship between year of study and female students being intimidated by male students in classes. in this case the spearman’s correlation coefficient of -0.241 at the 0.05 level (2-tailed) suggests that as students progressed through their studies over time females would feel less threatened by the male students in their classes. professional women survey the professional women sample consisted of 17 construction industry professional women working in various construction industry organisations at junior, middle and senior management levels. the impact of discrimination the sample was presented with nine statements related to the impact of discrimination on their careers to which they needed to respond on a five-point scale of agreement where 1=totally disagree, 2=disagree, 3=neutral, 4=agree and 5=totally agree. their responses are shown in table 13. rank statement n 1 (%) 2 (%) 3 (%) 4 (%) 5 (%) mean st dev 1 women experience discrimination on entering the construction industry 17 0.0 0.0 5.9 47.1 47.0 4.4 0.6 2 women who work on construction sites are most likely to experience a higher prevalence of discrimination relative to those who work for consulting firms 17 0.0 5.9 17.6 52.9 23.6 3.9 1.2 3 women experience discrimination in construction and do not experience upward mobility in comparison to their male counterparts 17 0.0 23.5 11.8 47.1 17.6 3.6 1.1 4 males discriminate against pregnant women in construction 17 0.0 35.3 11.8 35.3 17.6 3.4 1.2 5 my contribution as a professional woman is not regarded as equally important as that of my male counterparts 17 11.8 20.4 11.8 23.5 23.5 3.2 1.4 6 women who fall pregnant while working in the construction industry experience a higher prevalence to discrimination than those on other sectors 17 0.0 11.8 23.5 35.3 17.4 3.1 1.3 7 women working in construction do not have the same opportunities to develop as their male colleagues 17 0.0 29.2 23.5 23.5 11.8 2.9 1.2 8 i have experienced discrimination in my workplace 17 5.9 17.6 23.5 35.3 17.7 2.9 1.2 9 the nature of the construction industry poses a threat to the career development of women in construction 17 0.0 41.2 17.6 11.8 29.4 2.1 0.9 table 13 discrimination against women in the construction workplace australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   11 from table 13, almost all the women (94.1%) believed that women experienced discrimination while working in the construction industry. about three-quarters (76.5%) believed that this discrimination was more prevalent on construction sites than in consultancies. furthermore, 64.7% agreed that women in construction did not enjoy the same opportunities for upward mobility as their male counterparts. more than half (52.7%) believed that pregnant women experienced discrimination which was more prevalent in construction than in other sectors. more than half (53.0%) of the respondents had experienced discrimination at work. almost half (47%) reported that their contribution as professional women was not regarded as equally important to that of their male counterparts. further, 41.2% believed that the nature of the construction industry posed a threat to the career development of women in the sector. the impact of low representation of women the responses to two questions related to the impact of the low representation of women on the skills shortage experienced by the construction sector are shown in table 14. rank question n yes (%) no (%) unsure (%) mean sd 1 do you believe that the employment equity act is addressing the skills shortage in construction? 17 50.0 14.3 35.7 1.9 0.9 2 do you believe that the low number of women choosing careers in construction contributes to the skills shortage? 17 80.0 20.0 0.0 1.2 0.4 table 14 impact of women on skills shortages half (50.0%) of the women believed that the employment equity act was addressing the low representation of women in construction and subsequently the skills shortage in the industry. however, most (80.0%) of them held that despite this legislation low numbers of women in the construction industry exacerbated the skills shortage. influence of culture, nature of industry and career choice participants in the study were presented with three statements on the influence of culture and the nature of the industry on the career choices of women. their responses are shown in table 15. rank statement n 1 (%) 2 (%) 3 (%) 4 (%) 5 (%) mean st dev 1 i would encourage other young women to pursue a career in construction, because i believe that there is a place and a need for females in the industry 17 0.0 0.0 0.0 29.4 70.6 4.7 0.5 2 women’s cultural beliefs and background influence their success in the construction industry 17 5.9 23.5 29.4 11.9 29.3 3.3 1.3 3 my experience within the construction industry confirmed my expectations and beliefs of the industry being male dominated and discriminatory towards women 17 0.0 35.4 23.5 35.5 5.9 3.1 0.9 table 15 cultural beliefs, industry nature and career success professional women strongly agreed (mean=4.7) that they would encourage women to consider careers in construction, as there was a need for more women in construction. however, they were somewhat neutral (mean=3.3) about the influence of their cultural beliefs and background on their prospects of successful careers in the sector. they were australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   12 somewhat surprisingly neutral (mean=3.1) about whether their experience in the industry had confirmed their views about the industry being both male dominant and discriminatory towards women. it is possible that as they gained experience and acceptance in the industry over time that they became less sensitive to the male dominance and discrimination. influences behind career choices it is evident that job opportunities in the south african construction sector driven by government initiatives, women’s desire to demonstrate their ability to compete equally with men in a male dominated industry, availability of bursaries, influence of family and opportunities for financial independence all influence women when choosing careers in construction. comments by women included, inter alia: • i wanted to prove that women are strong and are capable of handling the harsh realities of construction activities; • the fact that women are taken as powerless and unable to do what men can do. i want to be independent as an african woman who can do things without having to depend on male counterparts; • i was attracted by non-formal clothing, the fact that work on site was not officebased, and jobs are constantly changing. student views compared with professional women views the findings suggest that experience of the industry by professional women tempered their views relative to the industry itself when compared with the responses of students. the findings suggest that there might be a relationship between the perceptions held by the female students about their success in construction and their experience of the sector. the responses of the professional women working in the construction industry suggest that this prospect is likely. similarly, the experience of women in the industry suggested that as they gained more experience and acceptance in the industry they were able to hold their own and develop more realistic views of the nature of the sector. discussion despite government efforts to increase the participation ratio of women in construction, bodies such as the south african women in construction (sawic) and construction industry development board suggest that while there have been increases these have been contractor grading designation maximum value of contract total women owned % of total 1 r200,000 67,119 32,593 49 2 r500,000 4,735 2,206 47 3 r1,500,000 1,271 600 47 4 r3,000,000 1,718 692 40 5 r5,000,000 1,096 407 37 6 r10,000,000 877 274 31 7 r30,000,000 435 94 22 8 r100,000,000 121 10 8 9 no limit 119 1 1 total 77,491 36,877 48 table 16 cidb contractor gradings and breakdown of registered contractors (source: www.cidb.org accessed april 3, 2009) http://www.cidb.org/ australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   13 marginal and at the lowest end of the cidb contractor grades. table 16 shows the respective cidb contractor grades. the cidb register of contractors has 77,491 construction enterprises of which 48% are owned by women, namely 36,877. however, 88.4% of these enterprises fall within the lowest category of registration, namely grade one. a further 7.6% are in grades two and three. only 4% are registered in grades four and higher. only ten contractors are registered at grade 8. it is likely that the low numbers of qualified women entering the industry contributes to the lack of women-owned contracting firms the higher grades of the cidb register. the survey of industry stakeholders confirmed that most construction firms employed small numbers of women per annum in their organisations. these women were mostly employed to perform secretarial and administrative roles. where they were employed on construction sites they were typically employed at the level of laborers suggesting that women were regarded to be more suited to administrative than production functions on site. female students in particular opined that women on construction sites were not respected to the same extent as men and were intimidated by there being more male professionals in the industry. there is evidently a need for women to review their own professional roles and accept themselves as competent professional women in their own right. almost all respondents reported that females were afforded the same rights, benefits and opportunities as males in their organisations, had separate facilities such as toilets and ablutions and were afforded equal advancement and promotion opportunities. however, substantially less reported that there was available funding targeted at improving the status and qualifications of female employees, written gender equity policies in place, and genderbased educational material provided. these findings suggest a lack of visible and tangible commitment to empower women in their organisations. perceived or real discriminatory practices impacted negatively on career choices by women in construction. arguably, if jobs or work climate were developed to provide a more desirable work environment devoid of overt and covert sexism and racism and inflexible working structures an increase in the numbers of women attracted to work in construction would likely result. the current situation results in large reserves of skill and talent remaining untapped. the study found that increasing the numbers of women in the sector would reduce the skills shortage and that the low employment levels of women in the sector actually contributed to the existence of the skills shortage. however, dainty et al. (2004) suggest that women have a poor initial understanding of the culture of the industry and the inherent difficulties of working in a male-dominated and oriented environment. the findings of the study supported the view that there was a general lack of knowledge by women of the industry itself and the career opportunities it offered, suggesting that there might be a relationship between knowledge of the construction industry and the choice of careers in construction. the study found no significant differences between the views of males and females on the influence of culture and historical background on their career success. furthermore, contrary to common belief, cultural beliefs and backgrounds were not major influences on career choices made by women. however, females agreed more strongly that neither cultural beliefs nor the cultural differences between the sexes would influence their choice of career or their success. given the challenging work environment, dangerous nature of construction, inability to work in or influence a male dominated industry, male dominance of the industry, discriminatory working environment and lack of knowledge of the industry women were more likely to choose careers in other sectors instead of construction. women tended to believe that legislation such as the employment equity act created the platform for the low representation of women in construction to be addressed. however, australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   14 most of them held that despite this legislation there continued to be low numbers of women in the construction industry that exacerbated the skills shortage. evidently, more than just legislation is needed. the study findings suggest that it is possible that as they gained experience and acceptance in the industry over time women became less sensitive to the male dominance and discrimination. the study also found that women in construction did not enjoy the same opportunities for upward mobility as their male counterparts. pregnant women experienced discrimination which was more prevalent in construction than in other sectors and many women had themselves experienced discrimination at work. the contribution of women as professionals was not regarded as important as that of their male counterparts. clearly, the current nature of the construction industry posed a threat for the career development of women in the sector. conclusion the findings of this study confirm the gender bias that still exists within the south african construction sector. the male dominant nature of the industry and gender-based discrimination experienced by women employed in the industry are challenges that need to be overcome if increasing numbers of women are to choose careers in construction. legislation by itself is insufficient to boost the present low numbers of women and significantly reduce the skills shortage in the industry. the overall poor image of the industry presents a further inhibitive factor to women choosing to work in construction. the industry needs to make a more visible and tangible commitment to empowering women at all levels by providing equal opportunities for women. gender relations need to change. access to construction education needs to be widened and the specific barriers, image and culture addressed. however, it is also necessary for women to review their own roles and accept themselves as competent contributors to the industry in their own right. references agapiou, a. (2002) ‘exploring the attitudes of school-age children, their parents and educators to career prospects in the scottish construction industry’, equal opportunities international, 12(8), 18-29 bennett, j., davidson, m. and gale, a. (1999) ‘women in construction: a comparative investigation into the expectations and experiences of female and male construction undergraduates and employees’, women in management review, 14 (7), 273-292 dainty, a., bagilhold, b., ansari, k., and jackson, j. (2004) ‘creating equality in the construction industry: an agenda for change for women and ethnic minorities’, journal of construction research, 5 (1), 75-86 ellison, l. (2001) ‘senior management in chartered surveying: where are the women?’ women in management review, 16 (6), 264 –278 fielden, sl., davidson, m. j., gale, a. and davey, c. l. (2001) ‘women, equality and construction’, the journal of management development, 20 (4), 293 305 gale, a. (1994) ‘women in nontraditional occupations: the construction industry’, women in management review, 9 (2), 3-14 greed, c. (2006) ‘social exclusion: women in construction’, in managing diversity and equality in construction: initiatives and practice, eds a. w. gale, & m. davidson, taylor & francis, london, 71-97 guppy, a. and rick, j. (1996) ‘the influence of gender and grade on perceived work stress and job satisfaction in white collar employees’, work and stress, 10 (2), 154-164 haupt, tc. (2003) ‘student attitudes towards co-operative construction education experiences’, australian journal of construction economics and building, 3 (1), 29-40 australasian journal of construction economics and building madikizela, k and haupt, t (2010) ‘influences on women’s choices of careers in construction: a south african study’,  australasian journal of construction economics and building, 10 (1/2) 1‐15   15 haupt, t. and smallwood, j. (2004) ‘gender equity in construction: myth or reality?’ contact africa, 3 (2), 4 international labor organization, (2008) global employment trends for women – march 2008, international labor organization, geneva johnson, d. (1999) transforming organizations: management cultures, women and leadership in south africa, unpublished kloot, l. (2004) ‘women and leadership in universities: a case study of women academic managers’, the international journal of public sector management, 17 (6), 470-485 kornegay, e. (2000) south african national framework for women’s empowerment and gender equality, the office on the status of women mathur-helm, b. (2005) ‘equal opportunity and affirmative action for south african women: a benefit of barrier?’ women in management review, 20 (1), 56-71 mathur-helm, b. (2004) ‘women in management in south africa’, in women in management worldwide: progress and prospects, eds l. davidson and r. burke ashgate publishing company, aldershot national gender policy framework, (2003) women’s empowerment and gender equality, national gender policy framework, pretoria phaahla, p. (2000) ‘bridging the gender divide in south african higher education management and leadership’, paper presented at the 13th annual international conference on women in higher education, 8-12 january, new orleans, louisiana, 1-10 ross, l.e. and elechi, oo. (2002) ‘student attitudes towards internship experiences: from theory to practice’, journal of criminal justice education, 13 (2), 297-312 sachs, r., chrisler, j. and devlin, a. (1992) ‘biographic and personal characteristics of women in management’, journal of vocational behaviour, 13, 439-447 schein, ve. (1978) ‘sex role stereotyping, ability and performance: prior research and new directions’, personnel psychology, 31, 259-268 thompson, n. (1997) ‘women in construction’, wisenet, 43, (7 pages) www.wisenetaustralia.org the republic of south africa, (1996) constitution of the republic of south africa, act no.108 of 1996, government printers, pretoria the republic of south africa, (1998) the employment equity act no 55 of 1998, government printers, pretoria wilson, e. m. (1998) ‘gendered career paths’, personnel review, 27 (5), 398 – 411 abstract introduction methodology industry survey student survey analysis of student survey findings by year of study professional women survey student views compared with professional women views discussion conclusion references microsoft word july paper 5.doc defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 53 defining an industry: what is the size and scope of the australian building and construction industry? gerard de valence construction economics, faculty of design, architecture and building, university of technology, sydney, australia introduction the traditional structure-conductperformance approach to industry economics originated in the us in the 1930s with the work of mason (1939) and bain (1959). this is now the standard framework for analysing the dynamics of an industry. however, the size and scope of the australian construction industry at the turn of the millennium may be better understood using an alternative model that highlights the diversity of the industry and the range of actors involved. industry analysis has traditionally focused on groups of firms with similar characteristics in their production processes, goods or services produced, and markets served in the wider economy. the distinction has been between firms and industries, and the analysis has emphasised the importance of economies of scale and scope (sutton 1991) or organisational structure (williamson 1979). one major difficulty in the standard structure-conduct-performance approach has been the definition of industries within the theoretical criteria of product homogeneity. further, some analysts see the construction industry as a manufacturing system, similar to the automotive industry. this view underpins the recommendations in the egan report (1998) in the uk, which emphasises lean thinking in construction. this analogy argues the industry in australia has a few very large key players whose task it is to 'assemble' constructed items, complete buildings or transport facilities for example. these key firms play the same role in both 'production' and innovation as the automotive assemblers, except that they do not have a fixed place of assembly. bjornsson (1998) suggests that in the future these large contractors will also resemble the auto assemblers in that they will be much bigger and fewer perhaps ten in the world in twenty years time. these 'assemblers' are in the process from moving from being 'demand-driven' in the sense of dependency on 'hard money' projects and traditional clients, to being demand-inducing, as they actively create opportunities through equity stakes and new forms of project delivery and finance. it should be said that the analogy with car manufacturers is controversial, and at variance to those with traditional views like raftery (1991: 39-42) and hillebrandt (1984). the australian government's construction industry policy document building for growth analysis had the comment "the industry is in the first stage of a global industrial formation that, by 2010 will see it dominated by perhaps 10 large firms" (isr 1999: 45). for a global consolidation on the scale suggested to take place the structure of the industry would have to undergo one of the most dramatic examples of concentration ever. however, the evidence from similar industries with low r&d intensity does not support that outcome (de valence, 2001). clearly, the future structure of the building and construction industry is becoming a point of debate among researchers and analysts. however, before analysing an industry's structure it is necessary to define the industry and identify its size, scope and scale. this establishes the true economic contribution of an industry. the objective of this paper is to review the current data available on industry size and scope and compare differences between the structure-conduct-performance approach and the alternative industry cluster approach. defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 54 the australian journal of construction economics & building industry clusters in the late 1980s one of the emerging new approaches to industry analysis looked at the role of chains, clusters and complexes of firms (porter 1990, marceau 1994). originally attention was drawn to the fashion cluster in northern italy (bie 1991), which links a large number of highly specialised firms in the textiles, clothing, leather and machine tools industries into a cohesive and globally competitive cluster. more recently the multimedia industry has been the subject of study overseas (braczyk et al 1999) and in australia (searle and de valence 2000). the multimedia research has confirmed that, like other industries based on intensive, rapidly changing knowledge, multimedia activities are centred on networks of clients, suppliers, freelancers and mobile skilled labour, most often organised on a project basis. these networks help multimedia firms to respond to complex, dynamic work situations and rapid changes in the external environment (heyderbrand 1999: 67). in particular, multimedia networks are characterised by strong interindustry relationships, particularly between multimedia, computing, and cultural industries. these relations are not mutually exclusive two or more activities can be successfully carried out in the same firm (brail and gertler 1999: 106). despite the industry's relative infancy, available evidence suggests that global alliances and other global networks are already significant. in toronto, 9% of multimedia suppliers and 18% of multimedia customers were found to be located outside canada, with 5% of customers located outside north america (brail and gertler 1999: 111). all these aspects of the multimedia industry can be found in the construction industry. the cluster approach shows the backward and forward linkages between the building and construction industry and the wider economy. it also captures the scale of the industry, as shown in the discussion below. given the complexity of the industry this approach can be more representative of the industry than the traditional industry structure approach. however, because it is so generalised it is also difficult to use to generate statements about the industry and research questions to be investigated. the construction industry the construction industry in australia accounted for just under 7% of gdp and nearly 8% of total employment in 19992000, under the australian bureau of statistics industry classification, shown in appendix 1. the output of the construction industry is composed of three distinct industry sectors. these sectors are engineering construction, nonresidential building, and residential building. they are not closely related, having their own distinguishing characteristics, and the well-known volatility of the industry cannot be equally distributed across them. engineering the engineering construction sector is divided into six major components. road and bridge construction is the largest industry sector. other engineering comprises electrical generation, transmission, water and sewerage, processing plants including oil and gas pipelines, and miscellaneous engineering construction, which includes railways, harbours, recreational facilities and pipelines. nearly 80 per cent of all engineering construction work is for urban infrastructure, the balance carried out for the mining and heavy industries. residential building although the housing construction share of gdp is not large, at up to 5% its volatility has an impact on the wider economy and contributes to cyclical patterns in other industries, such as consumer durables and building materials. residential building activity includes all dwellings. demand factors affecting the residential sector include: growth in household formation numbers and changes in household types, interstate defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 55 mobility and the level of net immigration the national and state level, and the age of the housing stock. more recently the demands of an aging population have led to changes in residential building types and locations, with support requirements like health and community services also affected. non-residential building in non-residential building, private sector activity dominates commercial construction, and includes offices, hotels, factories, shops and other business premises. the office construction area is particularly volatile. other business premises encompasses a wide range of structures including warehouses, terminals, service stations and car parks, telephone exchanges, studios and so on. public sector activity is mainly educational, health and recreational buildings. general economic activity and urban and population growth are the main determinants of demand in this area. table 1. construction activity, chain volume measures: reference year 1998-99, australia, ($billion). period residential building nonresidential building total building construction engineering construction total construction 1986-87 12.6 13.4 26.1 12.5 39.5 1987-88 13.8 15.4 29.2 11.6 41.8 1988-89 17.7 16.1 33.7 11.4 46.2 1989-90 16.9 17.2 34.0 12.7 47.8 1990-91 14.7 15.4 30.0 12.9 43.5 1991-92 14.8 12.0 26.7 12.0 39.1 1992-93 17.3 10.8 28.1 12.4 40.8 1993-94 18.9 10.4 29.5 13.4 43.5 1994-95 19.7 11.3 31.1 13.7 45.7 1995-96 16.3 12.6 28.9 15.0 44.9 1996-97 16.1 13.8 29.9 15.5 46.6 1997-98 19.2 13.9 33.0 17.4 51.6 1998-99 20.8 14.5 35.3 19.2 54.5 1999-00 24.2 14.2 38.4 19.3 57.4 source: abs construction activity: chain volume measures, australia, cat no. 8782.0. industry size there have been four construction industry surveys (cis) done by the australian bureau of statistics (abs). the fourth and most recent was for 1996-97. table 2 shows three cis for 1984-85, 1988-89 and 1996-97, and the distribution of firms across the industry sectors. the doubling in the number of subcontracting firms is the most notable feature. this reflects the trend toward contract employment, which is cheaper than fulltime employees, and is an outcome of low-bid tendering driving prices down across the industry. all four surveys have found the construction industry is overwhelmingly made up of small firms with under 20 employees, which contribute most of the industry's output and account for almost all of the total number of enterprises. table 3 shows the numerical dominance of small firms in the construction industry. businesses with employment of less than five accounted for 94% of all businesses in the industry, and over two-thirds of all employees. in contrast, less than 1% of businesses had employment of 20 or more. businesses with employment of less than five accounted for slightly less defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 56 the australian journal of construction economics & building table 2. private sector construction establishments: number operating during the year (‘000). 1996-97 1988-89 1984-85 total building construction 33.1 19.6 24.5 total non building construction 3.1 3.9 3.4 total general construction 36.3 23.5 27.9 total special trade construction 158.0 74.5 77.0 source: abs 1996-97, 1988-89 and 1984-85 construction industry surveys. table 3. summary of performance by business employment size. selected indicators units employmen t less than 5 employment 5 to 19 employmen t 20 or more all businesse s operating businesses ‘000 182 11.1 1.2 194.3 employment ‘000 332.2 85.9 66.0 484.1 wages and salaries $m 3 221.7 2 309.8 2 648.3 8 179.8 turnover $m 27 951.2 13 713.7 16 234.0 57 898.8 total income $m 28 202.5 13 801.0 16 591.2 58 594.7 total operating expenses $m 24 123.0 13 288.0 15 987.1 53 398.1 operating profit before tax $m 4 066.5 616.4 781.7 5 464.6 total assets $m 11 330.0 3 487.8 10 747.2 25 565.0 total liabilities $m 6 731.7 2 344.8 7 542.6 16 619.1 net worth $m 4 598.3 1 143.0 3 204.6 8 945.9 capital expenditure $m 9 984.9 226.3 1 120.9 11 332.1 industry gross product $m 8 657.2 3 582.2 3 941.9 16 181.2 source: abs. private sector construction industry, 1996-97. cat. no. 8772.0. table 4. percentage by firm size. selected indicators employment less than 5 employment 5 to 19 employment 20 or more all businesses operating businesses 93.67 5.71 0.62 100.00 employment 68.62 17.74 13.63 100.00 wages and salaries 39.39 28.24 32.38 100.00 turnover 48.28 23.69 28.04 100.00 total income 48.13 23.55 28.32 100.00 total operating expenses 45.18 24.88 29.94 100.00 operating profit before tax 74.42 11.28 14.30 100.00 total assets 44.32 13.64 42.04 100.00 total liabilities 40.51 14.11 45.39 100.00 net worth 51.40 12.78 35.82 100.00 capital expenditure 88.11 2.00 9.89 100.00 industry gross product 53.50 22.14 24.36 100.00 source: table 3. defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 57 than half the total income and expenses, whereas businesses with employment of 20 or more accounted for almost one-third of these items. almost three-quarters of construction industry profit before tax came from businesses with employment of less than five. higher profit margins were reported by smaller businesses, so the numerical dominance of businesses with employment less than five drives the industry average above the profit margins reported by businesses with employment of five or more. when the data on performance is converted to percentages (table 4) the importance of the 0.62% of large firms can be appreciated. their 13.6% of employee earn 32.3% of salaries and wages, generate over 14% of profits and nearly 25% of output. aligning the cis data with the industry activity in table 1 requires some balancing factor. the cis gives figures for turnover in 1996-97 of $57 billion (in 1996-97 dollars) and abs construction activity was $47 billion (in 1998-99 dollars). the difference in base year would account for around $4 billion of the difference and the rest can be attributed to sample composition and extent effects. the construction production chain carassus has developed a model of the construction industry cluster using data on the industry in france. he starts "in the field of industrial economics … the concept of a "sector" usually covers companies which produce construction; it deals with neither the set-up nor the design, nor the management of construction operations" (1998: 1). he used the concept of the "production chain" ("filiere de production" in french) to describe the successive stages in a construction operation: set-up, design, implementation, management. this is a "meso-economic" approach (in greek, "meso" means "median"), intermediate between the micro-economic and macroeconomic levels. carassus defines the "economic mesosystem" of construction as the range of relations between interdependent participants working to produce and manage a type of value of use: the services provided by the structures of the building and civil engineering products throughout their life-cycle. in the more developed countries, the central function of the construction mesosystem gradually becomes the strategic stock management of existing structures. by strategic stock management, we mean the decision-making system, based on technico-socio-economic analyses, which manifests itself in maintenance, renovation, transformation, demolition, purchases, sales, and construction of new structures. (carassus 1999: 35) the analysis by carassus is in terms of the ‘production chain’ of structures, or the sequence of operations necessary to create facilities. this chain has three major stages, each one associated with a type of work: scheduling of operations by the clients design of projects by architects site works by the contractors who obtain supplies from manufacturers of materials, components, facilities and equipment this method is very effective in analysing the construction sector in terms of flows of works ordered by clients (the downstream part of the production chain), executed by contractors (at the centre of the production chain) with material manufactures (upstream of the production chain). however, this approach does not take into account the management and maintenance of structures, the service provided by the facilities to users, and the life cycle of facilities (carassus 1999: 39). the methodology can be seen as a change from analysis in terms of a “chain of production of new structures: to an defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 58 the australian journal of construction economics & building approach in terms of “system of participants producing and managing the service provided by constructions throughout their life-cycle. the four types of process are involved in this system are identified as: an on-site continuous management process of structure service which includes management, operation and running maintenance short-lived on site production processes sites for major repairs, improvements, transformation, demolition and construction the industrial process of manufacturing materials, components, facilities and equipment, without site constraints (apart from the specific case of quarries and sand extraction) the sale and purchase of structures during their life-cycle figure 1. three types of production-management processes in the construction sector. source: carassus (1998: 6) in carassus 1999 the analysis is extended and the similarity with the aegis methodology detailed below is apparent. in each case the outcome is a view of building and construction as an interrelated set of firms that design, deliver and maintain the built environment. aegis' map of the b&c cluster this section extends the discussion of the structure of the building and construction industry by using ‘cluster analysis’ and applying it to the building and construction industry cluster (b&c). the ‘cluster analysis’ approach applied to the building and construction the general framework is the strategic management of the stock of existing construction, decision-making system which manifests itself in the maintenance, renovation, transformation, demolition, purchase, sale, and construction of 1 2 3 a process of continuous on-site management: management-operationmaintenance short-lived on-site production processes: construction, renovation, transformation, demolition industrial production processes without site constraints: the manufacture of construction products and equipment defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 59 industry by the australian expert group on industry studies (aegis) includes the industry sectors that provide services before and after the construction and identifies the flow of services between clients and industry participants. the cluster approach focuses on linkages and interdependencies between firms in a network of production. de valence and lauge-kirstensen (1996, see figure 2) and gann and slater (1998) also developed models used to illustrate the range and types of actors, activities and knowledge flows found in project-based, serviceenhanced production. these include the regulatory, institutional and technological structures in a framework for construction industry firms. figure 2. industry flows of inputs and outputs source: de valence and lauge-kirstensen (1996: 82). the aegis classification divides the industries into five product-system segments: on-site services, client services, b&c project firms, building products and supplies, and building fasteners, tools, machinery and equipment manufacturing. each of these is divided into four product/service classes. aegis argues that mapping the b&c product system in this way provides analytical advantages. firstly, it provides a stepping-stone between inputs: factors capital financial institutions funds labour material plant and equipment industry head contractors architects consultants subcontractors employer associations unions clients public private outputs buildings structures asset management facility management real estate agents built environment community professional institutes defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 60 the australian journal of construction economics & building traditional industry statistics based on hierarchical systems of classification and broader conceptual views of industry activity as depicted in clusters, chains and complexes. secondly, it gives a perspective on the interrelations between segments of the industry, a view of the ‘chain’ of production and a framework on which to base a variant of cluster analysis (aegis 1999: 35-36). the b&c cluster broken into five groups of firms is. 1. on-site services: building completion services – including plastering, ceiling, carpentry, tiling, carpeting, painting, decorating, glazing and related construction services; installation trade services – including plumbing, electrical, air conditioning, heating, fire and security systems installation services; site preparation and landscape services; and building structure services – including concreting, bricklaying, roofing and related services. 2. client services: real estate services – including real estate agent services; professional/technical services – including architectural, surveying, consultant engineering and related technical services; residential property services – including residential property operation services; and commercial property services – including commercial property operator and developer services. 3. b&c project firms, divided into four major areas: house-building non-house residential building; non-residential building – including factory, shopping centre and office building – non-building (engineering) construction – including road, bridge and other engineering construction. 4. building products and supplies: building products and supplies wholesaling and retailing; structural products – including such things as fabricated wood and wooden structures, concrete and aluminum products, structural metal, steel fabrications and prefabricated buildings; and b&c related products and supplies – including ply, veneer and wood products, glass, brick and ceramic products, cement, plaster, concrete, paint, plastics, metal piping and sheeting, electric cabling, etc. 5. building fasteners, tools, machinery and equipment: tools and fasteners – including machine tools, hand tools – and fasteners; construction-related machinery and equipment wholesaling, hiring and leasing; and b&c related machinery and equipment – including such things as construction equipment, lifting and handling equipment, and commercial heating and cooling equipment. when the data in table 3 is compared to that in tables 5 and 6 (from aegis 1999), the size of the industry virtually doubles, both in total income (and therefore share of gdp) and employment. the data is grouped by the product-system sectors. the industry income in table 3, of $58.6 billion, compares with total income of $110.4 billion in table 5, so the effect of inclusion of materials manufacturers and services is clearly seen. a similar result for total employment is found, increasing from 484,100 to 682,000. table 5. total b&c income by industry segment 1995-96 ($ million). defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 61 industry segment total industry income ($m) input-output discounted ($m) on-site services (trade services) 21,898 21,898 client services (engineering, technical, etc.) 8,607 8,607 building & construction project firms 34,250 34,250 materials and products supplies 41,352 18,608 machinery and equipment supplies 4,312 2,803 total 110,419 86,166 data sources: abs private sector construction industry 1996-97, cat no 8771.0. (preliminary). abs real estate agents industry: australia, 1995-96, cat no 8663.0. abs selected technical services: australia, 1992-93. abs consultant engineering services: australia, 1995-96, cat no 8693.0. abs business operations and industry performance: australia, 1995-96, cat no 8140.0. abs manufacturing industry: australia, 1995-96, cat no 8221.0. notes: 1. trade services and construction employment estimated for 1995-96 based on proportions of ‘construction’ in 1996-97. 2. architectural & surveying services income for 1995-96 estimated based on proportions to engineering services 1992-93. 3. excludes wholesale, retail, hiring and leasing. 4. excludes residential or commercial property operators and developers from ‘client services’ due to lack of data. 5. based on total income by industry, not allowing for input-output proportions. source: aegis (1999: 57). table 6. employment in the b&c product system by segment 1995-96. industry segment total employed on-site services (trade services) 220,000 client services (engineering, technical, etc.) 102,000 building & construction 108,000 materials and products supplies 222,000 machinery and equipment supplies 30,000 total 682,000,000 data sources: abs private sector construction industry 1996-97, cat no 8771.0. (preliminary). abs real estate agents industry: australia, 1995-96, cat no 8663.0. abs selected technical services: australia, 1992-93. abs consultant engineering services: australia, 1995-96, cat no 8693.0. abs business operations and industry performance: australia, 1995-96, cat no 8140.0. abs manufacturing industry: australia, 1995-96, cat no 8221.0. notes: 1. trade services and construction employment estimated for 1995-96 set equal 1996-97. 2. architectural & surveying services employment for 1995-96 estimated based on proportions to engineering services 1992-93. 3. excludes wholesale, retail, hiring and leasing. 4. excludes residential or commercial property operators and developers due to lack of data. 5. based on total industry, not allowing for input-output proportions. sources: aegis (1999: 58). policy implications the scale of the difference between the two approaches to defining the size and scope of the construction industry has significant implications for industry policy. there are two policy areas that are affected: competition policy and industry development. the key determinant of the degree of competition in any market is the number of firms that are supplying products and the number of buyers that are the purchasers defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 62 the australian journal of construction economics & building of that output. where there are few firms, competition tends to be less intense and price is higher than in markets where there are many firms and competition is severe. the building and construction market is characterised by a wide range of different products, and some of these products are bundled with services such as installation and maintenance. this makes it a market that often does not fit easily into the framework of the competition authority, in australia the australian consumer and competition commission (accc), and makes the fit with the theoretical structure given to different types of markets also problematic. in theory, where industrial economics specifies product and market characteristics in order to identify the form of market structure, the requirement is typically for either identical products, or for clearly identifiable markets for those products. in industry economics, industries are usually seen in terms of a number of firms which advance along a single technological trajectory, and these firms compete in enhancing the quality of their individual versions of the same basic product (homogeneity of product). in this case, firms make decisions on how much r&d to finance, and apply that r&d to product development. this view fits some industries well, however many industries encompass several groups of products rather than a large number of versions of a single product. the products may be close substitutes in consumption, but embody different technologies, so r&d projects that enhance products in one group may generate spillovers for products in other groups (de valence 2001). such complex overlapping patterns of substitutability have bedeviled industry economics since chamberlin (1932) first developed the definition of an industry as limited by the chain of substitution, where industries were defined by their product. if industries are broken into separate subindustries in order to address this problem, the choice in r&d spending can be between any number of technologies for the development of different groups of products. the products may be close or distant substitutes for products of firms on other technological trajectories. both of these linkages operate on the demand side. when the linkages are strong they reflect the presence of scope economies in r&d; where the linkages are weak these scope economies will be absent and there will be a low degree of substitution across sub-markets. applying this discussion of sub-markets to the building and construction industry raises a number of issues. the first is the general lack of specialisation of firms in the construction industry in terms of their product. the answer to the question "what does the industry produce?" varies from providing services (management, coordination, finance) to producing products (buildings and structures). the former argues that the main task of the industry is one of coordinating site processes while the latter is more concerned with the building itself. secondly, the building and construction industry is typically broken into the engineering, non-residential, and residential building sectors. although some firms cross all of these areas, typically firms work in either the residential or the non-residential sectors. many of the larger firms cover both engineering and non-residential building in their activities. within the non-residential building sector, there are ten or twelve different sub-markets, divided into offices, retail, factories, health, schools and so on. some firms specialize in building particular types of buildings, for example in australia grocon specialises in high-rise office buildings and westfield specialises in shopping centres. however, more commonly a building contractor will apply their management skills to a range of building types, and not limit themselves to specific sub-markets. in this case, for the construction industry, sub-markets are difficult to identify because firms can be highly specialized in one area, or they can be highly generalized and put up a wide range of buildings and structures. in regards to industry development and policy, the 1990s were a decade of defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 63 development and refinement of construction industry policy in australia, with a range of state and commonwealth agencies involved. the industry reform strategy has focused on the lead role of large public sector clients, the introduction of performance standards, rationalisation of contractual relationships, and more effective building management practices. the new south wales (nsw) government established a building industry royal commission (rcbi), which published in 1992 a 10 volume report, implemented by the nsw construction policy steering committee (cpsc), which was made responsible for the development of building and contractual policies and practices for nsw agencies. at the same time a commonwealth government agency, the construction industry development agency (cida), was working with industry and publishing reports on issues identified in the final report. cida's main policy initiatives were pre-qualification criteria, codes of conduct and tendering, and the development of best practice and continuous improvement tools (de valence 1997). in 1997 the australian procurement and construction council (apcc) was established as the national policy advisor on procurement and construction and the peak industry council for the commonwealth, state and territory governments. in 1997, the apcc released building a better construction industry in australia which contained fifteen recommendations to improve industry performance. this was followed by the launch of the building for growth policy and agenda (isr 1999) by the department of industry, science and resources. despite these efforts to promote better performance by the australian construction industry, the industry's performance measured by productivity growth, value of services exported, skill development, innovation and r&d, use of information technology and supply chain integration has be mixed, at best (isr 1999). conclusion this paper has presented data from two different perspectives on the size and scope of the australian construction industry. the first is in the traditional structure-conduct-performance approach to analysing industry structure. the industry activity data from the abs and the construction industry survey data is in this form. the paper then used an extended framework to the construction industry with a "complexes" or "cluster" approach that includes suppliers and manufacturers. this was applied to the australian industry by aegis, and that study produced data on the industry that extended the scale of the industry, doubling the share of gdp and employment. in conclusion, it appears that defining the size and scope of the construction industry depends on the definition of industry products or markets adopted and the sectors of the industry that are to be included. the importance of this finding has implications in two key policy areas. firstly, in competition policy administered by the australian competition and consumer commission, and counterparts overseas, determinations of anticompetitive behavior are based on the definition of ‘market’ and ‘industry’ used. from the data in this paper it is clear that the definition of the industry is far from being a settled issue. both narrow (sector based) and broad (cluster based) definitions are appropriate in certain circumstances. for example, some building materials are widely used (concrete, plasterboard) while others are not (scaffolding, lifts). some services are common (surveying), other are specialised (design, cost and engineering consultants). therefore, the appropriate definition of the ‘industry’ for competition policy will depend on the specific ‘market’ under consideration. secondly, the building and construction industry can be depicted in a variety of ways, but a model showing how the built environment is created through the project initiation, design and construction process is the most representative of the whole industry. the number and range of defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 64 the australian journal of construction economics & building participants in the creation and maintenance of the built environment can be seen in this view. from the suppliers to the end users, the number of stakeholders is extraordinarily large. the complexity and number of activities involved in the b&c has, to date, prevented a coherent view of the industry developing. this has, in turn, made efforts to improve the performance of the industry largely ineffectual. despite repeated efforts by governments, both in australia and elsewhere, the performance of the industry, using measurements such as the rate of productivity growth, levels of research and innovation, training and process improvement, is often seen as poor. an important part of the explanation for the failure of industry policy in the past is the misunderstood extent of the industry, due to the failure to adequately determine the size and scope of the building and construction industry, and the implications of that for policy initiatives. references abs (1996-97, 1988-89, 1984-85). construction industry surveys. australian bureau of statistics, cat. no. 8772.0. aegis, (1999). mapping the building and construction product system in australia. australian expert group on industry studies, department of industry, science and resources, canberra. apcc, (1997). building a better construction industry in australia, australian procurement procurement and construction council, canberra. bain, j. s. 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(1991). sunk costs and market structure: price competition, advertising, and the evolution of concentration. mit press, cambridge, mass. williamson, o. e. (1979). “transaction– cost economics: the governance of contractual relations." journal of law and economics, 22, 233-61. viewpoint developing an australian code of construction ethics sean francis mccarthy, (act government solicitor, australia) abstract this article looks at the increasing need to consider the role of ethics in construction. the industry, historically, has been challenged by allegations of a serious shortfall in ethical standards. only limited attempts to date in australia have been made to address that concern. any ethical analysis should consider the definition of ethics and its historical development. this paper considers major historical developments in ethical thinking as well as contemporary thinking on ethics for professional sub-sets. a code could be developed specific to construction. current methods of addressing ethics in construction and in other industries are also reviewed. this paper argues that developing a code of ethics, supported by other measures is the way forward. the author’s aim is to promote further discussion and promote the drafting of a code. this paper includes a summary of other ethical codes that may provide a starting point. the time for reform is upon us, and there is an urgent need for an independent body to take the lead, for fear of floundering and having only found ‘another debating topic’ (uff 2006). keywords: ethics, construction law why construction ethics? in general terms the construction industry endures a poor reputation. this is not limited to australia. a good many countries suffer the plight best summarised by u.k. academic professor john uff (2003) who has said there is a ‘lack of trust and confidence between those involved in the construction process’. australia faces a similar challenge a 2003 study by the queensland university of technology (zarkada-fraser et al 1998) addressing construction ethics specifically stated ‘in contrast with architects, however, construction contractors have a reputation for unethical behaviour, the main problem being, according to a poll conducted by the journal of building research and information, the high level of disputes between proprietors and builders’. ethics generally, have also been recently controversial. whether questioning the morality of ‘news of the world’ phone hacking scandals, the blatant disregard for business ethics with the likes of enron and hih collapses, or sham contracting in the construction industry, there exists the eternal question of what the role ethics can play in any industry. many other industries have adopted their own code of behaviour or set of industry specific ethical values. something can be gained from examining the various sector specific measures, for example in business ethics. in terms of construction specific measures the lead taken by the united kingdom in developing a national statement of ethical principles (by the u.k. society of construction law) provides a fine example of how australia might develop our own set of standards. australia is behind in both its research and the implementation of an industry standard. the very question of ‘why it should be supposed that ethics would have any application to the field of construction law’ has been answered by the uk society of construction law (uff 2003), and suggests the following reasons: australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 88 1) the need for regulation in areas not covered by legally enforceable duties (with medicine as a prime example). 2) because aligned industries to construction (engineering, architecture, surveying) all promulgate well developed ethical systems and regulation of professional conduct. 3) because ethics is inferred (or should be) in many construction activities such as tendering and dispute resolution. the distinctly english approach taken by uff (2003) holds that ‘an ethical approach may hold the key to a number of problems which have beset the construction industry for many years and may lead to a fairer and ultimately more prosperous future’. specific challenges in construction projects construction projects provide many opportunities for ethical dilemmas to arise. some of those stages have been identified as: 1. contract documentation; 2. obtaining tenders / placing contracts; 3. construction; and 4. post-construction. research in both australia and south africa has identified specific unethical conduct such as corruption, negligence, bribery, conflict of interest, bid cutting, under bidding, collusive tendering, cover pricing, frontloading, bid shopping, withdrawal of tender and payment games as concerns in construction (hamzah abdul-rahman et al 2010). australian construction a brief history the industry in australia has historically tended to be the domain of state and territory governments, however there has been an increasing trend since the 1960’s for co-operation and consistency at the national level. measures such as the building and construction industry improvement act 2005 (cwth) and the implementation guidelines for the national code of practice for the construction industry (august 2009) are examples of a more unified approach. in august 2001 the cole royal commission was established to report on the nature and extent of unlawful and inappropriate conduct in the building and construction industry. its final submission in 2003 outlined a general disregard for the law, and also established that regulatory bodies in the industry had inadequate powers to enforce the law. as a result of the commission, the building industry taskforce was established in october 2002, as an interim measure prior to the development of a national authority. over some 35 months of operation, the taskforce received 3367 enquiries, undertook 500 investigations and placed 29 matters before the courts. that taskforce tabled their final findings in september 2005 and 2006, with mr nigel hadgkiss stating: ‘this document highlights the continuation of unlawful and inappropriate behaviour in the industry’ (building industry taskforce 2005). the report also quoted the following:  ‘you have to cheat to compete’  ‘rule of law needs to be established in the industry’  ‘the industry remains plagued by a culture of civil disobedience, coercion, intimidation, threatening behaviour, and contempt for the law’ australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 89  ‘incidences of inappropriate industrial pressure, which can, in many instances, involve violent and thuggish behaviour, contribute to the lawless culture that currently plagues the industry’ the taskforce’s own inability to act as an enforcement agent for the law hindered progress, and suggested that intimidation, thuggery and illegal conduct in the industry might finally be tempered more effectively through the impending national authority of the australian building control commissioner (the abcc – established october 1 2005). it was said ‘that the industry was characterised by a widespread disregard for the law’, and it was thought that the abcc could provide ‘permanent and fundamental reform of the building and construction industry throughout australia’ (building industry taskforce 2005). further, it was thought ‘the abcc’s enhanced powers and statutory function promises to be immensely effective in eliminating the culture of lawlessness from the industry.’ initially the abcc was established to ensure compliance with workplace relations laws, but now ‘devotes considerable resources to promoting proper conduct’. it defines one of its ‘responsibilities’ as assessing and referring matters to the appropriate government bodies including the director of public prosecutions and the accc. it also investigates breaches of the building and construction industry improvement act 2005 (bcii act) and the building code. it assists with independent contractor legislation, can intervene in court proceedings involving building industry participants, can investigate breaches of collective agreements and awards, and provides assistance with the application of related legislation. it can enforce commonwealth acts and regulations (abcc website 2012). where the abcc suspects breaches, the abc commissioner is also able to take legal action. in terms of ethics, there is no one central authority charged with its promotion. defining ethics ethics is difficult to define without some consideration of a broader morality. morality can be thought of as ‘conforming to a conventional standard of moral conduct’ (collins dictionary 1991). a ‘moral’ refers to a ‘distinction between good and bad or right and wrong’ (collins dictionary 1991). ethics is ‘a set of principles considered correct’ and the ‘social, religious or civil code of behaviour considered correct’ (collins dictionary 1991). ethics might be thought of as a narrower sub-set of morality, perhaps reflected in a set of agreed principles for a particular profession, but nevertheless linked to the moral values held by a group, or society at large. whether ethics can be thought of as ‘you know it when you see it’, or ‘you’ve either got them or you don’t’ (loulakis 2003) seems over simplified. perhaps ethical conduct in its simplest is ‘doing the right thing when no-one is looking’ (devries 2009). early ethics natural law early ethical thinking thought that doing the right thing was based in a belief in natural law. philosophers such as aristotle, rousseau, hobbes and locke believed in a universal guiding principal that allowed humans to fundamentally know the difference between right and wrong. despite slight variations in approach, ‘the essence of natural law may be said to lie in the constant assertion that there are objective moral principles which depend upon the nature of the universe and which can be discovered by reason’ (freeman 2008). natural law proponents held that imminent truths existed and governed human nature, and mankind could essentially differentiate between right and wrong. natural law rejected immoral values as illegal. australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 90 bentham and utilitarianism utilitarianism developed ethical thinking beyond the omnipotent, with thinkers such as austin and hart taking a more cynical view and believing that humankind needed to have order imposed. utilitarianism quantified the assessment of an outcome, with the most desirable choice providing the greatest good to the greatest number. hence, an ethical dilemma could be solved by determining the greatest benefit and by providing the ‘greatest happiness for the greatest number’ (rachels 1989). bentham, for example considered a ‘calculus of felicity’ (freeman 2008), measuring lots of happiness to ascertain what utility decreed. positivism thinkers like fuller developed further the notion of a separate morality, and saw law as separate to mere belief and knowledge of what ‘ought to be’ (freeman 2008). some thinkers argued strongly over whether law should create moral obligations, especially for example if there existed an unjust law (for example apartheid or nazi law). hart argued that legal enforcement of morality must exist. realism ethical and jurisprudential philosophy developed with the approach of the scandinavian realists (1868-1939) who ‘sought to reverse the general notion of moral standards as being embodied in the law by the idea that it is moral ideas that are themselves largely determined by the law’ (freeman 2008). the scandinavian approach was logical given that legal prohibitions on murder and theft for example go back to earliest history. the scandinavians argued the dissemination of legal, moral and religious decrees throughout history is impossible, and furthered the debate as to whether ethics determined law or law determined ethics. the benefit of history historical perspectives help highlight the question of whether ethics for construction practitioners can simply be known (a kind of natural law perspective), or whether society should intervene and impose legislation, a code or other means as intervention measures (a positivism approach). contemporary ethics contemporary ethics is also useful in considering how to approach ethics for construction. one such approach, virtue ethics, is cited as an example of ‘one of three major approaches to normative ethics’ (oakley and cocking 2001) and focuses on benevolence. virtue ethics looks at the nature of a professional role and provides a ‘fluid’ approach to ethics, allowing for the particular circumstances of an ethical issue. it acknowledges the distinctiveness of each profession, and yet believes that a professional definition of ethics cannot be immune from society’s broad based moral values. rather idealistically, virtue ethics believes internalised guiding ideals provide a basis for a professional moral framework (oakley and cocking 2001). it attempts to frame individual decisions in the context of an individual making a commitment to human good, and leading a ‘flourishing life’ through the application of good professional conduct. virtue ethics also emphasises moral education and industry specific frameworks for guiding those decisions. virtue ethics believes that professional subsets of ethics can exist, and modern society now reflects that approach, perhaps confirming that modern ethical thinking has evolved well beyond a belief that good is known, to a belief that good can be directed. this is particularly relevant to the potential idea of developing a national code for construction ethics in australia. australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 91 professional ethical subsets furthering the idea of professional subsets, a number of professions are increasingly turning to the development of a profession centric code of ethics or conduct. widely criticised for a distinct lack of ethics (perhaps like construction), business ethics has been seen as an oxymoron. however, that does seem to be changing. controversial events in the business world have given rise to developments in the law to deal with director’s responsibilities, ethical obligations and behavioural accountability. in business, the law itself is being used to impose ethical and behavioural standards, with serious criminal and pecuniary sanctions being applied to cases like hih insurance ltd. legislation such as the corporations act 2001 (cwth) and even the sarbanes-oxley act implemented in the u.s. address directors duties and establish ethical matters as law. business ethics, or the lack of, has been made famous by quotes such as:  ‘enron actually had those values (respect, integrity…) well defined in it’s own code of ethics handbook, but it appears the only time the board of directors ever paid attention to that handbook was when they were officially agreeing to disregard it’ (cruver 2003).  investigations into the australian wheat board scandal stated that ‘there is a need to mark out to employees of companies who hold office at the level of seniority of the offender that they have a social and moral obligation, as well as a statutory duty, to act honestly and responsibly’ (cole, the hon t. 2006). whilst writers such as carr (1988) believe the world of business accepts a distinct lack of ethics as a ‘game plan’, idealists such as anshen (1998) still argue that business should reflect the broader values of society and should align business interests with other social interests. however, it would still seem many business professionals have been taught maximising shareholder wealth takes priority over ‘unsexy’ values such as integrity and respect (cruver 2003). medical practitioners also have their own ethical subset in the form of the hippocratic oath. doctors agree to respect the individual and to treat humans not diseases. central to the oath is the notion that: i will remember that i remain a member of society, with special obligations to all my fellow human beings, those sound of mind and body as well as the infirm. in agreeing to adhere to the oath, medical practitioners arguably utilize a kind of moral framework as a guide to future actions. providing that framework is a strong argument in favour of having such a code. legal practitioners also take an oath to uphold justice and the rule of law. legal practitioners commit to a duty to justice and the court first and foremost. with business, medicine, the law and a variety of other professions developing industry specific codes of ethics or conduct, it is simply a logical progression that the construction industry in australia should seek to develop their own code. as one us practitioner says: the names enron, arthur andersen, worldcom, global crossing, and even martha stewart all invoke notions of greed and dishonesty. the construction industry, with its low-price mentality, stiff competition, and razor thin margins, presents a ripe environment for ethical dilemmas (loulakis 2003). only to a limited extent in australia has ethics for construction obtained some credibility as a stand alone concept. the implementation guidelines for the national code of practice for australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 92 the construction industry (australian government department of education, employment and workplace relations 2009) do broach good behaviour in stating: ‘the core principles of the code…are aimed at ensuring the industry:  is client focussed  is based on trust  observes ethical tendering  maintains standards of ohs and environmental practice  encourages responsible industrial relations’ developing a code the lead of other regions is useful in benchmarking the australian position with regard to construction ethics. statement of ethical principles ethical conduct is the compliance with the following ethical principles. 1. honesty act with honesty and avoid conduct likely to result, directly or indirectly, in the deception of others. 2. fairness do not seek to obtain a benefit which arises directly or indirectly from the unfair treatment of other people. 3. fair reward avoid acts which are likely to result in another party being deprived of a fair reward for their work. 4. reliability maintain up to date skills and provide services only within your area of competence. 5. integrity have regard for the interests of the public, particularly people who will make use of or obtain an interest in the project in the future. 6. objectivity identify any potential conflicts of interest and disclose the conflict to any person who would be adversely affected by it. 7. accountability provide information and warning of matters within your knowledge which are of potential detriment to others who may be adversely affected by them. warning must be given in sufficient time to allow the taking of effective action to avoid detriment. these principles apply to the work of all professionals working in the construction industry, whatever their original qualification or affiliation. guidance on ethical principles application of statement the statement of ethical principles applies to persons as individuals, whether they work as an independent professional or as a partner, associate, director or employee of a firm or company. persons who work on behalf of a firm or company have additional responsibility to ensure that this statement of good practice is complied with by the firm or company to the extent of their authority. legal and other duties the statement of good practice is in addition to any other professional code that may apply. the statement of good practice is part of and additional to contractual and other duties taken on under civil law the statement of good practice applies independently of any requirement imposed by or breach of criminal law. unethical conduct unethical conduct is the deliberate or reckless disregard for the ethical principles, as they would apply to the ordinary standards applicable to the activity being undertaken – the recognised practice in that profession. figure 1 the statement of ethical principles (reproduced with permission from the uk socl 5 march 2012) australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 93 the united kingdom the u.k. society of construction law has produced its own statement of ethical principles. given the apparent collaboration between the u.k. society and the australian society of construction law, there may exist the opportunity for a good deal of cross-pollination to establish australia’s code. with generally a wide acceptance it is, however, not necessarily the case that all practitioners or academics approve of the code, however. jim mason, for example from the university of the west of england, bristol delivered a paper (using the u.k. statement of ethical principles as the reference point) on 2-3 september 2010 in paris suggesting that his studies into construction ethics would conclude a number of things, including; 1. any effective ethical code needs to be less woolly and be more practical. 2. an ethical code needs a government backed enforcement body. 3. ethics can only be addressed over the long term. 4. partnering, publishing and using standard form contracts can all be effective methods of addressing ethics. the united states the united states has also sought to develop a code of ethics that can achieve industry wide acceptance. construction management association of america ethics policy cmaa ethics policy code of professional ethics for the construction manager since 1982, the construction management association of america (cmaa) has taken a leadership role in regard to critical issues impacting the construction and program management industry, including the setting of ethical standards of practice for the professional construction manager. the board of directors of cmaa has adopted the following code of professional ethics of the construction manager (code) which apply to cmaa members in performance of their services as construction and program managers. this code applies to the individuals and to organizations who are members of cmaa. all members of the construction management association of america commit to conduct themselves and their practice of construction and program management in accordance with the code of professional ethics of the construction manager. as a professional engaged in the business of providing construction and program management services, and as a member of cmaa, i agree to conduct myself and my business in accordance with the following: 1. client service. i will serve my clients with honesty, integrity, candor, and objectivity. i will provide my services with competence, using reasonable care, skill and diligence consistent with the interests of my client and the applicable standard of care. 2. representation of qualifications and availability. i will only accept assignments for which i am qualified by my education, training, professional experience and technical competence, and i will assign staff to projects in accordance with their qualifications and commensurate with the services to be provided, and i will only make representations concerning my qualifications and availability which are truthful and accurate. 3. standards of practice. i will furnish my services in a manner consistent with the established and accepted standards of the profession and with the laws and regulations which govern its practice. 4. fair competition. i will represent my project experience accurately to my prospective clients and offer services and staff that i am capable of delivering. i will develop my professional reputation on the basis of my direct experience and service provided, and i will only engage in fair competition for assignments. http://www.cmaanet.org/cmaa-ethics-policy#code#code http://www.cmaanet.org/cmaa-ethics-policy#code#code australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 94 5. conflicts of interest. i will endeavor to avoid conflicts of interest; and will disclose conflicts which in my opinion may impair my objectivity or integrity. 6. fair compensation. i will negotiate fairly and openly with my clients in establishing a basis for compensation, and i will charge fees and expenses that are reasonable and commensurate with the services to be provided and the responsibilities and risks to be assumed. 7. release of information. i will only make statements that are truthful, and i will keep information and records confidential when appropriate and protect the proprietary interests of my clients and professional colleagues. 8. public welfare. i will not discriminate in the performance of my services on the basis of race, religion, national origin, age, disability, or sexual orientation. i will not knowingly violate any law, statute, or regulation in the performance of my professional services. 9. professional development. i will continue to develop my professional knowledge and competency as construction manager, and i will contribute to the advancement of the construction and program management practice as a profession by fostering research and education and through the encouragement of fellow practitioners. 10. integrity of the profession. i will avoid actions which promote my own self-interest at the expense of the profession, and i will uphold the standards of the construction management profession with honor and dignity. figure 2 the construction management association of america ethics policy (reproduced with permission from cmaa) other international leads construction ethics has also increasingly had focus in asia and europe. major research in malaysia revealed a lack of ethics to ‘have a direct and negative impact on the quality of construction’ (hamzah abdul-rahman 2010) thereby furthering support that ethical conduct not only enhances reputational concerns, but has a direct impact on job quality and cost. in a paper looking at the comparative approach of 8 european countries towards construction ethics, professor anthony lavers surveyed participating countries over specific ethical issues. laver built his study around the following potential questions: 1. can a contract call for retention monies? 2. can previous performance be evaluated in a current tender evaluation? 3. could an architect switch from working for the owner to working for a contractor on the same project? 4. can a client appoint a junior employee of his as contractor administrator of a traditional construction contract? 5. is a contractor obliged to warn of design defects? 6. can a client have unlimited powers to terminate or vary a contract without good reason? laver concluded the study with a comprehensive summary of the relative position of the participating countries, and by saying that ‘the most compelling conclusion of this exploratory exercise is that the individual societies of construction law can provide access to high quality information on construction law in the respective member countries and that the european society of construction law is in a unique position to commission comparative research through its members’. this creates a compelling argument that an equivalent organisation in australia would be the logical base from which to launch our own unique code. australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 95 australia with only limited national measures to date via legislation and the government code of practice, no one industry wide code has yet been implemented in australia. organisations with a relatively wide reach however, such as the master builders association (the mba) have established their own code in order to at least address ethics. master builders association of nsw code of ethics code of ethics the management of this firm subscribes to the following master builders association of new south wales code of ethics under which it commits itself to: ■ deal honestly and fairly with our clients; ■ recognise that fair and genuine competition is a fundamental service to which our prospective clients are entitled; ■ maintain a high standard of work and comply with the plans and specifications in the execution of all works we undertake; ■ comply with the prevailing building and construction codes for construction and work towards their improvement in the interests of structural efficiency, safety and health; ■ deal justly with our employees, and with those whom we contact; ■ so conduct our business that the health and safety of our employees, of those with whom we contract and their employees, and of the community, are safeguarded; ■ avoid all contact or practice likely to discredit or do injury to the building industry or our association; ■ give our informed and vigorous support to all sound legislation effecting the building and construction industry; ■ co-operate in aiding the advancement of the building construction industry; and ■ take every opportunity of rendering community service. figure 3 the mba nsw code of ethics (reproduced with permission 5 march 2012) common threads summarising the essential elements from the various countries above (and the mba code) arguably provides the initial steps towards outlining (at least) a code for australia. that summary could provide a starting point as follows: as construction industry professionals, practitioners will: 1. act with honesty and without deception. 2. act fairly so as not to obtain advantage. 3. act with integrity and in the public interest. 4. act with objectivity by identifying and addressing potential conflicts of interest. 5. exercise professional diligence in standards of work and education. 6. conduct themselves for the greater good of clients and society at large. 7. notwithstanding the above, work for the interests of employees. 8. seek to improve the reputation of the construction industry. australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 96 9. comply with all relevant legislation and regulations. 10. recognise and promote competition. 11. act swiftly, and seek advice from an independent industry group on unresolved ethical matters. supporting a code industry specific legislation further developments in the law may also be required to support the development of a code of ethics for the industry. the earlier cited sarbane-oxley act of 2002 (u.s.a.) believes legislation might also help ‘define the process by which corporations must conduct their business… ‘ (loulakis 2003). however, in an industry already subject to a raft of legislation and regulations, more legal compliance may simply add to the complexity and make compliance more difficult. certainly enforcement could be an issue. it may even be that ‘no morality can ever be founded on authority, even if the authority were divine’ (ayer 1998), or that ‘legality does not establish morality’ (pritchard and robison 1979). compliance modelling in terms of how a code might be enforced, one step might be to consider the approach taken by the australian taxation office (ato) in promoting taxation compliance. figure 4 ato model of compliance from “an evolving compliance model for tax enforcement” by valerie braithwaite and john braithwaite developed by john and valerie braithwaite (1992), a sliding scale of compliance is both logical and convincing. central to its apparent success is a belief that ‘compliance is most australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 97 likely when an agency displays and employs an explicit enforcement pyramid’. the ato model imposes a hierarchy of enforcement measures starting from ‘persuasion’ on the lowest level, to ‘licence revocation’ (for taxation practitioners) at the top of the apex. the compliance model was developed to: 1. understand the dynamics of the cash economy 2. build partnerships with the community 3. offer incentives for compliance 4. enforce compliance on an elevating scale. the model utilises increasing levels of enforcement (made known to taxation practitioners), starting at the lowest level with simple persuasion measures. over time a series of stepped enforcement measures may be utilised, and culminate with the possibility of full criminal sanctioning for those in defiance of their responsibilities. having worked remarkably well, the sliding scale of compliance could be transposed to any industry, and would seem well suited to the construction industry. initial compliance, for example, to an industry code of ethics, could be ‘persuaded’ by demonstrating wide acceptance and take up of the code, and for example could be enforced at tender stage. compliance might elevate through mandatory education programmes for practitioners (for example on longer term or large scale projects), and increase to the highest level of compliance through law or contractual provisions. education and awareness any ethical developments, whether by a code or not, must also be supported by education and awareness. in a study by qut on construction management student’s perception of ethics in tendering (qut 1998) it was evident that ‘the obvious stress on the need for profitability appears to generate a perceived conflict between profit and ethics, which is not resolved in the current curriculum’. empirically, ethical education works. although not construction related, a survey by the australian institute of chartered accountants studied the benefits derived from on-going ethics education (o’leary 2008). a study of 155 students exposed to f ive ethical dilemmas both before and after on-going education, revealed surprising results. performed on students predicted to already have well formed ethical parameters at the outset, the authors stated, ‘well, we were wrong...in all five scenarios students selected a more ethical option after the ethical training than before…ethical instruction methods did have an affect on their attitudes and a positive one at that’ (o’leary 2008). it may also be that education can link to practitioner registration. following the lead that some australian jurisdictions have taken towards domestic construction, it may be that a similar approach can be adopted in commercial construction. uff has supported such a view in the u.k. stating ‘i suggest some form of registration which is capable of being revoked or withheld by an appropriately empowered body’ (uff 2006). the key question, for all jurisdictions, is who becomes the ‘empowered body’? in that regard it is interesting to note that the u.k. society of construction law has shied away from that task, not seeing itself as an enforcement agency. standard form contracts further to the earlier view that a compliance model would utilise both low and high levels of enforcement, that higher level might be imposed through the use of an agreed code or behavioural standards being used in standard form construction contracts. this would then create some notional legal compliance as a standard term of contract. australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 98 whilst a host of difficult and complex legal arguments might arise as to what such a code may mean in a legal framework, even in its loosest form could be made to impose a duty for contracted parties to comply with ‘ethical standards that may reasonably be expected by practitioners in the construction industry’. establishing the code ross (2001) provides his perspective that codes cannot exist in isolation. perhaps we are asking too much of ethical codes. we have to recognise that such codes, which are usually general principles, are only a beginning to ethical behaviour. the gaps are filled by: specific professional association rulings, disciplinary proceedings, statutes and case law (ross 2001). even codes of conduct can take a legally binding form (such as the franchising code of conduct), or may simply outline a set of idealistic professional standards as industry practice. whilst to writers such as ross (2001), ‘codes of professional conduct are one of the most important characteristics of a profession’, to others they are more puzzling: what is it exactly, and how can it bind us? or can it? its status, normative if not otological, seems mysterious. either its pronouncements are obvious (read ‘platitudinous’), in which case it invites ridicule, or they are not obvious (read ‘controversial’) in which case it arouses suspicion. a third possibility is that its pronouncements are vague. in that case they are useless unless interpreted. when interpreted, they are either obvious thus platitudinous; or not obvious thus controversial (lichtenberg 1996). however, a simple professional code does have numerous benefits such as establishing a framework for decision making; offering a sense of protection for members and consumers; showing a professional commitment to standards; imposing standards to aspire to for nonmembers, and; establishing professional solidarity. but they also have weaknesses. codes can risk being ineffectual lip service; being remedial in nature; or serving only to try and give credibility to professions that have suffered. if poorly drafted, a code may not provide any framework for decisions. again following the u.k approach, uff (2003) made it known that ‘the task is to define a multi-disciplinary ethical code to apply to those performing a particular function (in construction) irrespective of their profession of origin’. further, he held that a code would cover ‘the drawing up and awarding of contracts; the administration of contract performance; and the formulation of and resolution of claims and disputes’. whilst not all of those issues are adequately covered, the u.k. statement of ethical principles has gone some way towards addressing those concerns. challenges in establishing a code – who steps up? arguably, the next step is simple – develop the code. the key question now is who will develop the code, and with what methodology? will it simply be by reference to other codes, or by collaborative industry consultation? ultimately, who will nail their name to the masthead as the organisation developing and promoting the code? there are obvious choices such as the australian society of construction law. that would seem a logical place for the responsibility to rest. the first stage however, would be (as with the u.k socl) the establishment of an ‘ethics committee’, which to date does not appeared to have occurred. ultimately we also face the challenge that confronted the u.k. in deciding who will enforce the code. if indeed, ‘the quality of the moral behaviour varies in inverse ratio to the number of human beings involved’ (aldous huxley from grey eminence, ch.10), then time is of the essence in setting up the code. australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 99 bibliography abcc, background; legislation, from http://www.abcc.gov.au anshen, m. (1998) ‘changing the social contract: a role for business’, joan c callinan (ed), ethical issues in professional life, oxford university press, new york australian government implementation guidelines for the national code of practice for the construction industry, august 2009, australian government, department of education, employment and workplace relations australian society of construction law at http://www.scl.org.au ayer, a. j. (1998) ‘essay on humanism’, the penguin thesaurus of quotations, penguin books braithwaite, v. & j. (1992) ‘an evolving compliance model for tax enforcement’ from http://vab.anu.edu.au/pubs/1/anevolvingcompliance.pdf building industry royal commission: background, findings and recommendations updated 25 september 2003, from http://www.aph.gov.au/library/pubs/cib/2002-03/03cib30.htm carr, a. (1988) ‘is business bluffing ethical?’, joan c. callahan (ed.) ethical issues in professional life, oxford university press, new york cole, the hon t. (2006) ‘report of the enquiry into certain australian companies in relation to the un oil-for-food programme: summary recommendations and background commonwealth of australia’. collins dictionary (1991) collins publishing construction management association of america code of ethics from http://www.cmaanet.org/cmaa-ethics-policy cruver, b. (2003) enron – ‘anatomy of greed’, arrow books freeman, m.d.a. (2008) introduction to jurisprudence, sweet and maxwell hamzah abdul-rahman, chen wang and xiang wen yap (2010) ‘how professional ethics impact construction quality: perception and evidence in a fast developing economy’, scientific research and essays 5 (23) lavers, a. (2006) ‘ethics in construction law – a review of the position in eight european countries’ a paper given to the european society of construction law, stockholm, 26 august 2006 loulakis, m. (2003) ‘ethics in construction: challenges and dilemmas’, international risk management institute (usa), 18 nov 2003 main, a. (2003) ‘other peoples money – the complete story of the extraordinary collapse of hih’, harper collins publishers mason, j. ‘a single ethical code for the construction industry – what do young professionals mason, j. ‘promoting ethical improvement in the construction industry – a single professional code?’ department of construction and civil engineering university of the west of england, bristol matteson, j. (2002) ‘constructing ethics and the ethics of construction: john ruskin and the humanity of the builder’ from http:www.crosscurrents.org/matteson2002.htm o’leary, c. (2008) ‘the importance of ethics’ charter magazine, august 2008 oakley, j. and cocking, d. (2001) ‘virtue ethics and professional roles’, cambridge university press parson, e. (2005) ‘the construction industry’s ethical dilemma’ from http://ecmweb.com/mag/electric_construction_industrys_ethical/ 1 aug 2005 http://www.abcc.gov.au/ http://vab.anu.edu.au/pubs/1/anevolvingcompliance.pdf http://www.aph.gov.au/library/pubs/cib/2002-03/03cib30.htm http://ecmweb.com/mag/electric_construction_industrys_ethical/ australasian journal of construction economics and building mccarthy, s f (2012) ‘developing an australian code of construction ethics’, australasian journal of construction economics and building, 12 (2) 87-100 100 pritchard and robison (1979) ‘profits and professions: essays in business and professional ethics’, humana press rachels, j. (1989) ‘what is morality?’ from james rachels (ed) the right thing to do, new york, random house ross, y. (2001) ‘ethics in law’, 3 rd ed, butterworths rowland, t. l. ‘ethics in construction: a risk management issue’ from http://www.irmi.com/.../ethicsinconstructionchallengesanddilemmas.pdf stanford encyclopaedia of philosophy (2007) virtue ethics at http://plato.stanford.edu/entries/ethics-virtue/ the penguin thesaurus of quotations (1998) penguin books think about it?’ department of construction and property university of the west of england, bristol u.k. society of construction law at http://www.scl.org.uk uff prof j cbe qc (2003) ‘duties at the legal fringe: ethics in construction law’ centre of construction law & management – the michael brown foundation fourth public lecture delivered at the great hall, kings college london, 19 june 2003 uff prof j (2006) ‘ethics in construction law – two years on’ australian construction law newsletter # 106, february 2006 upholding the law – findings of the building industry taskforce’ building industry taskforce, sept. 2005, 1 vee, c. and skitmore, r. (2003) ‘professional ethics in the construction industry’ from http://eprints.qut.edu.au/archive/00004119 zarkada-fraser, a. et al. (1998) ‘construction management students’ perceptions of ethics in tendering’ qut from https://eprints.qut.edu.au/secure/00004479/01/bear98r1.doc legislation and regulations building and construction industry improvement act 2005 (cwth) building and construction industry improvement regulations 2005 (cwth) trade practices act 1975 (cwth) the corporations act 2001 (cwth) http://www.irmi.com/.../ethicsinconstructionchallengesanddilemmas.pdf http://www/ https://eprints.qut.edu.au/secure/00004479/01/bear98r1.doc 2 viewpoint establishing a common ground for the use of structural equation modelling for construction related research studies ayodeji emmanuel oke, (federal university of technology, nigeria) deji rufus ogunsami, (federal university of technology, nigeria) stephen ogunlana, (hariot watt university, uk) abstract the use of structural equation modelling (sem) for research studies in construction related field has been on the increase over the years. the essence of this study is not to compare the level of usage of sem with other modelling methods, neither is it to examine its extent of adoption in construction management as this has been researched in previous works but to arrive at a common ground for future construction related research works, based on the findings and recommendations from existing studies on the subject of sem. research materials within and outside the field of construction management were reviewed and it was discovered that sem using amos (covariance approach) is the most appropriate method for construction research studies. this is not just because it is the most available of the software programs, but because of the numerous benefits and advantages highlighted from previous studies. the study also recommended appropriate sample size as well as cut-off value for various required goodnessof-fit tests of sem model. keywords: construction, construction research, goodness-of-fit measures, software programs, structural equation model, structural equation modelling introduction previous studies in the field of construction have identified and used a number of methods for generating and testing of models and frameworks. among these methods are regression equations of various types (e.g. linear, multiple, logistic, etc.), system dynamic (sd), artificial neural network (ann), structural equation modelling (sem), etc. this paper is devoted to sem. advantages and benefits of sem the benefits of structural equation modelling (bagozzi and yi, 2012; henseler, 2012; ringle et al, 2012) include that it provides an integrative function, that is, a single umbrella of methods under leading programs. it helps researchers to be more precise in their specification of hypotheses and operationalizations of constructs; takes into account reliability of measures in tests of hypotheses in ways beyond the averaging of multi-measures of constructs; guides exploratory and confirmatory research in a manner combining self-insight and modelling skills with theory. it often suggests novel hypotheses originally not considered and opens up new avenues for research. it is useful in experimental or survey research, cross-sectional or longitudinal studies, measurement or hypothesis testing, within and across groups and institutional or cultural contexts; and is easy to use. henseler (2012) identified the advantages of sem to include its abilities to model latent variables, correct for measurement error, specify errors and their covariance structures and estimate entire theories simultaneously. it allows a researcher to model and predict relationships between construct variables in the hypothesised manner. oke a e et al. (2012) ‘ establishing a common ground for the use of structural equation modelling for construction related research studies’, australasian journal of construction economics and building, 12 (3) 89-94 90 structural equation modelling is an advanced multivariate technique to examine multiple dependence relationships between variables simultaneously (singh, 2009, harris and schaubroeck, 1990). sem is generally preferred to other modelling methods due to the reasons highlighted by bryne (2010); roberts, et al (2010); ringle, et al (2012); and singh (2009). the reasons include: it takes a confirmatory rather than an exploratory approach to data analysis while most other methods including regression equations are descriptive, i.e. exploratory; it provides explicit estimates for measuring errors that traditional multivariate procedures are incapable of either assessing or correcting; the sample size can easily be regulated; it can be used for non-normal data; it allows for the use of formatively measured latent variables; data analysis using sem incorporate both observed and unobserved variables unlike other methods incorporating only the observable variables; it tests a priori relationship rather than allowing the technique or data to define the nature of relationship between the variables; and it provides alternative methods for modelling multivariate relations. yuan, et al (2010) concluded that sem is an established method for social science research. this therefore establish the usefulness of sem for construction related research works since it is social-science research inclined. research methodology a review of existing literature in the area of sem was carried out with emphasis on differences in approaches, software programs, sample size, data and respondents' type as well as necessary tests required in the final selection of sem model. however, the examined research materials were not limited to construction related areas only. approaches to sem there are three approaches for structural equation modelling as identified in the literature (hensler, 2012; hwang, et al 2010; ringle, et al 2012; yuan, et al 2010). the approaches indicated in table 1 depend on the adopted software programs and they are: covariance structure analysis (c-sem); partial least square (pls); and generalized structured component analysis (gsca). hwang et al (2010) referred to the first two methods as traditional approaches factors c-sem pls-sem gsca model specification latent variable factors components components number of equations one two one model parameter loadings. path coefficients, error variances, factor means and/or variance loadings, path coefficients, component weights loadings, path coefficients, component weights parameter specification input data covariances/correlations individual-level raw data individual-level raw data estimation method maximum likelihood (mainly) least squares least squares global optimization function yes no yes normality assumption required for maximum likelihood not required not required model fit measures overall and local local overall and local table 1 approaches to sem source: hwang, et al (2010) oke a e et al. (2012) ‘ establishing a common ground for the use of structural equation modelling for construction related research studies’, australasian journal of construction economics and building, 12 (3) 89-94 91 while the third is known as alternative method. c-sem involves the use of such software programs as lisrel, amos, eqs and mplus while pls can be implemented using lvpls, pls-graph, smart-pls and visualpls. gsca analysis is only implemented by the use of gesca software program. covariance structural equation modelling (c-sem) using analysis of moment structure (amos) software is recommended for construction related research works. hwang, et al (2010) while comparing the three approaches, concluded that c-sem has been found to recover loadings, parameters and path coefficients better than the others and it also produces unbiased parameter estimates. moreover, hensler (2012) in comparing c-sem with gsca observed that gsca substantially over-estimates direct effect in mediation analysis, partially invalid and provide inconsistent estimates. however, pls-sem should be considered as an alternative where c-sem could not be used for any reason sample size the role of sample size is crucial in all statistical analysis (lucko and rojas, 2010). the more sophisticated the statistical analysis the larger the sample needed. therefore, the sample size requirement in this study is a function of the model or framework development method in consideration. sem, like other statistical techniques, requires an appropriate sample size in order to produce reliable estimates (hair, anderson, tatham and black 2008). gorsuch (1983) suggested at least 5 participants per construct and not less than 100 individuals per data analysis. harris and schaubroeck (1990) proposed a sample size of 200 at least to guarantee robust structural equation modelling. kline (2010) suggested that a very complicated path model needs a sample size of 200 or larger while bagozzi and yi (2012) proposed that the sample size should be above 100, preferably above 200. in addition, yuan, et al (2010) after evaluating different models based on various numbers of respondents opined that a sample size of between 300 and 400 should be appropriate for structural equation models using ordinal data. this is supported by hair, et al (2008) who recommends a sample size of at least 200 but not exceeding 400. it was further pointed out that when the sample size exceeds 400 to 500 participants, the sem analysis becomes too sensitive and almost any difference is detected, making goodness-of-fit measure show poor fit. it can thus be concluded that a minimum and maximum sample of 200 and 400 respectively, is needed for sem research studies. analysis and selection of best-fit model like any other model, it is not always practicable and appropriate to accept the first result of analysis of a model. there is always a need to subject the model to various tests with the sole purpose of validating the model and arriving at the best-fit model. in sem, two stages i.e. model selection and evaluation are identified. model selection involves testing the factors and testing the model. in testing the factors, exiting studies opin a need to carry out factor analysis on latent variables and yuan, et al (2010) suggested a cut-off value of 0.50 while chinda and mohamed (2008) used 0.45 in modelling construction safety culture. the essence of the test according to barrett (2007) is to ensure the elimination of attributes with low correlations with the attributes of other latent factors in the final sem. the cut-off value is affected by sample size but a range of 0.45 to 0.50 is deemed appropriate. the second stage of model selection involves using selection criteria to declare one model superior and treating it as a best working hypothesis until a better model is proposed (preacher and merkle, 2012). molenaar et al (2000) opined that a feasible model should be selected based oke a e et al. (2012) ‘ establishing a common ground for the use of structural equation modelling for construction related research studies’, australasian journal of construction economics and building, 12 (3) 89-94 92 on the recommended goodness-of-fit (gof) measures and the model that satisfies both theoretical expectations and gof should be finally selected for sem analysis. standard indices of model fits can be established by using t-tests and r-squares for model equation (doloi, et al. 2011) as well as chi-square ( 2  ) goodness-of-fit statistics (bagozzi and yi, 2012; singh, 2009). the essence of these tests and the recommended level presented in table 2 according to preacher and merkle (2012), is to formulate a useful approximation model that fits well; has easily interpretable parameters; approximates reality in as parsimonious a fashion as possible; and can be used as a basis for inferences and predictions. however, bagozzi and yi (2012) opined that research can rely on five of the identified fit indices, that is, 2  , rmsea, nonnormed fit index (nnfi/tli), cfi and srmr. table 2 indicate the recommended cut-off values of various fit indices based on the recommendations of various research works. however, there is no need for rigidity as this is easily affected by other factors such as sample size, type of data, number of variables, etc. in order to evaluate the appropriateness of the measurement model used for final sem, jin, doloi and gao (2007) suggested that the strength of the measurement model should be established by performing the cronbach's reliability test. however, there are no discrepancies as both doloi, et al. (2011) and bryne (2010) suggested a cut-off value of 0.7 as an acceptable level of initial consistency. the closer the value is to 1, the more reliable the model will be. fit indices doloi et al (2010) bagozzi and yi (2012) singh (2009) chinda & mohamed (2008) recommended value(s) χ 2 /degree of freedom 1 to 2 0 to 2 1.00 to 2.00 < 2.00 1.00 to 2.00 goodness of fit (gfi) 0(no fit) 1(perfect fit) 0 to ≥1 0.00 to 1.00 0.00 to 1.00 root mean square error of approximation (rmsea) <0.05(very good) 0.1(threshold) ≤0.07 ≤0.05 to ≤0.08 ≤ 0.10 <0.05 to 0.07 standardized root mean square residual (srmr) ≤0.07 <0.05 to 0.07 comparative fit index (cfi) 0(no fit) 1(perfect fit) ≥0.93 0 to 1 > 0.90 0.93 to 1.00 tucker-lewis index (tli) 0(no fit) 1(perfect fit) ≥0.92 ≥0.95 0.95 to 1.00 normed fit index (nfi) 0(no fit) 1(perfect fit) 0.60 to 0.90 0.60 to 1.00 incremental fit index (ifi) 0(no fit) 1(perfect fit) 0 to 1 > 0.90 0.93 to 1.00 relative fit index (rfi) 0(no fit) 1(perfect fit) 0.90 to 1.00 table 2 recommended level of goodness-of-fit (gof) measure conclusion and recommendation having established the benefits, usefulness and advantages of using sem for construction related research studies, it could be concluded from previous research findings that the usefulness of sem in the field of construction is clearly established. the field is social-science related and the majority of the data are ordinal mostly from the perceptions and opinions of construction professionals and these are major areas of strength of sem. more so, covariance structural equation modelling (c-sem) using analysis of moment structure (amos) software is recommended due to its advantages over other identified methods. the sample size for oke a e et al. (2012) ‘ establishing a common ground for the use of structural equation modelling for construction related research studies’, australasian journal of construction economics and building, 12 (3) 89-94 93 developing sem should be within the range of 200 and 400 while cut-off values for various tests of goodness-fit were also recommended. references bagozzi, r. p.& yi, y. (2012) 'specification, evaluation, and interpretation of structural equation models', journal of the academy of marketing science, 40, 8-34 barrett, p. (2007) 'structural equation modelling: adjudging model fit', personality and individual differences, 42, 815-824 bryne, b. m. (2010) structural equation modelling with amos: basic concepts, applications and programming, (2nd ed.), routledge, taylor and francis group, new york. chinda, t. & mohamed, s. (2008) 'structural equation model of construction safety culture', engineering, construction and architectural management, 15 (2), 114-131 doloi, h, iyer, k. c. & sawhney, a. (2010) 'structural equation model for assessing impacts of contractor's performance on project success', international journal of project management, 29, 687-695 gorsuch, r. l. (1983) factor analysis, lawrence erlbaum, hillsdale, new jersey hair, j.f., anderson, r.e., tatham, r.l., & black, w.c. (2008) multivariate data analysis, (7th ed.). prentice hall publisher, upper saddle river, new jersey harris, m. & schaubroeck, j. (1990) 'confirmatory modelling in organizational behaviour/human resource management: issues and applications', journal of management, 16 (2), 337-360 henseler, j. (2011) 'why generalized structured component analysis is not universally preferable to structural equation modelling', journal of the academy of marketing science, 40, 402-413 hwang, h., malhotra, n. k., kim, y., tomiuk, m. a., & hong, s. (2010) 'a comparative study on parameter recovery of three approaches to structural equation modelling', american marketing association, 48 (august), 699-712 jin, x.h., doloi, h. & gao, s.y. (2007) 'relationship-based determinants of building project performance in china', construction management and economics , 25, 297–304 kline, r. b. (2010) principles and practice of structural equation modelling. (3rd ed.), the guilford press, new york lucko, g. & rojas, e. m. (2010) 'research validation: challenges and opportunities in the construction domain', journal of construction engineering and management, 136 (1), 127-135 molenaar, k, washington, s. & diekmann, j. (2000) 'structural equation model of construction contract dispute potential', journal of engineering and management, 126 (4), 268-277 preacher, k. j. & merkle, e. c. (2012) 'the problem of model selection uncertainty in structural equation modelling', psychological methods, 17 (1), 1-14 ringle, c. m., sarstedt, m., & straub, d. w. (2012) 'a critical look at the use of pls-sem in mis quarterly', mis quarterly, 36 (1), 3-16 roberts, n, thatcher, j. b. & grover, v. (2010) 'advancing operations management theory using exploratory structural equation modelling techniques', international journal of production research, 48 (15), 4329-4353 oke a e et al. (2012) ‘ establishing a common ground for the use of structural equation modelling for construction related research studies’, australasian journal of construction economics and building, 12 (3) 89-94 94 singh, r. (2009) 'does my structural model represent the real phenomenon?: a review of the appropriate use of structural equation modelling (sem) model fit indices', the marketing review, 9 (3), 199-212 yuan, k.., wu, r., & bentler, p. m. (2010) 'ridge structural equation modelling with correlation matrices for ordinal and continuous data', british journal of mathematical and statistical psychology, 64, 107-133 microsoft word july paper 9.doc sustainability of construction education by brian wood page 106 the australian journal of construction economics & bulding sustainability of construction education brian wood oxford centre for construction management, oxford brookes university, oxford, england introduction and background construction is changing, as heraclitus anticipated in the latter half of the sixth century b.c., when he said “no-one can step twice into the same river, nor touch moral substance twice in the same condition”. thus everything changes, and as handy observed (1989) “change is constant”. the following illustrate a few recent changes in relation to construction materials, methods, and management: • new materials have been developed such as epdm and teflon-coated roofings, photo-chronic and other forms of responsive glazing, microporous paints and self-healing finishes. at the same time there has been a resurgence in interest in ‘old’ or ‘traditional’ materials such as earth and turf, and in recycling materials. • construction methods have moved seemingly inexorably in the direction of greater mechanisation, including in uk with encouragement from the egan task force (1998) a renewed interest in prefabrication which had been in the doldrums since the collapse of roman point in 1969. this trend however is being challenged by the developing agenda for more labour intensive construction as exemplified by work of the research centre for employment creation in construction at the university of the witswatersrand reported at a recent cib symposium (mccutcheon, et al, 1999). • management in and of the construction industry has been influenced by changes in general management theories and techniques. the work of charles handy has already been referred to, and he is but one of hundreds of so-called ‘management gurus’. construction organisations have submitted themselves to de-layering, downsizing and re-engineering, and are currently addressing partnering. loosemore (1999) has questioned such ‘management fads’. there have also been changes in built forms with the development and adoption globally of the ‘skyscraper’, the ‘business park’ as successor to the industrial estate, and the edge-of-town supermarket superseding the corner shop. building standards, as represented by regulations and codes, have been increasing as living standards have risen, and more aspects of construction controlled. for instance in uk regulation of thermal insulation was introduced in the 1970s and has been progressively improved at intervals since. however, while standards ‘on paper’ may have improved, there remains indications that work on site does not always measure up. for instance at the launch of the uk construction quality forum in november 1993, the building research establishment (bre) reported that “each year, defects or failures in design and construction cost members of the construction industry more than £1,000 million (latham, 1994, p.79). latham and egan, and many before them, have suggested a target of zero defects, constructing right first time. there are related concerns that construction craft skills may not be available in the quantity of quality required. a study carried out in oxfordshire, uk (wood, 1999a) showed that not only were traditional skills in bricklaying and carpentry in short supply sustainability of construction education by brian wood the australian journal of construction economics and building page 107 but that there were serious shortfalls in it literacy and business skills. a study by the uk construction industry training board estimated that an increase in formal places of around 25% over the years 1999-2003 would be required to meet shortfalls (citb, 1999). this situation is influenced to some extent by an increased rate of “staying on” at school beyond the official school leaving age of 16 years. the uk government has been encouraging students to stay on and to aim for university, and this has resulted in less young people available for craft training. (cib, 1998, p.18). at the same time there is increasing demand for higher qualifications in construction. whilst there has long been an expectation of degree level education for a chartered surveyor or civil engineer, degrees in construction management are relatively younger, and it was only from 1994 that the uk chartered institute of building (ciob) has expected its candidates for professional membership to come through accredited honours degree courses. there has also been growth in postgraduate education; such courses are important for the profile and zone of universities and for the subject areas within them. within an industry where there are many in management positions, or aspiring to them, without graduate level qualifications there is a potential market to be served. for these people, undergraduate courses are unattractive, requiring several years of study and disruption, whether studying full-time or part-time, to achieve a qualification only the same as new entrants to the industry. by contrast, candidates with several years of industrial experience are welcomed onto postgraduate courses which are normally completed in one or two years, arranged possibly with short block visits for teaching and tutorials, and with a focus on self-directed learning. often such students find this kind of study, its level and quality of organisation required, especially time-management, more demanding than anticipated. these problems have been discussed in previous work by the author (wood et al, 1998). although not covered further here, such issues may contribute to the sustainability or otherwise of particular forms or formats of education provision. the poor image of construction is also an inhibition to people deciding to take up construction education. although efforts are being made to redress this, for instance in the uk through the setting up of a pan-industry national construction careers group, it is likely to be some time before construction careers will have the cachet of those in medicine and law. the fragmentation of the construction industry as observed by latham and egan is also unhelpful to construction education as it is reflected in recruitment to separately defined courses for each of the professional disciplines. the disciplines seem to find it as difficult to study together as they do to work together, although there is hope through “common learning outcomes” promulgated through the uk construction industry board (cib, 1996). each of these issues impinges upon the sustainability of construction education. implications for future development are discussed under three main foci: • the construction education market • satisfying needs: students as customers • courses of action markets construction education has a creditable tradition of serving constructing industry through courses designed to meet its needs at a range of levels through a variety of modes. the vocationality of construction education has been both a strength and a drawback; there are few who will study construction without expecting to pursue a career in the construction industry. sustainability of construction education by brian wood page 108 the australian journal of construction economics & bulding a study of construction academics (boshoff-wood, 1996) identified that around half of them did not see themselves as part of the construction industry. employability is a significant issue. course design will often include employers as part of the development team and/or as advisors, and they will be represented on validation, accreditation and quality assessment panels. course content and delivery modes are expected to be industrially relevant. there is a long history in construction, of study through ‘day-release’ programmes. thus many construction courses are already contributing significantly to universities’ missions as they endeavour to provide more diverse routes through higher education. there is also a significant proportion of mature students on construction courses, helping universities provide broader access to higher education. full-time students of construction are also generally expected to undertake a period of at least nine months of “industrial training”, which is often seen by students as the time in which they learned most, relating theory to practice and vice versa. this ‘sandwich’ course approach is highly valued by students and employers, and in this way both are kept up to date with developments, and this informs course content and curriculum, and contributes to sustainability. this experience with undergraduate and sub-degree programmes has helped inform the development of postgraduate or masters level courses. as the undergraduate market has matured and become saturated, especially as demand shrinks at time of recession in the construction market, so there has been increased focus on masters course developments, which are also seen as an important contributor to “profile”, and status within the academic framework. it is not yet certain that there is a sustainable market for masters courses, but that does not appear to be inhibiting their development. there is certainly a substantial body of people undertaking roles in the industry for which a masters level qualification would be appropriate; and the industry would benefit from more people better qualified in strategic planning, leadership and direction of the firm. however, ‘the jury is out’ on how many of these have the ‘right stuff’ for successful study at this level. courses have certainly been designed to appeal to this market and to facilitate study by construction managers. programmes are generally modular and offer a hierarchy of qualifications through certificate and diploma to masters, although often the ‘intermediate’ qualifications are seen as ‘fallbacks’ for students unable for whatever reason to see the course through. in the uk, this apparent “compensation for failure at another level” is proposed to be disallowed (qaa, 1999). credit is normally available for prior learning either by previous study or by experiential learning; these are attractive attributes for students trying to minimise the duration and costs of their studies. flexibility and open learning are also watchwords, enabling and encouraging students to bring to bear their often extensive experience to their benefit and that of their fellow students in discussing alternative approaches and solutions to problems they may have had at work. at the same time, some institutions have invested in trying to reach a wider market through the use of distance learning material, particularly in endeavouring to reach previously unreached markets, for instance in east asia. whether such approaches are sustainable is also open to question, for instance if substantial workbooks or their modern web-based equivalents are to be created and kept up to date. sustainability of construction education by brian wood the australian journal of construction economics and building page 109 the size of the global market may be helpful – it is certainly seductive – but global competition can be fierce and the recipe for success is uncertain. whether this market can be reached and served successfully is not yet proven, let alone whether this form of educational provision is sustainable. a number of issues related to the use of electronic media in a masters course have been discussed by the author elsewhere (wood, 1999b). students as customers the profile of construction students in terms of age, entry qualifications, gender, etc is not ‘typical’ of university students generally. few uk construction management students come direct from school with gce ‘a’ levels; these are generally a minority. broadly similar numbers of undergraduate students come to university after completing construction courses at further education college having left school at 16 rather than 18 years of age, or as mature students from industry with qualifications gained some years previously or with no formal qualification. however, the withdrawal of student maintenance grants and the requirement to pay fees is bringing changes to the nature of the ‘contract’ between the student and the education provider. students must be expected to become increasingly demanding and discerning and attention will need to be given to disparate and differing needs. increased competition for students may also be expected as institutions look to retain and enlarge their market. it will be important for institutions to ‘sell’ their courses, but not to ‘over-hype’ them. to take on too many students, or too many that are under-qualified or under-equipped to cope with the course, or students with unrealistic expectations, must be expected to bring problems in service delivery and dissatisfaction. seeing students as ‘customers’ with rights and expectations to be satisfied may be difficult enough for some, let alone actually achieving customer satisfaction. how sustainable will courses be in this customer focused context when they were designed to meet criteria determined by providers who ‘knew best’? satisfying needs (or wants?) it has been said (kotler et al, 1996) that “marketing must be understood not in the old sense of making a sale – ‘selling’ – but in the new sense of satisfying customer needs”. so what is the ‘need’ for construction education? and does this differ from ‘wants’ for construction education? there may be serious mismatches between what the construction industry needs and what students want. struggling with structures and scientific calculations are such areas of conflict. identifying needs is a necessary prerequisite to trying to meet them; this needs market research, something to which universities have not traditionally needed to apply themselves a great deal. as new courses are developed, and existing courses reviewed, their marketability will need to be assessed. endeavouring to open a course up to ‘market segments’ not previously targeted or served may mean significant changes in direction. items to address will include for instance: • course content • sequence and status of material • assessment regimes • delivery modes • accreditation needs in relation to content for instance, sustainability is definitely an important global issue at this time; however it is suggested that courses with the word ‘environmental’ in the title are attracting sustainability of construction education by brian wood page 110 the australian journal of construction economics & bulding less applicants than previously; more investigation would be warranted here. regarding course structures and organisation, modularity has facilitated students being able to “mix-and-match” and pursue a personalised programme. module content has to be considered in the context of what a student may or may not have already covered. increasingly, module leaders are in competition, seeking to maximise take up of ‘their’ module by making it ‘sexy’. there are also effects on assessment regimes. examinations may not be popular with students, but they can be more “resource-efficient” with regard to staff-time in marking them by comparison with coursework assignments that may represent the result of many hours of student effort. on the other hand, an examination directly on the end of a short block visit may be more “time-efficient” for a student than trying to ‘find time for’ and ‘fit in’ the research necessary for a satisfactory and satisfying piece of coursework. there may also be conflicts between student wants and the demands of accrediting professional bodies. there is often perceived pressure from the latter for a fuller and more prescriptive syllabus, which may cut across the facilitation of a student’s wish, or want, to pursue a particular area, and for which he or she is “paying good money”. review of course content is a familiar and routine exercise. syllabi are regularly revisited and it would be an exceptional course that had not for instance incorporated ‘sustainability’ somewhere into it. in the current marketplace irrelevant syllabus would be unsustainable. some institutions have responded to the marketplace by developing online webbased courses. in a commercially competitive world it is difficult to obtain definitive figures on costs and returns on investment. however, a study at kansas state university, comparing a distance learning course with the on-campus course from which it was developed concluded that “…based on 1997 enrolments, variable costs such as faculty time per student are larger and revenues per course are smaller for distance learning relative to on-campus instruction” (burton, 1998). it is questionable whether the kind and level of input required to start up and maintain bespoke on-line teaching materials is sustainable. an on-line course on sustainability may make an interesting combination of medium and message. information technology more generally offers a range of opportunities, including for instance ‘renewable learning resources’. the author’s experience in this field using existing online databases, websites and mailing-lists suggests this is a viable and effective vehicle for facilitating sustainable construction education. courses of action the relatively new and developing context of a more discerning and demanding student is driving a response that features a greater apparent student centredness as a route towards a greater certainty of customer satisfaction. the benefit of learning by doing, as opposed to just listening to ‘teacher’ or note-taking, has long been recognised. it is also suggested that learning from mistakes is significant. as samuel smiles put it (1859) “we learn wisdom from failure much more than from success. we often discover what will do by finding out what will not do; and probably he who never made a mistake never made a discovery”. governments and others trying to induce greater innovation and invention need environments created that are facilitative; some institutions will find this difficult. perhaps a relatively ‘soft’ way of learning is to learn from the experiences of others, including their mistakes. universities are currently much focused on research and sustainability of construction education by brian wood the australian journal of construction economics and building page 111 publication; a ‘student-centred’ agenda can be aligned with this. sometimes this student-centredness is expressed as the ‘bofo’ model, where the student is encouraged to ‘go away and find out’. at its crudest this model may suggest a student finding out in a library that which a lecturer may otherwise have delivered, but that is to neglect much of the opportunity. a ‘learning contract’ where an individual student negotiates his or her own learning has much to commend it. in essence the student identifies a topic, how he or she intends to investigate it and what the outcome will be, and agrees this with the tutor. this ‘contract’ could be renegotiated if necessary along the way. the author’s experience with learning contracts indicates that students are wellmotivated by the method – they ‘own’ the project – and that the approach is capable of producing good and interesting outcomes. to an extent, the students become ‘researchers’ (and they learn from the process as well as the product) and potentially help tutors and other students by identifying material previously unknown and sometimes creating new material through investigation of their employer’s perceptions and practices. this approach has encouraged a focus on current thinking and practice rather than a reliance on material already published. whilst this may put a strain on electronic resources, it relieves pressure on paperbased materials. a downside may be a tendency to pay less attention to historical development, context and theoretical underpinning. thus while the ‘learning contract’ or bofo method may be sustainable from resource or delivery standpoints, there may be concerns around sustainability of quality outcomes. while it is notoriously difficult to confirm or refute suggestions that students are not “what they used to be”, feedback from employers has confirmed that useful outcomes have been achieved, that students have produced material that they value and that the students have themselves developed through the process. conclusions construction is changing, and so is the market for construction education. construction education providers are responding to this changing context, recognising students as customers to be valued and satisfied. courses need to be designed and reviewed in the context of what and how students want to study. this is likely to have an increasing influence on course content and delivery mechanisms. the ‘bofo’ principle, by which students are encouraged and enabled to ‘go away and find out’ what is needed to meet a learning outcome which he or she has negotiated with a tutor (and possibly their employer too) is capable of producing good results, using renewable resources and delivering sustainable construction education. more information is required on the costs and benefits of distance and on-line educational forms and the author would be keen to participate electronically and face-to-face in an exercise to bring together such global experiences. references burton, r o (1998) costs and benefits of increasing access to a traditional agricultural economics course. american journal of agricultural economics, december 1998, v80(5) pp.979-984. boshoff-wood, e (1996) responses to email questionnaire (unpublished). construction industry board (1996) educating the professional team, thames telford, london. construction industry board (cib), (1998) strategic review of construction skills training, thomas telford, london. sustainability of construction education by brian wood page 112 the australian journal of construction economics & bulding construction industry training board (1999), construction employment and training forecast 1999-2003, citb, january 1999. egan, sir j, (1998) rethinking construction, hmso, london. handy, c (1989), the age of unreason. harvard business school press, boston. kotler et al (1996) principles of marketing: london: prentice hall, p6. latham, sir m (1994) constructing the team, hmso, london. loosemore, m (1999) the problem with business fads in proceedings of second international conference on construction process reengineering (cpr 99), university of new south wales, sydney, september 1999, pp355-363. mccutcheon, r t, van steenderen, w p c, quainoo, h a and taylor parkins, f l m, (1999) research centre for employment creation in construction: innovative research and education in proceedings of customer satisfaction: a focus for research and practice in construction: joint triennial symposium of cib commissions w65 and w55, cape town, september 1999 (cd-rom). quality assurance agency (qaa) (1999) consultative paper on higher education qualifications frameworks – qaa, bristol, october 1999. smiles, s (1859) self help. wood, b r, boshoff-wood, e and hallenberg, t (1998) distance learning: a mechanism for just in time construction education in proceedings of cobra 98, oxford, rics, london, september 1998, vol. 1, pp.124-132. wood, b r (1999a) construction skills training in oxfordshire, oxford brookes university, february 1999. wood, b r (1999b) just in time construction management education in proceedings of the australasian university building education association (aubea), university of western, sydney, july 1999, pp37-45. book review book review scientific feng shui for the built environment michael y. mak and albert t. so, city university of hong kong press, isbn:978-962-178-4 paperback 304 pages, usd 29.00 to many, feng shui is something mystical. if something cannot be explained in scientific terms, feng shui comes to rescue. to a certain degree, it is synonymous to superstition. this book by dr. mak and dr. so sets out to bust this myth. this intention has been aptly spelled out in the title. the book has three parts: (a) scientific feng shui (chapter 2 to 5); (b) the form school approach (chapter 6 to 11) and (c) the compass school approach (chapter 12 to 17). the main purpose of part a is to put feng shui on a scientific footing as far as possible. the authors admit that without an approach relaying on scientific methods, the study of feng shui would easily fall prey to superstition. the chapter on “science and feng shui” begins with accounts of the philosophy of science and chinese wisdom. perhaps the differences between the western and eastern approaches to knowledge explain the philosophical emphasis of science and feng shui. the chapter ends with the observation of western acceptance of feng shui knowledge. chapter 3 “scientific methods and feng shui study” outlines the various methodological constructs in the scientific research paradigm. the strength and weaknesses of these methodologies are also discussed. it is advocated that the study of feng shui is akin to the domain of soft methodologies such as naturalistic observation and case study; defining feng shui is no less difficult than studying it. chapter 4 pinpoints the importance of understanding the meaning of the terms used in feng shui study, in particular the intricacies and subtleties of many chinese words in the feng shui language. with regard to the built environment, feng shui knowledge provides a holistic approach embracing ideas in anthropology, ecology and architecture. in view of the complex philosophical constructs, the authors remind readers of the issues of terminology, translation and transliteration in studying feng shui. through this introductory part, the authors highlight the fundamental differences between the east and west in explaining natural phenomena. two major feng shui schools/approaches are introduced. detailed treatment of the two schools, form and compass, are provided in part b and c respectively. part b is devoted to the form school approach. chapter 6 gives a succinct account of the different cultural underpinnings of the east and west. the authors observe that the western concept of architecture tends towards the „reaching up to the heaven‟ approach. the western architecture attitude to palaces and landscapes emphasizes the rigid structure in height and depth and the man-made environment in gardens, while chinese architectural concepts tends towards harmonization of the built and natural environment. the chinese architecture approaches to palaces and landscape stress the spatial relationship incorporated into the natural environment. it is argued that these traditional chinese approaches to architecture originated in feng shui knowledge, in particular from the form school. the fundamentals of the form school are given in chapter 7. based on the form school, the most predominant approach, feng shui models are to be constructed primarily of the physical configuration of the five geographical secrets (dragon, sand, water, cave and direction) and the four emblems (black tortoise, azure dragon, white tiger and red bird). the models are applicable in macrocosms and microcosms. accordingly, outer and inner forms of dwellings are expanded to four design modules: surrounding environment, external layout, internal layout and interior arrangement. australasian journal of construction economics and building cheung, s o (2011) book review, australasian journal of construction economics and building, 11 (3) 92-93 93 chapter 8 gives an excellent summary of the eight approaches discussed by various feng shui scholars. the authors relate these approaches to contemporary form school practices in architectural design and the built environment. chapter 9 is an important chapter where the conceptualization of the form school is presented. the four fundamental concepts of the form school approach to building design are: feng shui model, parallelism, form design modules and feng shui design criteria. favorable and unfavorable conditions with regards to surrounding environment, external layout, internal layout and internal arrangement are particularly informative. for illustrative purposes, two feng shui villages in hong kong are examined in the light of the concepts of the form school approach. these examples, as presented in chapter 10, exemplify the applications of the five geographical secrets and the four emblems theory. apparently, the importance of having the right dragon, sand, water and cave is identified as being more significant than direction. in chapter 11, an example of a 6-star rated office development in sydney is used to compare the concepts of western sustainable design and chinese feng shui. harmonizing the built and natural environment underpins these two approaches. the prominent features in chinese feng shui that map well with sustainability are the notions of balancing yin and yang, exterior and interior and the relationship between human and surrounding environment. part c (chapter 12 to 17) details the compass school approach. in chapter 12 and 13, the authors built connections between the compass school and western philosophy in two aspects, numerology and modern physics. the compass school appears to be more mystical than the form school as it involves more philosophical concepts from chinese beliefs in tai chi, yin and yang theory, eight trigrams, five elements, etc. two popular compass school methods, the eight mansion and the flying stars are clearly explained in chapter 15 and 16. in this connection, case studies both in hong kong and overseas are used to put „theory‟ to practice. the authors state that “… to validate these methods scientifically takes time and requires substantial resources to unravel whatever fundamental physics lay behind them”. feng shui can be identified as the wisdom of ancient chinese, harmonizing the built and natural environment. the nomenclature used is instrumental in a wider and easier acceptance by the general public. notwithstanding, many of the features of the form school model echo well with good architectural practices for the comfort, health and safety of the inhabitants. sustainability has been observed in the golden rule of „live with what you have‟. the notion of „qi‟ is interesting; although yet to be proved scientifically, similar propositions underpin many of the chinese medicine practices. readers with feng shui knowledge would find this book informative. inter-twined with discussions on chinese civilization, western and eastern approaches to architecture, sustainability, numerology and cosmology, the body of knowledge on feng shui has been expounded lucidly in a scientific context. for readers of limited knowledge on feng shui, the authors have thoughtfully prepared an introductionary chapter giving succinct information about the content and chapters arrangement. in addition, for ease of acquaintance with the key concepts and terminology used, a cursory read of the list of classical feng shui terms is useful. the last chapter (18) points to future directions of scientific feng shui in the context of research and education for the built environment. overall, this is an interesting introduction to feng shui, a handy reference on the applications of feng shui concepts to the built environment and a thought-provoking read on a scientific approach to explain feng shui. sai on cheung professor, department of civil and architectural engineering, city university of hong kong, july 2011 dr jane cioffi, lesley wilkes and jess hartcher-o’brien 10 the australian journal of construction economics and building vol.2 no.2 outdoor workers and sun protection: knowledge and behaviour dr jane cioffi, professor lesley wilkes and jess hartcher-o’brien the university of western sydney introduction due to australia’s close proximity to the equator new south wales (nsw) has very high levels of solar ultra violet radiation (uvr) (gies et al., 1997). a major effect of uvr is skin cancer. in australia, new cases of skin cancer outnumber all other forms of cancer by more than three to one. currently there are around 1,300 deaths each year from this disease, with 2,807 new cases of skin melanoma in nsw (the cancer council nsw and nsw health department, 2001). for adult males (20–54 years) melanoma of the skin is the most common form of cancer (coates and armstrong, 2000; marks et al., 1993). the single most important modifiable risk factor for skin cancer is unprotected exposure to solar ultraviolet radiation. a group at high risk of skin cancer is adults who have high cumulative exposure to uvr in the workplace. outdoor workers are part of this high risk group and are targeted in the skin cancer prevention strategic plan for nsw 2001–2005 (the cancer council nsw and nsw health department, 2001). this study describes outdoor construction workers’ knowledge and sun protective behaviour associated with their risk of skin cancer. literature review some studies were found that addressed outdoor workers in australia (dobbinson and knight, 2001; parisi et al., 1999; kimlin et al., 1998; airey et al., 1997; green et al., 1996; wong et al., 1996; girgis et al., 1994; borland et al., 1991). these studies were carried out mostly in queensland, with two in victoria and another in nsw. outdoor workers who participated included farmers, telecom lines staff, and tradespersons. the focus of five of these studies was exposure to uvr (parisi et al., 1999; kimlin et al., 1998; airey et al., 1997; green et al. 1996; wong et al., 1996) with the remaining studies focusing on the effects of an interventions on outdoor workers’ sun protective behaviour (girgis et al., 1994; borland et al., 1991) and organisational change (dobbinson and knight, 2001). no study was found that had surveyed outdoor workers in nsw to assess their knowledge and sun protective behaviour associated with their risk of skin cancer. in australia, sun protection precautionary measures were self-reported by a majority of people (82% of males and 83% of females) (australian bureau of statistics, 1999). specifically in nsw, 59% of males protected themselves against the sun with a cap or hat, 38.6% applied sunscreen and 54.2% reported having a skin check (nsw health department, 2000). other australian studies have shown males as a subgroup tend to spend more time in the sun and employ fewer sun-protective measures except for wearing a hat (hill et al., 1992; scholfield et al., 2001; wentworth area health service, 2000). hence, males in the community do not generally practise sun protection at acceptable levels. unprotected sun-exposure has been found to be treated as advantageous where the prevalent perception correlates a tan with health, ‘looking sexy’ and ‘mood’ improvement (sahn, 1995). in such a context the inherent dangers that come with sun exposure are not always acknowledged. this attitude, if present in outdoor workers, would influence behaviour and further increase their risk of skin cancer as resistance to sun protection strategies has been found to be associated with a ‘sun’ culture (dobbinson and knight, 2001). in the occupational context of outdoor workers, the implications of the high levels of sun exposure are an occupational health and safety concern that has legislative support in nsw. recommendations for workplace sun protection outlined in the skin cancer prevention strategic plan for nsw 2001–2005 are engineering controls including provision and use of shade; administrative controls including rescheduling work to less uv intense times; and personal protection including use of protective clothing and equipment such as long sleeved protective shirts and trousers, broad brimmed hats, outdoor workers and sun protection: knowledge and behaviour the australian journal of construction economics and building vol.2 no.2 11 sunglasses and sunscreen (the cancer council nsw and nsw health department, 2001). organisations, therefore, have a responsibility to support workers’ sun protection. over the last five years local government and the construction industry in nsw have been targeted with the development of policies and implementation of programs for sun protection (the cancer council nsw and nsw health department, 2001). no evaluation of these programs was found. however, an evaluation of a program in victoria aimed at achieving positive policy and behavioural changes in workplace settings found 40% had a sun protection policy in place, 18% were developing a policy. personal protective equipment was the most common strategy and changes to work schedules or training were less commonly provided. problems were being experienced with compliance and policy implementation including resistance to the provision and use of protective clothing (especially in the heat), a sun culture and lack of awareness or denial of the risks of uv exposure (dobbinson and knight, 2001). this suggests changing workplace culture may meet resistance and may require careful strategic planning. however, in australia two studies have shown the sun protection behaviour of outdoor workers can be significantly increased (girgis et al., 1994; borland et al., 1991). the interventions used in the randomised control trial (girgis et al., 1994) was an individual skin screening by a dermatologist and an education session, and in the quasi experimental study, a campaign using marketing techniques (borland et al., 1991). this suggests that health education programs of similar design would be effective in achieving changes in the sun protective behaviour of outdoor workers. information about skin cancer and sun protection provides people with the opportunity to understand the value of sun protection. according to the skin cancer prevention strategic plan for nsw 2001–2005, mass media, particularly television advertising, has played an important role in the last 20 years in raising and maintaining high levels of community awareness of the importance of sun protection (the cancer council nsw and nsw health department, 2001). workcover in nsw has been encouraging workplaces to adopt structures and practices to improve the safety and health of employees. a resultant acceptance and use of protective clothing has been attributed to this intervention (the cancer council nsw and nsw health department, 2001). no study was found that reported outdoor workers’ level of awareness of the dangers of skin cancer as measured by knowledge and sun protective work behaviour. method design: a survey design using questionnaires was used to determine outdoor workers level of awareness of the dangers of skin cancer as measured by knowledge of and attitudes to skin cancer and sun protection behaviour. sample: outdoor workers (n=142) working on construction sites in northwest and western sydney who consented to complete the questionnaire formed the convenience sample. only a few workers who were approached declined to join the study, usually giving tight schedules as the reason. instrument: a short close-ended questionnaire was designed to address behaviour (nine items), shade equipment (one item), sources of information (two items) and knowledge (six items) to determine, respectively, use of protective measures and shade equipment available, sources of information and basic knowledge of skin cancer and sun protection. some items were adapted from the 1997 nsw health survey questionnaire (nsw health department, 2000) and others were developed based on study findings (moehrle et al., 2000; rosenthal et al., 1988). the questionnaire was deliberately designed to take no more than five minutes to administer to each worker on site. data collection procedure: at each site workers who volunteered to join the study most usually requested that each item on the questionnaire be read to them whilst they continued to work. they then indicated their responses, which were recorded by the research assistant. data analysis: frequencies and percentages were used to summarise responses to questionnaire items. results of the 142 outdoor construction workers who participated in the study, 139 were males and three were females. respondents were from a variety of trades including bricklaying, plumbing and painting and most were in the 31 to 40 years age range. dr jane cioffi, lesley wilkes and jess hartcher-o’brien 12 the australian journal of construction economics and building vol.2 no.2 table 1: frequencies and percentages for sun protective behaviour at work item never f = (%) occasionally f = (%) frequently f = (%) always f = (%) wore a brimmed hat 50 (35) 15 (11) 17 (12) 60 (42) wore a baseball cap 59 (41) 27 (19) 18 (13) 38 (27) wore sunglasses 27 (19) 28 (20) 30 (21) 57 (40) wore a sleeved shirt# 107 (75) 19 (13) 4 (3) 11 (8) used sun lotion# 35 (25) 57 (40) 19 (13) 30 (21) used a shade device# 122 (86) 12 (9) 6 (4) 1 (1) # 1 non response present twenty six percent reported getting sunburnt frequently/always, 48% occasionally and 25% never. sun protective work behaviours reported by workers showed they frequently/always wore a brimmed hat (56%), a baseball cap (50%), sunglasses (61%), sleeved shirt (11%), sun lotion (34%) and used a shade device (5%) to protect themselves against uvr (see table 1). workers showed they did not exclusively use a brimmed hat or a cap at work but were inclined to use them interchangeably. other protective behaviour reported was the use of machinery fitted with a shade device (14%), awareness of the uv index in the daily weather report (65%) and a skin check in the last 12 months (33%). nineteen percent of the workers had previously had a skin lesion removed. workers showed they knew working without sunglasses caused eye damage (85%), their risk of skin cancer was increased by working in middle of the day (94%), and important areas to cover are head and chest (82%). however, fewer workers knew sweating increased their risk of sunburn (43%). forty four percent of workers considered a tanned body was healthy and 72% stated a tan improved appearance. sources from which workers had received information about skin cancer were television (78%), radio (0%), newspaper (35%) with others being pamphlets (6%), local doctor (4%), parents (4%) and workcover (3%). however, only 44 % reported receiving information about skin cancer recently, that is during the last year. discussion the main findings showed some form of head apparel and sunglasses were the most common sun protection used by workers. however, their use was not as high as would be desirable. about a third applied sun lotion and there was only poor use of sleeved shirts and shade devices. the low use of sun lotion may be attributed to workers’ perception that it could be harmful. a comment from one worker reflects this view, “sunscreen is more unhealthy for you than skin damage … accumulates in liver. so i won’t wear it.” application of sunscreen by males was similar to that reported in nsw health survey (1997) with the use of a cap or hat being slightly below (nsw health department, 2000). this suggests male sun protection behaviour has altered little in the last five years. personal strategies employed by outdoor workers need to be increased to reduce high cumulative exposure in the workplace. workers’ knowledge of sun protection and risk was on the whole quite high which may reflect information they had received about skin cancer mostly from television, radio and the newspaper, respectively. the recency of receiving this information was less than desirable as just below half had received this information in the last year. knowledge, however, did not directly translate into sun protective behaviour. in addition, nearly three-quarters of the workers reported some episodes of sunburn and a marked number of workers perceived a tan to be healthy and attractive. workers commented for example that “…it’s healthy outdoor workers and sun protection: knowledge and behaviour the australian journal of construction economics and building vol.2 no.2 13 ‘cause when you look good, you feel good.” and “a tanned body is healthy. we’re in australia!” this suggests there is some resistance to the acknowledgement of the importance of the information received. worker resistance similar to this was previously found by dobbinson and knight (2001) and borland et al. (1991). such resistance may be due to factors such as a lack of motivation and a competing value or norm such as the ‘bronze image’ culture. the receipt of skin checks by a third of the workers in the last year indicates some engagement in screening activities. skin checks reported by workers were much lower than that reported by males in nsw in 1997 (nsw health department, 2000). a higher uptake of skin screening in these workers needs to be encouraged through health education programs in the workplace that are aimed at workers accepting responsibility for their own risk assessments. accessing workers directly on site was found to be most successful. prior to this an initial distribution approach was attempted through the head offices of main construction firms operating in the area, however, this was not successful, largely due to the subcontracting of work by these firms. the use of a short questionnaire was found to elicit strong participation from workers. additional items to consider in future questionnaires could include the estimated period of time employed as outdoor worker, daily average working hours and details of time of day exposed to sun. this would provide insight into workers’ cumulative exposure risk. items from other questionnaires and studies addressing sun protection were used; however, the validity and reliability of the questionnaire were not tested. the generalisability of the findings to all outdoor workers is restricted as a convenience sample and only one type of outdoor worker was included. despite the limitations of this survey it can be considered that outdoor construction workers need to improve patterns of sun protective behaviour in the workplace. it is recommended that research needs to be planned to address issues that outdoor workers have with using sun protective strategies. such studies need to provide further insight and understanding of outdoor workers and sun protection to inform future health promotion programs. such programs maybe more effective if they are implemented on actual construction sites and include strategies that actively coach workers to use better sun protective practices. ethics approvals for this study were obtained from the university of western sydney human research ethics committee. acknowledgments to the construction workers who took part in the study. to ms shantala mohan for her support of the project. references airey, d.k., wong, j.c., fleming, r.a. and meldrum, l. r. (1997) an estimate of the total uv-b exposure for outdoor workers during a south-east queensland summer. health physics, 72, 544–9. australian bureau of statistics (1999) national health survey: cancer related information. special article. september. borland, r. m., hocking, b., godkin, g. a., gibbs, a. f. and hill, d. j. (1991) the impact of a skin cancer control education package for outdoor workers. medical journal of australia, 154, 686–8. coates, m. s. and armstrong, b. k. (2000) cancer in nsw. incidence and mortality 1997. nsw cancer council, sydney. dobbinson, s, and knight, k. (2001) protecting workers from ultraviolet radiation in sunlight. journal of occupational health safety—australia and new zealand, 17, 587– 589. gies, p. h., roy, c. r., toomey, s. and mclennan, a. (1997) protection against solar uv radiation. sun protection seminar papers. australian cancer society. girgis, a., sanson-fisher, r. w., and watson, a. (1994) a workplace intervention for increasing outdoor workers’ use of solar protection. american journal of public health, 84, 77–81. green, a., battistutta, d., hart, v., leslie, d. and weedon, d. (1996) skin cancer in a subtropical australian population: incidence and lack of association with occupation. the nambour study group. american journal of epidemiology, 144, 1034–40. dr jane cioffi, lesley wilkes and jess hartcher-o’brien 14 the australian journal of construction economics and building vol.2 no.2 hill, d., white, v., marks, r., theobald, t., borland, r. and roy, c. (1992) melanoma prevention: behavioural and nonbehavioural factors in sunburn among an australian urban population. preventive medicine, 21, 654–669. kimlin, m. g., parisi, a.v. and wong, j. c. (1998) quantification of personal solar uv exposure of outdoor workers, indoor workers and adolescents at two locations in south-east queensland. photodermatology, photoimmunology, photomedicine, 14, 7–11. marks, r., staples, m., and giles, g.g.(1993) trends in non-melanocytic skin cancer treated in australia: the second national survey. international journal of cancer, 53, 585–590. moehrle, m., koehle, w., dietz, k. and lischka, g. (2000). reduction of erythema dose by sweating. photodermatology, photoimmunology, photomedicine, 16, 260–262. nsw health department (2000) public health division, report on the 1997 and 1998 nsw health surveys. http://www.health.nsw/gov.au/publicnswhs/sun_intro.htm. parisi, a. v., meldrum, l.r., wong, j.c., aitken, j. and fleming r. a. (1999) lifetime ultraviolet exposure estimates for selected population groups in south-east queensland. physics in medicine and biology, 44, 2947–53. rosenthal, f.s., phoon, c., bakaaalian, a. e. and taylor, h. r. (1988) the ocular dose of ultraviolet radiation to outdoor workers. investigative ophthalmology and visual science, 29, 649–56. sahn, e. (1995) why teenagers embrace sun’s dangers. in skin cancer—the need for continuing education. hill, m. dermatology nursing, 7, 220–222. schofield, p. e., freeman, j. l., dixon, h.g., borland, r. and hill, d.j. (2001) trends in sun protection behaviour among australian young adults, australian and new zealand journal of public health, 25, 62–65. the cancer council nsw and nsw health department (2001) skin cancer prevention strategic plan for nsw 2001–2005. wentworth area health service (2000) health profile: wentworth area health service 1993–1998 penrith, nsw. wong, j.c., airey, d.k., and fleming, r.a. (1996) annual reduction of solar uv exposure to the facial area of outdoor workers in southeast queensland by wearing a hat. photodermatology, photoimmunology, photomedicine, 12, 131–5. ajceb_vol2_no2_28-11-02_part16 ajceb_vol2_no2_28-11-02_part17 ajceb_vol2_no2_28-11-02_part18 ajceb_vol2_no2_28-11-02_part19 ajceb_vol2_no2_28-11-02_part20 microsoft word paper 4 dec.doc the role of the media in south african construction health and safety (h&s) by john smallwood and danie venter the australian journal of construction economics & building page 37 the role of the media in south african construction health and safety (h&s) john smallwood and danie venter, university of port elizabeth, port elizabeth, south africa introduction mass media are pervasive in modern society and are essential to disseminate information, facilitate expression, and to determine happenings beyond the immediate environment (vivian, 1997). the mass media fall into three categories based on the technology by which they are produced – print, electronic and photographic. the primary print media are books, magazines and newspapers. the primary electronic media are television, major radio and sound recordings, and the web. the one photographic medium is movies (vivian, 1997). a further issue is that of ‘hot’ versus ‘cool’. according to theorist mcluhan, books, magazines and newspapers are ‘hot’ media because they require a high degree of thinking to use. this contention has been reinforced by research, which found that people remember much more from reading a magazine or newspaper, than from watching television or listening to the radio (vivian, 1997). given the scope of the mass media, this paper focuses on the role of the print media in the form of magazines, and then primarily those which are construction, and to a lesser extent, those which are h&s related. to this end a study was initiated in south africa to determine: • the role of the media; • the need for the media to contribute; • the influence and impact of the media, and • perceptions of editors. the status quo in terms of construction h&s accident statistics and the possible cost of accidents (coa) in south africa, amplify the need for the media to contribute to construction h&s. according to statistics provided by the compensation commissioner (cc) (2000), in 1995, the year for which the latest h&s statistics are available, every working day in construction, approximately: 1.03 workers were killed; 4.45 workers were permanently disabled; 39.63 workers were temporarily disabled, and 77.49 workers received medical aid from a medical practitioner. the disabling injury incidence rate (diir) of 2.03 in 1995, means that 2.03 workers per 100 incurred disabling injuries (dis). the construction industry has the fifth highest diir, and the fourth highest permanent diir, out of twenty three industries. the severity rate (sr) which is relative to 1000 hours worked, was 2.77 in 1995. given that the average worker works 2000 hours per year, when the sr is multiplied by two, the modified sr of 5.54 means that 5.54 days were lost per worker in 1995. the total of 236 fatalities in 1995 results in a fatality rate of 59.5/100 000 workers. this fatality rate does not compare favourably with those of selected international countries or states for the year 1992: germany (14.0); japan (19.0); new south wales (11.0); ontario (7.4); sweden (6.0); the netherlands (3.3), and the usa (18.6) (center to project workers’ rights, 1995). inadequate or poor h&s results in injuries and fatalities and disease. although contractors can obtain insurance cover for the cost of injuries, fatalities and disease in the form of workers’ compensation insurance, the insurance only covers the direct coa, such as medical care, and the role of the media in south african construction health and safety (h&s) by john smallwood and danie venter page 38 the australian journal of construction economics & building lost wages in excess of three days. however, the indirect coa cannot be insured against. the indirect coa includes, inter alia: reduced productivity for both the injured worker and the crew; clean-up costs; replacement costs; cost of overtime; administrative costs; costs resulting from delays; costs related to rescheduling, and wages paid while the injured is idle (levitt & samelson, 1993). research conducted by the university of washington (hinze, 1992) determined the indirect costs (excluding claims and material damage costs) to be more than 1.67 times the direct costs. however, for minor injury cases (direct costs less than us$50), the indirect coa was determined to be more than 5 times the direct coa. according to grossman (1991), a study by the construction industry institute safety task force in the usa, concluded that the indirect coa is 20 times the direct coa. according to the business roundtable (1995), research conducted in the usa determined the direct and indirect coa to be approximately 6.5% of the value of completed construction. anderson (1997) cites findings in the uk, which estimate the direct and indirect coa to be 8.5% of the tender price. regardless of the actual percentage, the coa constitutes a substantial percentage of construction costs. importance of the media mass media are a source of information, the heart of the informing function being in messages called news. advertising is also part of the mass media’s information function. mass media also persuades people, usually through editorials and commentaries. however, advertising is the media message designed to persuade people. public relations (pr) also seeks to persuade, but is subtler, as it is not intended to induce immediate action (vivian, 1997). magazines can contain news, editorials, commentaries, advertising, and even advertorial, which effectively combines advertising and pr. magazines there are two categories of magazines, consumer magazines which are generally available on newsracks, and nonnewsrack magazines which are either sponsored magazines or trade magazines/journals. sponsored magazines are primarily directed towards the promotion of an association or society, such as national geographic, and growth in membership. every profession or trade has at least one magazine for keeping related people abreast of developments. similar to consumer magazines, trade magazines rely mostly on advertising for income, whereas sponsored magazines rely on both advertising and self funding (vivian, 1997). magazines as a channel of influence wilde (1994) maintains that society has become more reliant on the mass media as channels for influencing attitudes and behaviour. television, radio, newspapers, periodicals, posters and other message carriers are being used in efforts to distribute knowledge, to educate, to teach skills, to shape attitudes and to propagate or discourage various habits. according to vivian (1997), magazines contribute to the creation of a national culture and promote literacy. magazines are much less expensive than books and are affordable for most people. magazines were the first advertising medium in the usa and contributed to the transformation of the usa from an agricultural and cottage industry to a modern economy. magazines have led other media in terms of innovations in journalism, advertising and circulation through investigative reporting, in-depth personality profiles and photo-journalism. investigative reporting entails, inter alia, explorations of abusive institutions or organisations in society. indepth personality profiles usually entail a highly structured ‘question –and-answer’ interview, whereas photojournalism uses the role of the media in south african construction health and safety (h&s) by john smallwood and danie venter the australian journal of construction economics & building page 39 visuals to communicate messages (vivian, 1997). according to kotelchuck (1989), a paper authored by cooke and published in the british medical journal in 1924, linked asbestos exposure to disease. subsequent to 1924, while reviewing hundreds and thousands of documents “ in preparation for his book ‘asbestos : medical and legal aspects’, castleman unearthed the cover-up by top us corporations in the asbestos industry and revealed the “smoking gun of corporate irresponsibility” (kotelchuck, 1989). in effect, a corporate policy was established to cover up the hazards of asbestos, which decision shaped and distorted scientific research and public policy relative thereto. selikoff maintains the aforementioned resulted in the needless loss of tens of thousands of lives over several decades, the expected loss of thousands more, as well as profound human suffering (kotelchuck, 1989). the media can also indirectly act as a channel of influence, as if an injury is particularly severe or dramatic, it attracts media attention, which in turn will undoubtably attract the attention of regulatory personnel (hinze, 1997). however, the civil engineering and building contractor (1999) says that even though it has been said that the media has a social obligation to promote h&s in construction, the media can only do so if the industry itself sets out to promote h&s on a much wider basis. the aforementioned clearly indicate the role and potential role of industry magazines, journals and other print media in h&s, particularly with respect to communicating research findings and investigative journalism. criticism of trade magazines vivian (1997) says many trade magazines are recognised for honest, hard-hitting reporting of the industries they cover. however, he maintains that some trade magazines are ‘loaded with puffery exalting their advertisers and industries’ and persist in pandering to their trades, professions and industries rather than approaching their subjects with journalistic truth-seeking and truth-telling. he also cites the american textile reporter’s dismissal of the hazard of textile workers contracting brown lung disease by inhaling cotton dust, as ‘a thing brought up by venal doctors’ at the time when 100 000 us textiles workers were afflicted with brown lung. impact of the media according to wilde (1994) accident reports in the daily press are among the most frequently read material of all newspaper content. however, invariably the reports do not communicate to readers how they themselves can avoid accidents. wilde (1994) further says that numerous studies have demonstrated that well designed mass media messages for h&s can have a considerable influence on the general public’s knowledge, attitudes and observable behaviours. research given the findings of literature, a descriptive survey was conducted among editors of construction industry and h&s magazines/journals, the objectives being to determine: • the level of knowledge and awareness of editors with respect to h&s; • perceptions with respect to h&s performance in the construction industry; • the current and potential contribution and role of the written media, and • perceptions with respect to the potential of various stakeholders to contribute to improving h&s. 18 editors responded to the national postal survey, which represents a response rate of 64.3%. ‘construction magazine’ (66.7%) predominated among the categories of publications represented by editors (table1). the role of the media in south african construction health and safety (h&s) by john smallwood and danie venter page 40 the australian journal of construction economics & building table 1: categories of magazines represented by respondents category response (%) construction magazine 66.7 ‘in-house’ construction magazine 11.1 health and safety magazine 16.7 construction paper 0.0 construction journal 5.5 total 100.0 the mean circulation of publications was 5,090, the predominating circulation category being ‘>2,000≤5,000 (50%)’, followed by ‘>5,000≤10,000’ (38.9%). 47% of editors had one qualification, 41.2% had two, and only 5.9% did not have a qualification. only 11.1% of editors had a h&s qualification. 83.3% of editors responded with respect to years spent practising as a reporter, journalist and editor. on average, the editors had practised 1.9 years as reporters, 3.3 years as journalists, and 7.9 years as editors. 94.4% of editors perceived there to be a need to improve construction h&s. table 2 indicates that the number of fatalities (52.9%), followed by conditions on site (observed) (47.1%), predominated among reasons for their perception. the number of fatalities and injuries in the south african construction industry has received frequent coverage in the written media (construction world, 1998) and in reports such as the department of labour’s annual report (department of labour, 1999). table2: reasons for perceived need to improve construction h&s reason response (%) number of fatalities 52.9 number of injuries 35.3 conditions on site (observed) 47.1 reports 35.3 industry comment 11.8 38.9% of editors perceived themselves as capable of rating the h&s performance of the south african construction industry. of the 61.1% that perceived themselves as capable, the greater percentage (63.6%) rated the h&s performance as ‘poor’ (table 3). the rating reflects the status quo in terms of south african performance relative to the performance of selected international countries (smallwood, 2000). table 3: rating of h&s performance by editors rating response (%) very poor 9.1 poor 63.6 satisfactory 18.2 good 9.1 very good 0.0 the role of the media in south african construction health and safety (h&s) by john smallwood and danie venter the australian journal of construction economics & building page 41 editors who had rated the h&s performance as ‘poor’ or ‘very poor’, were than asked to identify which of a number of aspects contributed to the nonsatisfactory performance. lack of management commitment (87.5%) and lack of worker training (87.5%) predominated among ten aspects, followed by lack of worker participation (table 4). the aforementioned have all been previously identified as aspects contributing to the lack of, or, inadequate h&s in south africa (smallwood, 2000). table 4: aspects which have contributed to the ‘poor’ or ‘very poor’ h&s performance aspect response (%) lack of management commitment 87.5 lack of worker training 87.5 lack of worker participation 50.0 industry culture 37.5 lack of industry commitment 37.5 lack of designer consideration 25.0 lack of management education 25.0 non-enforcement of legislation 25.0 lack of client prioritisation 12.5 south african culture 12.5 88.8% of editors believe that the media can positively influence h&s. 44.4% of editors responded that h&s is ‘very important’, followed by ‘important’ (27.8%) and ‘fairly important’ (22.2%). only 5.6% responded that h&s is ‘not important’. table 5 indicates that articles (88.9%) predominate among the various forms of coverage h&s is afforded by editors. the next highest percentage was relative to news (44.4%). table 5: publications’ form of h&s coverage form response (%) articles 88.9 news 44.4 letters 27.8 award 27.8 announcement 16.7 columns 16.7 editor’s comment 11.1 on average, editors devoted 6.2% of their editorial to h&s. although 44.5% of editors responded that they never received complaints regarding the communication of unhealthy and unsafe construction practices in their publications, 36.8% responded that sometimes they did, and 22.2% rarely. tables 7, 8 and 9 contain findings in the form of a range of responses: always, often, sometimes, rarely, never, no response; not at all, a little, a fait bit, extensively, don’t know, and more, adequate, less, don’t know. given the possible range of responses, an importance index (ii) with a minimum of the role of the media in south african construction health and safety (h&s) by john smallwood and danie venter page 42 the australian journal of construction economics & building zero and a maximum of either four, three or two, was computed to enable ranking of the problems. the ii is calculated using the formulae: 4n1 + 3n2 +2n3 + 1n4 + 0n5 or 3n1 + 2n2 +1n3 + 0n4 or 2n1 + 1n2 +0n3 (n1 + n2 +n3 + n4 + n5) (n1 + n2 +n3 + n4) (n1 + n2 +n3) where n1 = always n2 = often n3 = sometimes n4 = rarely n5 = never/no response where n1 = extensively n2 = a fair bit n3 = a little n4 = not at all/ don’t know where n1 = extensively n2 = adequate n3 = less/don’t know table 6 indicates that, based upon an ii with a minimum value of 0.0, and a maximum value of 4.0, editorial is the aspect most frequently reviewed by editors, or their colleagues, to ensure that the general public is not exposed to the portrayal of unhealthy and unsafe practices. editorial is followed by photographs, columns (regular), advertorial and advertisements. given that 2.00 is the midpoint value of the ii, only the review of editorial can be regarded as prevalent. table 6: media aspects reviewed by editors response (%) ii rank media aspect never rarely sometimes often always no response editorial 16.7 16.7 22.2 16.7 22.2 5.5 2.00 1 photographs 38.9 5.5 5.5 22.2 22.2 11.1 1.72 2 columns (regular) 50.0 0.0 6.3 6.3 25.0 12.6 1.31 3 advertorial 33.3 11.1 11.1 16.7 11.1 16.7 1.28 4 advertisements 44.4 5.5 16.7 11.1 11.1 0.0 1.17 5 table 7 indicates that based upon an ii with a minimum value of 0 (not at all) and a maximum value of 3 (extensively), contractors are the stakeholder perceived to be able to contribute most to improving construction h&s, followed by management (construction), and workers (construction). the potential of contractors, management and workers to contribute to improving construction h&s is well documented, the findings reflecting the ‘hierarchy of potential’ in literature (levitt and samelson, 1993; hinze, 1997). industry associations, the department of labour (dol) and unions, achieved rankings of fourth, fifth and sixth respectively. industry associations can raise and maintain a level of awareness, disseminate information, facilitate research, and organise competitions. the dol can increase the number of inspections, however, the dol is constrained in terms of the number of available inspectors. unions can raise the level of awareness, train members, negotiate the inclusion of h&s in labour agreements and participate in partnering processes (levitt and samelson, 1993; hinze, 1997). insurers, which achieved a ranking of seventh can provide funding for, or employ their own h&s advisors, and the role of the media in south african construction health and safety (h&s) by john smallwood and danie venter the australian journal of construction economics & building page 43 promote and sponsor h&s competitions. tertiary institutions, which achieved a ranking of eight, can contribute through the inclusion of h&s in all construction and related curricula (smallwood, 2000). it is notable that editors, journalists and reporters achieved rankings of ninth, tenth and eleventh respectively. overall, it is significant that all iis were above the midpoint value of 1.50, indicating that the potential for all stakeholders to contribute to improving h&s exists. table 7: extent to which construction industry stakeholders can contribute to improving construction h&s extent of contribution (%) ii rank stakeholder not at all a little a fair bit extensively don’t know contractors 0.0 0.0 11.1 88.9 0.0 2.89 1 management construction 0.0 5.6 5.6 88.9 0.0 2.83 2 workers (construction) 0.0 22.2 0.0 77.8 0.0 2.56 3 industry associations 0.0 5.6 27.8 61.1 5.6 2.44 4 department of labour 0.0 16.7 27.8 55.6 0.0 2.39 5 unions 0.0 5.6 16.7 66.7 11.1 2.39 6 insurers 0.0 5.9 29.4 52.9 11.8 2.24 7 tertiary institutions 0.0 22.2 38.9 38.9 0.0 2.17 8 editors 0.0 27.8 61.1 11.1 0.0 1.83 9 journalists 5.6 22.2 66.7 5.6 0.0 1.72 10 reporters 5.6 27.8 66.7 0.0 0.0 1.61 11 table 8 indicates the ranking of various interventions, based upon an ii with a minimum value of 0 (less/don’t know), and a maximum value of 2 (more). it is notable that all interventions achieved an ii above the midpoint value of 1.0, indicating that generally the perception exists that more attention relative to the interventions is required. legislation is the only intervention for which the percentage response relative to ‘adequate’, exceeded the percentage response relative to ‘more’, and marginally so. it is significant that management education, worker education and industry promotion achieved rankings of first, second and third respectively, both management and worker education achieving iis of 2.0 (the maximum value). the perceived degree of attention required relative to these interventions correlates with the top four ranked stakeholders in terms of the extent industry stakeholders can contribute to improving construction h&s: contractors; management (construction); workers (construction), and industry associations (table 7). given the objectives of the study, it is notable that magazines (industry) achieved a ranking of fourth, followed by visual media. the editors were presented with a double page a3 size construction magazine advertisement promoting a light delivery vehicle. the advertisement included a four floor reinforced concrete frame building under construction as a backdrop. editors were requested to record any observed unsafe acts, unsafe conditions and poor housekeeping. the observations and the percentage related response is recorded in parentheses. the role of the media in south african construction health and safety (h&s) by john smallwood and danie venter page 44 the australian journal of construction economics & building table 8: perceived degree of attention required degree of attention (%) intervention less adequat e more don’t know ii rank management education 0.0 0.0 100.0 0.0 2.00 1 worker education 0.0 0.0 100.0 0.0 2.00 2 industry promotion 5.9 0.0 94.1 0.0 1.88 3 magazines (industry) – awareness 0.0 17.6 82.4 0.0 1.82 4 visual media – awareness 0.0 11.1 77.8 11.1 1.67 5 inspections by dol 0.0 5.6 77.8 16.7 1.61 6 union prioritisation 5.6 22.2 66.7 5.6 1.56 7 ministerial (govt) prioritisation 0.0 38.9 55.6 5.6 1.50 8 legislation 0.0 50.0 44.4 5.6 1.39 9 newspapers – awareness 0.0 38.9 50.0 11.1 1.39 10 magazines (general) – awareness 0.0 33.3 50.0 16.7 1.33 11 prioritisation by dol 0.0 22.2 50.0 27.8 1.22 12 • “site is in a mess.” (27.8%) • “rubble.” (5.6%) • “poor housekeeping.” (27.8%) • “plenty.” (5.6%) • “inadequate safety barriers.” (38.9%) • “shuttering not stacked.” (11.1%) • “unprotected stairs.” (16.7%) • “lack of supervisor discipline.” (5.6%) • “site barbecues – unhygienic, unsafe and poor practice.” (5.6%) • “wasteful aspects.” (5.6%) • “no fencing around building site.” (5.6%) a total of twelve comments in general regarding the role of the media in construction h&s were received. 5.6% of editors had two comments, 55.6% had one comment and 38.9% had no comments. most of the comments have been presented below: • “the media will respond to industry attempts to promote safety on site.” • “legislation and education are needed – media’s role is very minor.” • “merely reporting is not enough. exposing unsafe acts is essential and publicising prosecutions is essential.” • “use media more to get across a simple message.” • “the media needs to: compare the construction industry with others in south africa to see how bad it is; compare with construction industries overseas to see if we do well, or badly, and monitor trends to see if we are improving.” • “it should strive to be more aware and treat safety issues more seriously and allocate more space to these issues.” • “they have an important role to play in communicating fact and creating perceptions.” • “if more editorial is provided by specialists in the field we will publish willingly.” • “the media needs companies to be an open book as far as oh&s is concerned.” • “we can play a very important role in promotion.” • “the media is merely a medium, the onus is on those concerned with oh&s to utilise this medium to voice their concerns.” conclusions the conclusions are presented relative to the objectives of the study. the role of the media in south african construction health and safety (h&s) by john smallwood and danie venter the australian journal of construction economics & building page 45 the role of the media the print media can disseminate information in the form of news, dedicate editorial and, or columns to h&s, publish articles, conduct and publish interviews, undertake investigative reporting and review photographs, advertisements and advertorial, to ensure that unhealthy and unsafe practices are not communicated. currently, the print media afford h&s coverage primarily in the form of articles. however, given that h&s is a ‘second level’ project parameter, vis a vis, cost, quality and schedule, then the average percentage of editorial devoted to h&s, and the other forms of coverage afforded h&s, indicate commitment to h&s by editors of construction magazines and journals. the general comments elicited during the descriptive survey indicate that the print media perceives its role to be important, but not critical. however, the comments indicate that industry initiative with respect to the role of the media is necessary, and may be a prerequisite. the need for the media to contribute the print media in the form of magazines, newspapers and journals has a responsibility as an industry stakeholder to contribute to h&s related endeavours. this responsibility arises from the level of fatalities, injuries and disease in the industry and the cost thereof to the country as a whole. the need for the media to do so, is reinforced by the media’s role and potential to influence the industry and society as a whole. the fourth and fifth placed rankings of magazines (industry) and the visual media respectively in terms of the degree of attention required relative to various interventions in terms of h&s reinforces the need for the media to contribute. the influence and impact of the media the print media can: bring the hazardous nature of materials and / or processes to the attention of industry and society; expose abusive organisations, and engender focus on h&s through the citing of the benefits thereof. the descriptive survey findings indicate that only the review of editorial by editors, or their colleagues, to ensure that unhealthy and unsafe construction practices are not communicated, can be regarded as prevalent. this implies that other aspects such as photographs, columns (regular), advertorial and advertisements can be reviewed more frequently. the print media, represented by editors, journalists and reporters, are perceived to be the stakeholder to have the least potential to contribute to improving construction h&s. perceptions of editors the findings of the descriptive survey indicate that editors are: • aware of the need to improve construction h&s, which need is reinforced by industry statistics; • knowledgeable with respect to the aspects which have contributed to the ‘poor’ h&s performance of the industry, and • aware, to a degree, of what constitutes unsafe acts, unsafe conditions and poor housekeeping, based upon their review of the advertisement during the descriptive survey. recommendations the construction industry, more specifically, industry associations, should make more use of the print media to engender focus on h&s. editors should endeavour to increase the percentage of their editorial devoted to h&s. editors, reporters, journalists and photographers should review the media aspects pertinent to their occupation, such as: editorial; photographs; columns (regular); advertorial, and advertisements, to ensure that unhealthy and unsafe practices are not communicated. the role of the media in south african construction health and safety (h&s) by john smallwood and danie venter page 46 the australian journal of construction economics & building editors, reporters, journalists and photographers should be vigilant, and expose unsafe practices and conditions in the industry. the photograph of workers removing asbestos cement roof sheeting at the casino project in port elizabeth without wearing any personal protective equipment, which accompanied the brief report ‘asbestos ban supported’, is an example of the need to do so (eastern province herald, 2000). references j anderson. the problems with construction. the safety and health practitioner, may, 29 and 30, 1997. centre to protect workers’ rights (cpwr). building a safety culture-report on the second national conference on ergonomics, safety and health in construction. cpwr, washington, d.c. 1995. compensation commissioner. report on the 1995 statistics. www.wcomp.gov.za, 2000 construction world. and now we wait… construction world, august, 3, 1998. department of labour (dol). annual report 1998. pretoria, 1999. eastern province herald. asbestos ban supported. 23 september, 2, 2000. d grossman. construction industry builds a safe work place. safety and health, april, 48-51, 1991. jw hinze. indirect costs are a major portion of job site injury costs. concrete construction, march, 229, 1992. jw hinze. construction safety. prentice hall, new jersey, 1997. d kotelchuck. asbestos: “the funeral dress of kings” – and others. in d rosner & g markowitz. dying for work. indian university press, indianapolis, 1989. re levitt and nm samelson. construction safety management . 2nd edition. john wiley & sons, inc., new york, 1993. jj smallwood. a study of the relationship between occupational health and safety, labour productivity and quality in the south african construction industry. unpublished phd (construction management), thesis, university of port elizabeth, port elizabeth, 2000. the business roundtable. improving construction safety performance report a3. the business roundtable, new york, 1995. the civil engineering and building contractor. saace’s offer to government. the civil engineering and building contractor, april, 8, 9, 11 and 13, 1999. j vivian. the media of mass communication. 4th edition. allyn and bacon, massachusetts, 1997. gsj wilde. target risk. pde publications, toronto, 1994. microsoft word paper 9 dec.doc combating the ‘sick building syndrome’ by improving indoor air quality by pongchai nimcharoewon and graham miller page 82 the australian journal of construction economics & building combating the ‘sick building syndrome’ by improving indoor air quality pongchai nimcharoenwon and graham miller, school of construction, property and planning, university of western sydney, new south wales, australia 1. introduction 1.1 sick building syndrome (sbs) the sick building syndrome (sbs) is a term often used to explain symptoms, such as headaches, dizziness, runny noses, itchiness and so on, produced by any harmful environment in buildings, especially in air-conditioned buildings (royal australian institute of architects, 1991, p.1). as approximately 80 to 90% of people’s time is spent in buildings (eap, 1998,), concerns about indoor air quality resulting in such symptoms are increasing. there are a number of methods which appear to be able to reduce the sbs symptoms, such as purifying/cleaning indoor air and utilising materials for construction, furniture and finishes that have been proven to reduce adverse effects. o’brian (1988) and karnstedt (1991), suggest that ionised air is beneficial to human health and can also reduce the symptoms of sbs. based on the premise that, if sbs and the potential for harmful conditions within buildings are to be avoided, building professionals require suitable design tools (ferguson 1987, p.1), this paper describes a method for estimating how much additional negative ions should be added to a room/office to compensate for the losses caused by three major factors namely, video display terminals (vdt), heating ventilation and air-conditioning (hvac) and building contents (bc). 1.2 negative ions ions are electrically charged atoms or molecules that can gain or lose an electron (bionic products, 1998). an atom gaining electron(s) is called a negative ion and an atom losing electron(s) are called a positive ion. from this formation process of the ions, there seem to be a number of ion effects, positively and negatively in terms of indoor air quality. with regard to the nature of the movement of electrons, negative ions (atoms with excess electrons) are quicker than positive ions. the positive effects of this phenomenon can be felt near waterfalls, in pine forests and on the seashore where waves are breaking on the shore (bionic products, 1998). most negative ions are likely to be the negative hydrogen ions (-h) produced by solar continuous spectrum (massey, 1976, p.673). massey suggests that the number of negative ions of carbon (-c) and oxygen (-o) produced by ozone reaction are significant. these types of negative ions are therefore also considered for the purposes of the calculations used in this study. 1.3 negative ion therapy there has been a considerable amount of research that has shown positive and beneficial effects from negative ions such as removing air particles and contaminants, and preventing and reducing the sbs (o’brian, 1988, and karnstedt, 1991). some researchers however, are sceptical about the positive effects. they suggest that the reverse may be true and that generating negative ions might emit ozone excess that can irritate eyes and affect the lungs (nava, 1998). it is not the aim of this study to argue either way but rather to demonstrate a method for estimating the de-ionising effects of key factors in modern buildings. the following tables show the possible effects of the amount of negative ions in particular areas (penex air ionisers, 1988). combating the ‘sick building syndrome’ by improving indoor air quality by pongchai nimcharoewon and graham miller the australian journal of construction economics & building page 83 table 1.1: possible effects of negative ion density density (ions/cc) effects 0-100 dead air, oppressive, difficulty of concentration; virus's and germs flourish. 500-1000 normal air found indoors where pollution is low and the building has open windows. 1000-5000 country fresh air, the minimum level one should sleep, work and live in. 5000 + exceptionally fresh, clean and invigorating air, "mountain air." 50,000 + pure air, very stimulating, exhilarating and relaxing, germs cannot live in this air. table 1.2: negative ion densities in places or conditions density (ions/cc) places or conditions 0-250 hermetically sealed steel-structure office building, with central heating/air conditioning 20-251 inside and airplane 0-100 smoky indoor air 250-500 normal indoor air (windows open) 250-750 urban air in average industrial city 1,000-2,000 country air 1,000-5,000 mountain air 5,000-20,000 inside caves 25,000-100,000 waterfalls 2. negative ion loss in airconditioned buildings 2.1 factors decreasing negative ions negative ions in air-conditioned buildings may be reduced by a number of means. in air-conditioned offices principal reducers of negative ions are, video display terminals (vdt’s), hvac (particularly airconditioning systems), and building contents (bc’s) including building materials, furniture and finishes used. figure 1 shows the effects of the three factors reducing negative ions. as can be seen from the figure 1, each factor reduces the amount of negative ions in buildings differently. vdt’s, appears to decrease negative ions by emitting ionising radiation as low energy xray. hvac is likely to reduce the negative ion density (ions/cc) in air through its process, especially the process of the airconditioning system. the building contents (bc’s), which naturally have electrostatics, may be electrically activated by contact, such as sliding and rolling of two insulating materials. the electrical charges generated appear to attract the positive and negative ions in indoor air and stick on the bc’s surfaces, and therefore the ions in buildings are likely to be reduced. combating the ‘sick building syndrome’ by improving indoor air quality by pongchai nimcharoewon and graham miller page 84 the australian journal of construction economics & building 2.2 how much each factor reduces negative ions 2.2.1 video display terminals (vdt’s) studies of vdt’s by the australian radiation laboratory, (1998), indicate that the while terminals emit visible radiation, in creating the image, many types of the electromagnetic radiation are also generated, in particular, extremely low frequency radiation (elf), and low energy x-ray. the latter is an ionising radiation, which can knock electrons out of negative ions by overcoming the electron binding energy or electron affinity (ebe) of negative ions (australian radiation laboratory, 1998, ionising radiation quantities and unit). the negative ions then lose their potential (see also figure 2). as a consequence of this, the energy of low energy x-ray and the electron binding energy or electron affinity of negative ions (ebe) can be calculated and consequently the amount of negative ions eliminated can also be calculated. the following equation indicates the relationship of participant parameters for estimating negative ion loss from vdt’s (vdt-nil). vdt-nil α lex, 1/ebe, rr, and fn (equation 1) where: lex = low energy x-ray = approx.9 to 20 kev per a vdt (arl, 1998, calibration: therapy dosimeter radiation qualities) ebe = electron binding energy of -h and o2 = approx.0.277 and 0.440 ev (massey h., 1976, p.9 and 184) hvac building contents (bc) vdt’s reduce the density of negative ions flowing in air ions reduce negative ions by attracting to bc’s surfaces building eliminate negative ions by ionising radiation figure 1: three main factors affecting negative ion decrease in buildings ion + + + ion-surface electron ebe x-ray from vdt knocking an electron out of the atom figure 2: the typical positions of electrons in an ion combating the ‘sick building syndrome’ by improving indoor air quality by pongchai nimcharoewon and graham miller the australian journal of construction economics & building page 85 rr = refresh rate of vdt’s = approx.50 to 95 hz (tijierina l., 1984, p.7) fn = negative ion factor = approx.4/9 (ration between ordinarily positive and negative ions) from the relationship in equation (1), the negative ion loss (nil) by vdt’s can be estimated in terms of the negative ions reduced in a period of operating time as follows: vdt-nil = 4.7 x nv x po +-15% bil. ions (equation 2) where: nv = number of the vdt’s po = period of operating the vdt’s this above equation (2) shows the loss of negative ions by the low energy x-ray of a vdt. moreover, it determines by referring to the possible effect of the loss, to the lowest electron binding energy of negative ions. as an example two normal 14” or 15” television and computer screens might eliminate almost all the negative ions (typically 500 neg.ions/cu.cm) in a closed room of 3 x 3 x 2.4 m within 30 mins. 2.2.2 hvac the negative ion loss from hvac (hvac-nil) can be calculated from the fact that particles in air are likely to be electrically charged by an electric field intensity (about 30 kv/cm) in any normal condition including air-conditioned buildings (hendricks, cited in moore, 1973, p.57). they then attract the opposite charge of ionised air (negative or positive charge), and thus a number of negative ions will stick their electrons on the particle surfaces (see also figure 4). each negative ion is assumed to have an excess electron of approximate 1.6 x 10^19 c (weisstein, 1996) after the air conditioning system filters a number of the atmospheric dust and/or particles, a number of negative ions seem to be also obstructed by filtering. the process is to consider filtering atmospheric particles, and assume the particles as spheres. the electric field intensity can be considered as an average value, which includes the intensity of the air conditioning system and others (hendricks, cited in moore, 1973, p.57) the negative ion loss (hvac-nil) is estimated as a percentage of the difference between negative ions outside and inside (%nil). the following equation shows the relationship of the participant parameters for this. %nil α qp, rp, fn, dneg, 1/cp, fh, %ef, and 1/dp (equation 3) where: qp = charge of a particle = 3.1 x 10^-4 x r^2 (hendricks, cited in moore, 1973, p.59) + + + + + + + + + + + figure 4: cross section showing negative ions attracting a particle negative ion particle and electric charges combating the ‘sick building syndrome’ by improving indoor air quality by pongchai nimcharoewon and graham miller page 86 the australian journal of construction economics & building rp = radius of a particle fn = negative ion factor = approx.4/9 (ration between ordinarily positive and negative ions) dneg = density of negative ions outside (ions/cc) cp = particle concentration (gm/cu.m) fh = hvac flow rate (cc/s) %ef = filtration efficiency of hvac (air conditioning systems) dp = density of particles (particles/gm) from the relationship (equation 3), the percentage of negative ions reduced (%nil) in any area type (or in any particle concentration) can evaluated as shown in figure 5. the parameters assumed are that the flow rate of the air conditioning system (fh), and negative ions density outside (dneg) are 200 cfm and 200 to 1000 ions/cc, respectively. for example, in urban air the density (ions/cc) of indoor negative ions is approximately 150 ions/cc. 2.2.3 building contents (bc) this section illustrates the effects of electrostatics on the bc’s surfaces such as building materials and furniture. the effect seems to come from normal activities of the occupants in buildings, such as sitting on a chair, documents being put on a table, walking on a floor, and so on (electro statics, 1998). such activities may potentially bring about electrically charged surfaces. the electrically charged ions (negative and positive ions) in the indoor air will be attracted (polarised) by the charged surfaces and eventually be reduced in the air. 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 2. 00 e -0 5 4. 00 e -0 5 6. 00 e -0 5 8. 00 e -0 5 1. 00 e -0 4 2. 00 e -0 4 4. 00 e -0 4 6. 00 e -0 4 8. 00 e -0 4 1. 00 e -0 3 2. 00 e -0 3 particle conce ntration (gr/cu.m ) p er ce nt ag e of n eg at iv e io ns b et w ee n in si de an d o ut si de % nil, 1000 dneg % nil, 200 dneg rural urban ‘when two insulating materials are rubbed together, the surfaces acquire a net electric charge, with one becoming negative and the other positive.’ (cross, 1987, p.17). this is the action of the electrostatic potential on the material surfaces. in addition, the action is likely to be caused by contact between two materials. the unbalancing charges, after that, occur at the material surfaces and become polarising. effectively, air ions will be attracted by the opposite charged surface and give up their potential (jowett, 1976, p.56). figure 6 shows the simply contacting action of two materials during and after contacting. figure 5: relationship between %nil and particle concentrations combating the ‘sick building syndrome’ by improving indoor air quality by pongchai nimcharoewon and graham miller the australian journal of construction economics & building page 87 from the effective contacting of two insulators (see also figure 6), the relationship between the negative ions attracted by the positive charges and related parameters can be demonstrated as follows: bc-nil α σ, %σ,max., and 1/rσ,m/i (equation 4) where: σ = ideal surface charge density of two materials = approx.1.656 x 10^10 e/sq.cm (jowett, 1976, p.116) %σ,max = the maximum percentage of sliding and rolling contacts = approx.8% (jowett, 1976, p.116) rσ,m/i = ratio between the surface charge density of metal and insulate materials = approx.10,000 to 26,000 as a consequence of this, while the material surfaces are electrostatically activated and become electrical charge, negative and positive ions seem to be attracted by polarisation of the opposite surface charges of about 5.095 x 10^4 to 1.325 x 10^5 e/sq.cm. equation (5) is a formula to estimating negative ion loss from the building contents (bc). bc-nil = max.1.325 x 10^9 x noct x abc ions (equation 5) where: noct = number of effective contacts abc = surface area of building contents contacted an example of this is in an office building where the contents, the seat(s) of chairs used, computer keyboard(s) used and so on, may affect the static electrification. if we assume their areas to be about 5 sq.m, this room will lose approximately a maximum of 6.63 bil.ions of negative ions. 3. negative ion loss testing 3.1 dof-nil formula three negative ion loss formulas can be incorporated and become dof-nil formula. the relationship between the dof-nil and participant parameters is demonstrated in the following equation. dof-nil α nv, po, at, fr, noct, and abc (equation 6) where: nv = number of vdt’s po = period of operating time of vdt and hvac at = area type (urban or rural) fr = air filtration rate of hvac (airconditioning system) fe = filtration efficiency of hvac (airconditioning system) noct = number of effective contacts of two insulate materials abc = surface area of a building content contacted 3.2 testing negative ion loss in airconditioned offices to validate the results provided by the formula, testing of negative ion loss (nil) was performed using an instrument called an air ion counter (aic). the test was 2 a contact a balancing charge surface charged during contracting 1 2 negative ions attracted a negative charge -----------+ + + + + a positive charge after contacting figure 6: electric charge surfaces of two building materials 1 combating the ‘sick building syndrome’ by improving indoor air quality by pongchai nimcharoewon and graham miller page 88 the australian journal of construction economics & building performed in two different areas: a typical air-conditioned office (3m x 3m x 2.4mh), and a room (6m x 3m x 2.4mh), which was used for testing only the effects of an air conditioning system, and the density of negative ions outside the rooms (dneg) about 1,500 ions/cc. dof-nil showed the results in terms of negative ion density (ions/cc) in the rooms, and the rate (ions/hr) of negative ions reduced by vdt’s and bc’s with +15% error of vdt and bc effects. the aic showed the negative-ion density (ions/cc) in each room with 25% accuracy. the results were as follows: in the air-conditioned office and the control room, the negative ion densities inside were about 1,400 and 1,450 ions/cc with the negative ion decrease rates of about 1x 10^10 and 1 x 10^9 ions/hr, whereas the aic showed the density of about 600 and 1,250 ions/cc, respectively. figure 7 below, shows the rates of additional negative-ions required for the condition of 1,500 ions/cc in the required period of 1 to 10 hours. the additional rate indicated by the aic drops sharply when longer ion-generation is required. whereas according to the dof-nil formula the rate remains quite stable over any time period. however the estimated required rate of additional negative-ions for a 3 to 4 hour period (a realistic time period) as calculated using the dof-nil formula compared favourably with results obtained by the air ion counter (aic) for an air-conditioned office this is approximately 12 billion ions/hr. figure 7.1: typical office 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 0. 25 1 3 5 7 9 time required (hr.) aic; 25% accuracy dof-nil; 30% error figure 7.2 a room and only air conditioning system 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 0. 25 1 3 5 7 9time required (hr.) aic; 25% accuracy dof-nil; 30% error 4. conclusions it is proposed that the dof-nil formula described provides a method that has a reasonable degree of accuracy for estimating the amount of negative ion loss in air-conditioned buildings for the critical 3 to 4 hour period. the dof-nil formula can be used to estimate the loss in terms of negative ion density (ions/cc) by hvac, and the rate (ions/hr) of negative ions reduced by vdt’s and bc’s. a weakness with the dof-nil formula, is that only considers three factors, whereas a suitable instrument can take account of significantly more factors, for example the effects of air leakages in buildings and the effect of particle size and density. however these factors and the additional factors measured by an instrument appear figure 7: additional negative-ions for 1 to 10 hours required combating the ‘sick building syndrome’ by improving indoor air quality by pongchai nimcharoewon and graham miller the australian journal of construction economics & building page 89 to be relatively minor in their effect, and the difference in the results obtained are therefore also minor. currently available instruments require a considerable amount of time to record data – typically up to 10 hours and require a real building to obtain results, whereas applying the formula method can produce data quickly and easily which can be used at the design stage to avoid possibly costly mistakes and/or to introduce measures to counter the adverse effects of deionisation. 5. references australian radiation laboratory arl (1998), calibration: therapy dosemeter radiation qualities, http:// www.health.gov.au:80/arl/irs_cal2.htm australian radiation laboratory arl (1998), ionising radiation quantities and unit, http://www. health.gov.au:80/arl/irs_bg2_htm (10 september, 1998) australian radiation laboratory arl (1998), radiation emissions from video display terminals, http://www.health.gov.au:80/arl/is_vdtrd.ht m (10 september, 1998) bionic products (1998), what are ions, http://www.negativeions.com/main.htm (10 october, 1998) cross, j.a. (1987), electrostatics: principles, problems and applications, adam hilger: bristol electro statics (1998), static electricity, http://www.electrostatics.com/page2.html (15 october, 1998) environmantal protection agency (1998), epa’s indoor air quality home page, http://www.epa.gov/iaq (23 august, 1998) ferguson, d. (1987), indoor air pollution: the concern of architects dissertation 2, raia practice division: n.s.w. jowett, c.e. (1976), electrostatics in the electronics environment, macmillan press: london karnstedt, j (1991, cited in electrocorp, 1998), ions and consciousness, http:// www.net-gain.com/ electrocorp/cons.html (23 august, 1998) massay, h.s. (1976), negative ions, cambridge university press: london mechanical engineering services (1992), air filters no.da15: application manual, australian institute of refrigeration, air conditioning and heating inc. moore, a.d. (ed.) (1973), electrostatics and its applications, john wiley& sons, new york. nava g. (1998), no positive effects from negative ions therapy, http://www.netasia.net/users/truehealth /negative%20ion%20therapy.htm (24 september, 1998) penex air ionisers (1998), what are negative ions, http://www.pentex.com/homepage. html (9 september, 1998) o’brien, r. cited in electrocorp (1998), ions can do strange things to you, http://www.netgain.com/electrocorp/strange.html (23 august, 1998) royal australian institute of architects (may, 1991), the sick building syndrome: the liability of architects in the design of buildings report, raia practice division: n.s.w. tijerina, l. (1984), video display terminals: workstation ergonomics, online computer library center inc.: columbus. weisstein, e.w. (1996-1998), physics, http://www.astro.virginia.edu/eww6n/physics (22nd september, 1998). microsoft word ajceb vol.2 no.1 compiled sized.doc assessment of professional competence in a construction management problem-based learning setting the australian journal of construction economics and building vol.2 no.1 47 assessment of professional competence in a construction management problem-based learning setting marcus jefferies, swee eng chen and jane conway university of newcastle, australia introduction the idea of a competency-based approach to higher education has generated a wide range of responses ranging from resentment of imposed changes to hopeful optimism about the opportunities that might exist. early surveys conducted by bowden and masters (1992) indicated that the most prevalent response from academics towards a competency-based approach to higher education is negative, viewing the approach as “too narrow... mechanistic and prescriptive.” on the other hand, there was also a significantly positive response which saw competency based education and training as benefiting higher education in clarifying intended outcomes of undergraduate programmes, particularly in relation to workplace requirements. competency based assessment, higher education and problem based learning increasingly, professional courses are seeking to determine graduate outcomes through assessment within a competency framework. it is necessary to distinguish competency standards appropriate for higher education from the standards used at vocational education and training levels (kingsland and chen, 1993). it is useful in defining competencies appropriate to the development of higher education curricula, or higher-order competencies, to contrast the attributes and objectives of these competencies with those appropriate to vocational training and those appropriate to professional practice. where this approach to competency-based education and training is adopted, a broader view of the competencies assessed must be taken and this can only be achieved when performance is viewed holistically and in context. in the context of professional courses, a competency oriented approach to assessment differs from the traditional behaviourist approach to task performance that has pervaded discussions of competency based assessment. assessment of professional competence, especially in problem-based learning (pbl) programmes, is fundamentally different from competency based assessment described in vocational training assessment. to consider it to be the same negates the characteristics of pbl which, in addition to drawing from practice contexts and using “real life” situations, emphasises thinking skills (such as problem solving, critical thinking, decision making), requires an integration of knowledge, skills, attitudes and behaviours, promotes self direction and lifelong learning, and recognises that learning is shared and constructed in the context of relationships with others (problarc, 1996). indeed, these characteristics of pbl form the basis of the so-called “higher order” competencies. when used in professional education courses, pbl claims to provide opportunities for the individualisation of the learning experiences in order to engage and ultimately empower learners. use of pbl is claimed to result in empowered exploration, deep learning, creativity and critical thinking (engel, 1991). the goals of higher education are to empower individuals to be “creators in the development of knowledge and skills, leaders of change, not just reproducers of existing knowledge and skills” (chen et al., 1999). therefore, assessment approaches in pbl programmes in higher education should be designed to support these outcomes. implications of competency based, problem based curricula for professional education in australian universities in australia, it has been clearly expressed in government policy statements that the competency-based approach embodied in the plan for integrated national training and education would not tie universities to the competency standards established by training agencies in relation to vocational proficiencies. indeed, relevant professional bodies and higher education institutions offering professional courses are expected to marcus jefferies, swee eng chen and jane conway 48 the australian journal of construction economics and building vol.2 no.1 determine for themselves any relationship between competency standards for the professions and the education provided (baldwin, 1992). debate about whether the competency standards determined by the professions are the appropriate ones to drive the development of curricula in professional courses offered by higher education institutions is tied to the contentious issue of what the role of higher education should be. it could be argued that higher education should adequately prepare graduates to successfully make the transition from a generalised role model to a diverse range of specialised roles possible in professional practice. the development of curricula in professional courses is frequently based on a conception of assumed and notional roles carried out by practitioners. cowdroy (1991) proposed that professional education is conditioned by the casting of the practitioner into idealised role models from which competencies that drive curriculum development are derived. however, in reality, practitioners specialise and develop skills profiles according to the particular roles they take on after graduation. this suggests that higher education should address a wide platform of competencies which prepare graduates for development into specialised roles with continuing professional development. the preparatory nature of these competencies distinguishes, where necessary, competencies appropriate for the higher education context from competencies appropriate to the practice context. these higher order competencies also embrace the important intellectual processes of critical reasoning and reflection (barnett, 1990), conceptualisation, innovative thinking and the ability to transfer skills and knowledge to new tasks and situations (barnett, 1994). higher order competencies may be specific or complex combinations of lower order competencies or individual attributes. these combinatorial competencies are also synergistic in nature, representing more than just the aggregate of knowledge and skills required for the successful performance of the component attributes. in practice, even specific competencies require the professional to understand when and why these combinations of attributes are called for (gonczi et al., 1990). the exercise of judgement, and all the attendant intellectual processes, is often called for. higher order competencies also reflect a creative dimension. they require more than the reproduction of specified performance to set standards. performance processes associated with higher order competencies are flexible, open-ended and complex. analysis, problem-identification and solution, ideas generation, and on-going learning are some of the skills that characterise higher-order competencies. it is also essential that higher-order competencies include the ability to generalise, extend and transfer skills that may have been developed in a specific learning situation. professional courses will never be able to expose students to all knowledge and skills that practice may demand. professional education should enable students to “seek out, integrate and use knowledge” (alverno college, 1985). the development of appropriate integrated research skills enables higher-order competencies to be maintained in situations subject to information obsolescence and expansion. higher-order competencies should also require performance to strongly demonstrate the integration of attitudes with appropriate knowledge and skills in complex situations. this may be reflected in choices and actions which assess and determine priorities, recognise conflicts and propose compromises, and respond to wider societal demands, moral and ethical questions (dall’alba and sandberg, 1993). clearly, a problem based approach to curriculum and instruction is consistent with a desire to prepare graduates for professional practice contexts, and the competencies essential to lifelong learning and professional performance. assessment of professional competence: a goal of pbl curricula assessment is widely recognised as one of the most powerful influences on the learning approaches and behaviours adopted by students (biggs, 1996; feletti, 1997). while there may be debate about the extent to which assessment of professional competence is the sole outcome of the curriculum, it is clearly one of the goals of professional education. while conventional assessment methods are often considered to be at odds with problem based learning approaches used in assessment of professional competence in a construction management problem-based learning setting the australian journal of construction economics and building vol.2 no.1 49 professional courses (cowdroy et al., 1999), and even at odds with the goals of higher education, use of professional competence as a framework for both learning and assessment is implicit in any pbl curriculum. assessment of professional competence focuses on outputs — what learners can do as result of learning process — rather than on inputs, in the sense of what subjects or courses have been completed (harris et al., 1995). thus, a pbl approach to curriculum and instruction accommodates the needs of higher education and professional performance and a competency oriented approach to assessment provides a framework in which to collect data about students’ performance in a range of areas using a variety of assessment tools — conventional or otherwise. figure 1 demonstrates the interrelationship between competency-oriented assessment and pbl as a curriculum design. case study at the university of newcastle, the bachelor of construction management (building) programme views curriculum design as a dynamic and interactive process. consistent with intra-professional directions, it has incorporated the competency standards of each relevant profession into its programme. description of the programme and its implementation of assessment of professional competence in the construction management programme, the use of a competency-based approach to assessment reflects changes in the practice of the discipline. accrediting authorities for construction management and construction economics courses in australia, the australian institute of building (aib) and the australian institute of quantity surveyors (aiqs), have decided to use competency-based criteria for future accreditation of undergraduate programmes in australian universities (aib, 1997; aiqs, 1998). the introduction of competencybased criteria for the accreditation of undergraduate courses in construction management provided the department of building (the discipline of ‘building’ is now located within the ‘school of architecture and built environment’ after a university wide restructuring process in 2002) at the university of newcastle with an opportunity to review and introduce innovative processes into its problem-based learning course (jefferies and chen, 1999). the trend in general education is to view knowledge as constructed within personal and social contexts (biggs and telfer, 1987; leder, 1993) and the need for students to acquire lifelong learning skills (bates et al., 1999). figure 1: pbl and competency oriented assessment pbl as curriculum framework performance in context in professional practice data collected using a range of tools higher order competencies (critical thinking, reflection et al.) competency oriented assessment marcus jefferies, swee eng chen and jane conway 50 the australian journal of construction economics and building vol.2 no.1 the bachelor of construction management (building) programme has been using an integrated problem-based learning approach and an outcomes-based description of its curriculum since its inception in 1990. these outcomes are defined as objectives for each of the sub-disciplines and stages of the course. using a hierarchical process these are then expressed as skills, knowledge and processes that can be demonstrated by students as evidence of competence. the assessment criteria are directly linked to the learning objectives at each level and to the overall course objectives. appropriate learning activities, generated by projects, are designed to permit students to develop and demonstrate their competence as required by the programme. a two-stage assessment process has been implemented with the continued use of integrated problem based learning. whereas previous assessment processes involved the grading of formal submissions in accordance with the satisfaction of stated learning objectives linked to those submissions, the assignment of marks in this single stage assessment process is not consistent with the assessment of elements in a competency-based approach. the synergistic nature of higher-order competencies with regard to its component elements of competence also demands a more sophisticated assessment process to identify and recognise the higher-order attributes that characterise these competencies and distinguish them from lower-order competencies. at the start of each problem phase (a phase being defined as a period of learning culminating in a formal submission), students are advised of the elements of competence to be demonstrated and the evidence required. normally these competencies are demonstrated through the formal submission, which contains the required evidence. during the phase students receive formative assessment in the form of feedback during tutorials, trial submissions and self or guided assessments. this feedback is intended to facilitate the development of the submission response and does not have a direct impact on the students’ final grades. at the time of formal submission, students complete a checklist for self-assessment to be submitted with the assessment product. this checklist also identifies the evidence offered to satisfy the learning objectives and assessment criteria. the checklist is returned with the assessor’s summative feedback. the feedback identifies whether the criteria have been met satisfactorily and provides qualitative feedback indicating the quality of the submitted work and, if appropriate, provides guidance on how the work may be improved. should any student fail to adequately demonstrate any of the required elements of competence, they may continue to work at it until they satisfy the evidential requirements. this process is necessarily limited by the administrative requirements for an enrolment period (semester or year). the assessment of these elements of competence is simply on a ‘satisfactory’ or ‘not satisfactory’ basis, consistent with other forms of competency based assessment. the second stage of assessment occurs at the end of the semester and is a holistic assessment of higher-order competencies. at this stage, students present evidence of performance demonstrating higher-order attributes to a panel of assessors. this evidence generally takes the form of a portfolio of work accompanied by a reflective journal, verbal presentation or any other relevant form of evidence decided and designed by the student. the remainder of this paper explores the issues that have emerged in the context of the discipline and the process of implementation of assessment of competence. method overview of case study approach and relationship to pbl principles case study is a practice based research method that involves analysis and description of a “real life” situation to promote understanding (yin, 1989). according to yin (1989) “as a research endeavour, the case study contributes uniquely to our knowledge of individual, organisational, social and political phenomena.” the ability to appreciate such phenomena in relation to practice is one of the goals of pbl curricula. in an educational context, using case study design requires the evaluator to note what happens to learners who have received the instructional treatment being evaluated (popham, 1993). in this paper, the ‘learners’ are both students and staff of the of the building discipline, at the university of newcastle, australia, and the ‘treatment’ is the introduction of competency based assessment assessment of professional competence in a construction management problem-based learning setting the australian journal of construction economics and building vol.2 no.1 51 into the bachelor of construction management (building) programme. the authors of this paper believe that a case study approach is consistent with the philosophy of pbl as both value the examination of situations in context and are practice oriented. similarly, the collection of a range of data from both staff and students reflects a commitment to examining multiple perspectives and viewing staff as learners in any implementation of an educational intervention. while limitations of the case study approach are well documented and include numerous threats to internal validity (popham, 1993) and obvious limitation in generalisability, the advantages of a case study approach are that it enables comparison of different perspectives and illuminates views and experiences (thomson, 1998). data collection methods used by the authors to inform the content of this paper included: interviews with both staff and students in the school about their experiences of assessment analysis of student reflective journals in relation to assessment analysis of staff workshop data in relation to assessment observation of the conduct of assessment of competence results the data revealed a number of recurring themes for both staff and students in assessment of professional competence. these were: assessment of professional competence makes what had previously been implicit quite explicit concern about a perceived lack of clarity, equity and objectivity in assessment of professional competence issues related to learning strategies and construction of knowledge. making the implicit explicit staff in the study revealed they had quite implicit ways of assessing students and invariably indicated that they were assessing students’ ability to communicate clearly and professionally, and their enthusiasm, interest, confidence in and commitment to the learning experience. however, it seems it is often the students’ responsibility to demonstrate these characteristics rather than the assessment criteria's purpose to elicit behaviours indicative of these. assessment based on professional performance competencies demands that evidence to support judgements about performance be collected. the implicit nature of the assessment by educators who rely on their own expert judgement of performance is not adequate grounds for deeming a student’s progress unsatisfactory. the construction management programme has sought to address this through presentation of a portfolio before a panel of experts. concern about a perceived lack of clarity, equity and objectivity in assessment of professional competence staff and students in the study expressed concern about these issues. there was a tendency among staff to use the holistic performance standards as a substitute for collection of evidence about student performance. while staff highlighted their own confusion about how the assessment related to the students’ level, and tensions between use of professional competence as both a formative and summative assessment method, students expressed dissatisfaction with “putting in a lot of work to find out that you have got it wrong”. related to this, staff expressed concern about the tension between recognising that students in a pbl situation would approach things from a variety of perspectives and ensuring that there was some ‘core knowledge’ underpinning a student's learning experience. students reported that that they were unclear about the purpose and structure of assessment. although students in first and second years indicated that the process of assessment became increasingly clear to them as they progressed throughout their course, students indicated that they sought guidance about strategies to meet the goals as well as more clear articulation of the goals. despite this there was evidence to suggest that students did acquire the ability to define their progress and identify areas of improvement in their performance. marcus jefferies, swee eng chen and jane conway 52 the australian journal of construction economics and building vol.2 no.1 while staff expressed difficulty in determining and discriminating between the level of students’ performance in terms of year expectations, students seemed to be able to discriminate between the level they were at and their achievements, perhaps because they were in the process of developing professional competence. staff, on the other hand, have expectations of performance based on their understanding of practice and their own professional experience. issues related to learning strategies and construction of knowledge for both staff and students in this study there were difficulties in seeing how the professional competencies reflected their ability to conceptualise their discipline. while one should not be surprised as to students' difficulties with this (after all the goal of any programme is to teach them this), it is disturbing when staff do not seem to be able to demonstrate a relationship between professional performance criteria and their discipline. discussion this study raises many issues for the construction management programme and the nature of assessment of professional competence. implications for curriculum planning in non integrated pbl curricula the aib and aiqs use competency-based criteria accreditation of undergraduate programmes in australian universities (aib, 1997; aiqs, 1998). the construction management programme at newcastle uses a curriculum mapping approach in order to demonstrate how it meets the accreditation requirements of the aib and aiqs along with the needs of the industry, students and the community (chen and ostwald, 1995). education should be transformative, emancipatory, dialogic and reflective (cranton, 1994; friere, 1972; mezirow, 1985). thus, it would seem that assessment of professional competence is consistent with the direction of the discipline. in this study there was evidence that students and staff reported being unable to see how traditional assessment tasks articulate with the profession's competency statements. as the competency based approach provides a common framework for developing and linking many aspects of work and education (preston and walker, 1993), it may be of assistance to students if each assessment item were identified in terms of how it related to the profile of the graduate and the professional competence of a construction manager. implications for staff development activity there is substantial evidence that students view their educators, both on campus and in the industry-based environment, as role models as they seek to determine their professional roles (chen et al., 1994). evidence in this study suggests that those role models have difficulty themselves in seeing how the competency statements relate to ‘everyday’ practice. additionally, some staff, particularly the industry-based educators who are isolated from on-campus activity, indicate that they need guidance and support in assessment procedures. the school has attempted to address these issues through staff development programmes that focus on assessment. preliminary evaluations of these programmes suggests that these have resulted in increased awareness of the curriculum and an increased understanding of the use of the assessment tools and principles of assessment. implications for existing assessment strategies assessment in higher education is driven by institutional as well as educational demands and therefore needs to serve formative, summative and normative purposes. table 1 differentiates between these. assessment of professional competence in a construction management problem-based learning setting the australian journal of construction economics and building vol.2 no.1 53 table 1: assessment process — bachelor of construction management (building) (chen et al., 1998) assessment type purpose implementation means formative developmental tutorials, trial submissions, self/guided assessments expert opinions summative assessing competence; formal submissions evidence assessing excellence; administrative final presentations professional judgement; marks normative final presentations discriminatory reviews of final results professional judgement formative assessment needs to occur during the learning process in order to assist and support continuous learning and needs to provide meaningful feedback to the student. summative assessment should occur at the end of the learning process or at some predetermined stage (such as formal examinations) and be a simple judgement of whether the performance demonstrated by a student meets satisfactory standards. where performance is not satisfactory, specific remedial education and training needs can be readily identified from the assessment reference criteria. normative assessment is usually required by institutions for purposes such as honours and other awards. this requires performances to be judged on a relative basis and makes marking a necessary procedure. this is more difficult to reconcile with an assessment process which is based on professional judgement of broad and complex criteria deriving from higher order competencies rather than the more precise testing instruments based on clearly defined problems. an implication communicated in bowden and masters’ (1992) discussion of assessment of outcomes is that outcomes must be expressed as objectively observable and assessable items. this does not address the issue of synergy in integrated learning. it also would negate the possibility of trying to develop skills, attitudes and behaviours for which only subjective criteria, standards and assessment are possible. the key point is, therefore, to shift the emphasis of assessment away from judgements about knowledge acquisition and towards the ability to perform specific workplace tasks and roles competently. it is where these tasks involve large, complex processes and require the integration of knowledge from a wide variety of sources that we can effectively encapsulate competency assessment of higher order skills. harris et al. (1995) describe competencybased assessment as a process of risk management which requires valid and quality assessment processes. these authors note that assessment may be conducted: by the individual themselves (if they do not know how competent they are, how competent are they?) by the individual's peers ( this may include fellow learners, workmates, fellow practitioners) by 'experts' ( including teachers, lecturers, trainers, supervisors and a variety of other individuals). if one is to ensure that students of pbl programmes graduate with the abilities necessary to work as members of teams and self evaluate performance (engel, 1991), it is essential that assessment activity incorporate self and peer evaluation as well as 'expert' evaluation. this presents numerous challenges for staff who are reluctant to accept these as valid means of collecting data about performance. while staff are apparently suspicious and untrusting of self and peer assessment, learners are not likely to accept responsibility and accountability for their own performance and as such will continue to demand that staff are accountable for their learning. according to kennedy (1987), the technicalskills definition of expertise has been most criticised for its assumptions about how marcus jefferies, swee eng chen and jane conway 54 the australian journal of construction economics and building vol.2 no.1 technical skills contribute to professional practice. what the technical skills orientation lacks is attention to the rest of professional practice: theory and principles, analytic capacity, and so forth. it overlooks the decisions that professionals make about whether and when to employ a particular skill. during this study it became apparent that both staff and students struggle with the process of decision making in professional practice and how possible it is to explicate the tacit knowledge of the professional. further complicating this is a need in higher education to discriminate not only between levels of performance for the purposes of grading students, but also between the level of performance on a year or semester basis. despite claims that levels of competence and progression between levels required and assessment should be devised to infer an individual's current level of competence, to decide whether the level satisfies some predetermined standard, and to provide feedback to assist in the person's professional development (masters and mccurry, 1990), there is evidence that the tensions between use of assessment as part of instruction and assessment as summative evaluation of performance continue. large student to staff ratios and assessment of students by individual members of staff may preclude individual learning and potentiate the use of normative assessment approaches under the guise of criterion referenced assessment. the construction management programme has addressed this through recognition that reducing assessment of professional competency to higher order skills checklists are of little value because they reinforce the notion that competence can be captured in a list of observable behaviours (masters and mccurry, 1990). hence, the construction management programme has sought to provide opportunity for integrated, global assessment that requires the person being assessed to justify his/her decision making in context. in the programme, this takes the form of panel assessment of a portfolio presentation that is providing meaningful indicators of students' professional performance. the purposes and forms of assessment need to be clearly linked to the learning process and the outcomes of learning (biggs, 1996). assessment of complex multiple higher-order competencies presents difficulties in quantification of outcomes, because assessment of the resolution of complex issues is more than an assemblage of parts. each part may be able to be assessed on an objective scale but the integration into a holistic product can be assessed only by qualitative judgement (biggs, 1996). while “the characteristics of higher-order competencies described earlier make professional judgement a valid basis for assessment” (chen et al., 1999), staff are attempting to design assessment items that are inclusive of both the product and process of learning, are conceptually and professionally relevant, and not prescriptive and constraining, yet clear enough to guide students' learning meaningfully. assessment tools are the means to operationalise concepts in competence for both staff and students. conclusion it has been noted that the educational system should prepare a person for a life of learning with emphasis on cognitive and affective processes, rather than on content and techniques. the industry-based environment is primarily concerned with technical and organisational competencies where technical competencies are still used as the measure for success. unless we are aware of essential tensions between the goals of educational and service sectors and acknowledge and address these in our curricula and assessment criteria, there will be potential for staff and students to dismiss professional competencies as vague, abstract and meaningless. performance assessment may revert to a disintegrated and decontextualised task oriented approach to learning outcomes that is incongruent with the philosophy and principles of pbl. the debate over competency-based approaches in higher education should not be isolated from the other major contemporaneous issues in higher education. irrespective of the motives in setting the contemporary agenda for higher education, it should be recognised that some principles of the competency-based approach offer opportunities for improvements in higher education. these include the focus on the outcomes of the process of higher education. this is important for quality management, accountability to society for the public assessment of professional competence in a construction management problem-based learning setting the australian journal of construction economics and building vol.2 no.1 55 funding supporting higher education, clarification and communication of higher education objectives and functions to stakeholders including government, professions, industry, the community and students. the competency-based approach can provide a framework for identifying, organising and implementing relevant curriculum, and clarify understanding of assessment objectives, procedures and strategies. it can synchronise the needs of industry, professions and the community with the preparatory role of higher education. this is particularly evident when this is embedded within a pbl approach to teaching and learning as pbl, both as a curriculum design and instructional method, provides the framework for “looking to identify key knowledge and skills in the context of realistic professional tasks” (masters and mccurry, 1990). according to the university of newcastle (1999), pbl, as delivered by the building discipline at newcastle, helps to develop graduates who integrate problem solving skills, encourage creative thinking and implement various examples of innovative practice into the construction industry. references alverno college faculty (1985) assessment at alverno college (revised edition), milwaukee, alverno productions. aib (australian institute of building) (1997) competency based standards. aib information publication no. 14. act, australia. aiqs (australian institute of quantity surveyors) (1998) competency standards. canberra, aiqs publication. baldwin, p. (1992) opening address: the implementation of government policy by deet — competency standards, the australian standards framework and the professions. seminar on the professions and competency standards, canberra, 17 november, 1992. barnett, r. (1990) the idea of higher education. society for research into higher education/open university press, buckingham. barnett, r. (1994) the limits of competence. society for research into higher education/open university press, buckingham. bates, i., simmonds, m. and aggarwal, r. (1999) pbl and lifelong learning in a new curriculum design. in: conway, j., and williams, a. (eds) themes and variations in pbl. problarc, newcastle. biggs, j.b. (1996) enhancing teaching through constructive alignment. higher education, 32, 1–18. biggs, j. and telfer, r. (1987) the process of learning. prentice hall, sydney. bowden, j.a. and masters, g.n. (1992) implications for higher education of a competency-based approach to education and training. deet, interim report. australian government publishing service, canberra. chen, s.e., jefferies, m.c., ilett, m. and conway, j. (1999) ethics and professional values: the framework for reflective practice. in: conway, j. and williams, a. (eds) themes and variations in pbl. problarc, newcastle. chen, s.e. and ostwald, m.j. (1995) curriculum mapping in pbl programs to address professional accreditation requirements – a case study in construction management. in: little, p., ostwald m. and ryan g. (eds) research and development in pbl: assessment and evaluation, 3, 51–66. chen, s.e., ilett, m. and kingsland, a.j. (1998) competency-based assessment, reflective journals and integrated problembased learning. probe, august, 12– 16. chen, s.e., cowdroy, r.m., kingsland, a.j., and ostwald, m.j. (1994) reflections on problem based learning. problarc, newcastle. cranton, p. (1994). understanding and promoting transformative learning: a guide for educators of adults. jossey–bass, san francisco. cowdroy, r. (1991) recognition vs assessment and evaluation. in: scott, g. (ed) defining, developing and assessing higher order competencies in the professions. university of technology sydney. cowdroy, r., degraff, e. and crick, m. (1999) new competencies and consequences for pbl. in: conway, j. and williams, a. (eds) themes and variations in pbl. problarc, newcastle. dall’alba, g. and sandberg, j. (1993) a competency-based approach to education and training: will it improve competence? herdsa news, 15 (1), 2–5. marcus jefferies, swee eng chen and jane conway 56 the australian journal of construction economics and building vol.2 no.1 engel, c.e. (1991) not just a method but a way of learning. in: boud, d. and feletti, f. (eds) the challenge of problem based learning. kogan page, london. feletti, g. (1997) the triple jump exercise: a case study in assessing problem based learning. in: ryan, g. (ed) learner assessment and programme evaluation in problem based learning. australian problem based learning network, newcastle. friere, p. (1972) the pedagogy of oppression. penguin, harmondsworth. gonczi, a., hager, p. and oliver, l. (1990) competency-based approaches to education. paper presented at the annual conference of the australian association for research in education, university of sydney. harris, r., guthrie, h., hobart, b., and lundberg, d. (1995). competency based education and training: between a rock and a whirlpool. macmillan, sth melbourne. jefferies, m.c., and chen, s.e. (1999) education for sustainability — a strategic approach in construction management. in: zhang, j. (ed) trends in construction management education and responsibly managing the built environment. aubea and catalyst 99, sydney. kennedy, m. (1987) professional education and the development of expertise in review of research education. exact science, 14, 133–167. kingsland, a.j. and chen, s.e. (1993) defining, developing and assessing higher order competencies: focus on learning outcomes and higher education. after competence: the future of post-compulsory education and training (vol. 1). griffith university, brisbane. leder, g. (1993) constructivism:theory for practice? the case of mathematics. higher education research and development, 12 (1), 5–20. masters, g.n., and mccurry, d. (1990) competency based assessment in the professions. australian government publishing service, canberra. mezirow, j. (1985) a critical theory of self directed learning. new directions for continuing education, 25, 17–30. preston, b. and walker, j. (1993) competency based standards in the professions and higher education: a holistic approach. in: collins, c. (ed) competencies: the competencies debate in australian education and training. the australian college of education, canberra. problarc (1996) workshop materials. problarc, university of newcastle. popham, w.j. (1993) educational evaluation. 3rd edition. allyn and bacon, boston. thomson, a. (1998) recognizing research processes in research based literature. in: crookes, p. and davies, s. (eds) research into practice. balliere-tindall, edinburgh. university of newcastle (1999) composite student questionnaire report. (feenstra, f. and corning, a., editors) statistical and evaluation services (information and education services division), university of newcastle. yin, r.k. (1989) case study research: design and methods. sage, newbury park, california. convergence among the sub-markets in australian regional building construction sector convergence among the sub-markets in australian regional building construction sector junxiao liu and kerry a. london, (school of architecture & building, deakin university, australia) abstract studies on market convergence are well considered in the literature. however, the majority of the previous research focused on housing markets and few studies have concentrated on construction markets. owing to a simultaneously dramatic increase in the construction prices of the sub-markets in the building construction sector in australia, this paper aims to identify the convergence among these markets, involving house construction market, otherresidential building construction market, and non-residential building construction market. to achieve it the granger causality test and generalized response function depending on the vector error correction model with the quarterly data of australia’s eight states from 1998 to 2010 will be applied. based upon the econometric tests, the price diffusion patterns among these construction markets have been identified. research on the convergences of construction markets not only helps construction firms perform well in business operations and arbitrage activities, but also provides policy makers with useful information for enacting effective construction policies for national perspectives and approaches to infrastructure planning. keywords: construction prices, convergence, vector error correction model introduction market convergence is one of the most popular research topics in the literature. this is because a comprehensive understanding of the situations of convergences allows business organisations to perform well in investments or arbitrage activities (jiang et al., 2010), but also helps public sector policy makers effectively enact relevant policies for market adjustments (bramley et al., 2007). convergence generally defined in previous studies is the long-run causal or dynamic relationships between observed markets (drake, 1995; cook, 2003). as an important market indicator, prices are normally the primary variable for the research on convergence, such as house prices. thus, construction prices will be the key variable in this study. the construction price concerned here is the output price that reflects the changes over time in the price of new construction outputs, and it can be measured by the output producer price indexes of construction industry, which are an economic indicator revealing the rate of change in the prices of buildings sold as they leave the production procedure (abs, 2005; abs, 2010a). in australia, the building construction sector consists of three sub-markets: house construction market, other-residential building construction (e.g. unit, flat and apartment) australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 12 market, and non-residential building construction (e.g. hotel, shopping center, factory, school, hospital and cinema) market (abs, 2006). since 1998, the construction prices of these three markets in australia have increased dramatically. table 1 indicates the growth rates of the construction output producer price indexes (ppi) of the three markets aforementioned across the states between the september quarter 1998 (1998, q3) and march quarter 2010 (2010, q1). nsw vic qld sa wa tas nt act house construction 47.9% 51.0% 70.3% 63.3% 97.1% 72.8% 84.2% 66.6% otherresidential construction 54.3% 44.3% 51.2% 58.6% 86.8% 64.7% 76.5% 59.8% nonresidential construction 56.6% 46.8% 57.7% 49.9% 81.9% 64.6% 73.5% 58.3% table 1: growth rates of the construction output ppi (1998q3-2010q1), abs, 2010b although these dramatic increases in construction prices can be triggered by a series of external economic or demographic factors, it is impossible to exclude the causation in a price convergence between these markets. this is because construction prices in different kinds of construction markets are not independent but interconnected. skitmore et al. (2006) support this notion and maintain that inflations of construction prices in individual markets often diffuse to other markets because today’s construction firms are diversified and their resources are employable across different market segments. although there is a theoretical specification about construction price convergence, the empirical study in this field is sparse. the structure of this paper is quite conventional and includes a literature review on the studies which establish the context of this research. then the methodology and data collection following the literature review will describe the econometric methods that will be applied for the analytical section and the data derived from australian bureau of statistics. finally, the granger causality test and the generalised impulse response function depending on the vector error correction model (vecm) will be adapted to estimate the convergence between three sub-markets in australia’s regional building construction sector. literature review convergence has been one of the most popular topics in academic research, particularly in the studies regarding housing, since the 1990s. most of these studies focus on identifying the price diffusion or interactions in regional housing markets by a series of econometric techniques. this type of literature has contributed on the establishment of the theoretical system so called ‘ripple effect’ or ‘convergence’, whereby a price shock in a certain market will diffuse to other markets in a specified period and there is a long-run equilibrium relationship between the markets (bramley et al., 2008). the ‘convergence’ or ‘ripple effect’ studies originated from the house price research for british housing markets. from 1991 to 1997, a number of studies, such as ashworth and parker (1997), giussani and hadjimatheous (1991), muellbauer and murphy (1997) and australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 13 munro and tu (1996), have contributed to the development of the concept of ‘ripple effect’. in these studies, a similar structural time-series model is applied to test the convergence among the house prices of different regional housing markets in the uk. apart from the studies aforementioned, drake (1995) estimates the convergence between uk regional house prices by a different approach – the kalman filter. all of these empirical studies suggest that there is a clear presence of convergence in the uk regional housing markets. at the end of the 1990s, meen (1996; 1999) devises an innovative method with spatial effect to examine the existence of the ‘ripple effect’ in the uk regional housing market and he also explains this phenomenon from the causations of migration, equity transfer, spatial arbitrage and spatial pattern in the determinants of house prices. since the year 2000, the theory in regard to ‘ripple effect’ or ‘convergence’ has been systemised as more and more scholars contribute to the literature by developing different methodologies to test the ‘ripple effect’ and ‘convergence’. for example, cook (2003; 2005) applies the cointegration test and unit root tests to examine the convergence between regional house prices in the uk. additionally, stevenson (2004) adapts the granger causality test based on the vecm to examine the convergence between the house prices of ireland republic and northern ireland. the empirical results of stevenson (2004) suggest that there is a cross-border convergence existing in the housing markets of ireland republic and northern ireland, and ‘the northern irish market is more linked with the housing market in the republic than with the rest of the uk’ (stevenson, 2004, p. 301). furthermore, the studies conducted by holmes (2007) and holmes and grimes (2007) adopt the panel unit root test to examine the convergence of uk regional house prices, and the results indicate that the majority of uk regions exhibit house price convergence. besides, a study undertaken by chien (2010) proposes a two-break unit root test to test whether or not the regime changes have broken down the stability of housing ‘ripple effect’ in taiwan. the findings of chien’s (2010) study support the existence of the ‘ripple effect’ in taiwan and further demonstrate that changes in policies can trigger structural breaks of regional house prices. in australia, the empirical research related to ‘ripple effect’ or convergence is more recent, (luo et al., 2007; liu et al., 2008). these two studies use the error correction model (ecm) and vector autoregression model (var) respectively to identify the causal and dynamic relationships between the house prices of australian regional housing markets. the results generated by the engle-granger-based cointegration test and a var model help luo et al. (2007) and liu et al. (2008) to identify a price diffusion pattern of the housing markets of eight state capital cities in australia. furthermore, the research of liu et al. (2009) estimates the interactions between the housing markets of eight state capital cities in australia using the variance decomposition on the basis of a var model. this study focuses on the house price growth rate rather than the house price level, and the findings suggest the changes in the house prices in sydney and melbourne cause the movements in the house prices of other state capital cities. australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 14 it can be identified from the studies aforementioned that the empirical research on ‘ripple effect’ and ‘convergence’ is primarily concerned with regional housing markets. however, the work commenced by ho et al. (2008) estimates the price convergence of different types of housing markets in hong kong. in this study, hong kong’s housing market is not viewed as an entity but several sub-markets defined as class a (under 40 square meters), class b (4060 square meters), class c (70-99.9 square meters) and class d (100 square meters and above). the results based on the granger causality test strongly indicate that a ‘ripple effect’ exists in the sub-markets in hong kong housing market (ho et al., 2008). although a large number of empirical research emphasise market convergence, the study with regard to construction market within this field is sparse. jiang et al. (2010) identifies this point and investigates the long-run relationship between house construction markets across australia’s six states and two territories. the empirical evidences encourage jiang et al. (2010) to identify the price interaction pattern within regional context, in which victoria and new south wales are of the states that are more sensitive to the construction price changes in other states. however, the study of jiang et al. (2010) only focuses on the causal links of house construction market across six states and two territories in australia but not on the cross-market interactions among all sub-markets in australian building construction sector. this literature review has presented an overview of previous studies in relation to the ‘ripple effect’ and convergence (chien, 2008; cook, 2003, 2005; drake, 1995; giussani and hadjimatheous, 1991; ho et al., 2008; holmes, 2007; holmes and grimes, 2007; liu et al., 2008; liu et al., 2009; luo et al., 2007; meen, 1999; muellbauer and murphy, 1997; munro and tu, 1996; parker, 1997; and stevenson, 2004). jiang et al. (2010) are novel in their approach unlike the other studies and they test the convergence for regional construction markets. thus, it is identified from the literature review that the analysis on convergence is mainly concerned with housing markets but is lacking for construction markets, especially for the sub-market convergence within the framework building regional construction sector. this provides an opportunity for further study. methodology the sections of introductions and literature review have demonstrated that convergence is a long-run causal and dynamic relationship between variables. therefore, the granger causality test and the generalized impulse response function depending on the vector error correction models are the ideal tools for this study. these two econometric methods can help to identify the causal linkage and dynamic mutual influences between the variables with long-run equilibrium relationship (hui & yue, 2006). vector error correction model (vecm) the vector error correction model is proposed by engle and granger (1987) through integrating the autoregressive and error correction representations into co-integrated systems. in short, the vecm is a vector autoregressive (var) model with co-integrated restriction and error correction term. one of the purported advantages of recognizing australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 15 cointegration in the autoregressive system is the improvement in forecasting performance (engle & yoo, 1987). the form of the vecm (p) can be written as follows.       1 1 1 ' p i tititt yyy  (1)       1 1 1 p i tititt yecmy  (2) where ∆yt-1 stands for a vector in difference level with k dimensions; ecmt-1 = β’yt-1 denotes the error correction term, which reflects the long-run equilibrium relationship between variables; γi is the coefficient matrices; and εt is a k-dimensional vector of error term. due to the integration of autoregression and cointegration, the establishment of the vecm relies on two other simple tests, unit root test and cointegration test. granger causality test the granger causality test is a technique proposed by granger (1969) in the 1960s and it is used to examine whether lagged values of a time-series variable x have explanatory power in the movement of the other time-series variable y. if the changes in the y can be explained by the lagged information of x, it is concluded that x granger causes y. the test of the granger causality is able to be based on simple f tests in the reduced-form var or vec models. as suggested by greene (2000) and gao (2009), a bivariate reducedform var (p) displayed as equation (3) is an appropriate model to explain the granger causality test depending on the var.                                                                                                                             t t pt pt pp pp t t t t t t x y aa aa x y aa aa x y aa aa a a x y 2 1 2121 1211 2 2 )2( 22 )2( 21 )2( 12 )2( 11 1 1 )1( 22 )1( 21 )1( 12 )1( 11 20 10 (3) if and only if coefficient 0 )( 12 a q in coefficient matrices, the lagged values of variable x have no explanatory power for y, implying that x can not granger cause y and it is exogenous to the system. accordingly, the most appropriate solution for estimating the granger causation is applying the f-test to examine the following joint hypothetical testing. pqah q a ,,2,1,: 0 )( 20  (x dose not granger cause y) h1: there is at least one q in the system causing 0 )( 12 a q the statistics of the testing are indicated as follows: australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 16 )12,(~ )12(/ /( 1 10 1 )     ptpf ptrss prssrss s (4) where si follows the f-distribution; rss1 denotes the residual sum of squares of the y equation in (3), and rss0 is the residual sum of squares of the y equation without variable x. the rss1 and rss0 are also able to be written as follows.  ̂ 2 11 trss (5)  ̂~ 2 11 t rss (6) if s1 is larger than the critical values of the f-distribution, then the null hypothesis (h0) of the joint hypothetical testing above will be rejected, implying that x granger cause y. otherwise, the null hypothesis will be accepted: x can not granger cause y. since the 1990s, some research attempts to test the granger causality within a vector autoregressive system with the cointegration because there is an existence of misspecifications of the reduced-form vars when the observed variables are co-integrated. these studies involved toda and yamamoto (1995), yamamoto and kurozumi (2006) and rajaguru and abeysinghe (2008). as a result, the granger causality test can be run under the vecm framework. generalized impulse response function (girf) the impulse response function (irf) is utilised to trace out the systematically dynamic effect of a shock of the error term of an endogenous variable to other variables in the var or vec models. it is one of the core analytical components of the vector autoregressive systems. koop et al. (1996) develop the traditional irf and create the generalized impulse response function. a summary of key equation is now explained. to understand the girf, a var (p) must be presented first. ,,...,1 1 1 ttxdx t k i i ttt      (7) where xt stands for a vector with p dimensions; dt is a vector with deterministic variables; εt denotes a vector of error term with p dimensions and it is assumed to be independent and identically distributed with zero mean and positive definite covariance matrices  . the h-steps ahead forecast error for xt is written as equation (8).       1 0 h j jhtjththt cxex  (8) australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 17 here iit is a set of information, which incorporates all lagged values as well as the t-period values of xt and the entire time path for dt. the cj is p*p matrices with a condition that c0= ip. therefore,      jk i ijij jcc ,min 1 1, (9) as a result, all cj matrices are able to be determined by the matrices ∏i. the girf, therefore, can be defined as:       111 ,),,( thttthttx xexehgi  (10) where  stands for a some known vector, implying that:  chgi htx   ),,( 1 (11) based upon equation (11), it can be summarized that  is a key issue for determining the time for any girf. in order to simplify the calculation of the function, shocking one element (  jjt  ) instead of shocking all components of εt is an appropriate alternative. hence the girf can be defined again by:         1 11 ,),,( tht t jthttx xexehgi j (12) assuming that wjjj  ,  jt is a standard deviation, and  t follows gaussian distribution. then,   wewe jjjjjjtt 2/1  (13) where e j stands for the j-th column of ip. as a result, the girf can be viewed as: wecwhgi jjjh t x jj 2/1 1 ),,(     (14) the equation (14) measures the response of xt+h to a standard deviation of εjt. in this kind of response, the correlation between εjt and εit has been considered. australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 18 data collection and description the output ppi of australia’s three construction markets in building construction sector, including house construction output ppi (hppi), other-residential building construction output ppi (orbppi) and non-residential building construction output ppi (nrbppi), will be the data used in this study. this type of index in australia is compiled and published by the australian bureau of statistics. as mentioned in the introduction, the construction industry output ppi measures the changes in prices of the outputs of selected construction industry classes. figure 1, 2 and 3 indicate the movements of construction industry output ppi for the three markets aforementioned in australia’s six states and two territories from 1998q3 to 2010q1. all of these figures indicate that the construction output ppi in state level maintained an upward trend during the sample period. the overall average growth rates of construction output ppi of the submarkets within building construction sector in every state were more than 47%. in the group of western australia and northern territory, the changes in the construction output ppi were the most apparent. figure 1, 2 and 3 illustrate that the construction output ppi of western australia between 1998q3 and 2010q1 increased from 98.9 to 194.9 in house construction market, 99.2 to 185.3 in other-residential building construction market, and 99.4 to 180.8 in non-residential building construction market. in northern territory, the construction output ppi of the three markets increased to about 176.0 from no more than 100.0. however, the changes in the construction output ppi in new south wales and victoria were the least evident. in new south wales, the construction output ppi rose to 145.8, 151.5 and 153.3 from 98.6, 98.2 and 97.9 respectively in the three markets. in addition, victoria’s construction output ppi increased by 147.1, 141.8, and 145.0 from the level of 98.0 during the period under study. regarding the group composed of queensland, south australia, tasmania, and australian capital territory, the growth rates of the construction output ppi were similar, as much as 60%. 80.0 100.0 120.0 140.0 160.0 180.0 200.0 nsw vic qld sa wa tas nt act figure 1: the output ppi of house construction in australia c o n s tr u c ti o n o u tp u t p p i years australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 19 80.0 100.0 120.0 140.0 160.0 180.0 200.0 nsw vic qld sa wa tas nt act figure 2: the output ppi of other-residential building construction in australia 80.0 100.0 120.0 140.0 160.0 180.0 200.0 nsw vic qld sa wa tas nt act figure 3: the output ppi of non-residential building construction in australia the identity of simultaneity of the increases in the construction prices of three different markets during recent decade allows to be inferred that there should be an interaction of construction price existing in building construction sector in australia. in the following analytical section, two econometric methods discussed in the methodology will be set up to pursue this kind of dynamics. analysis and discussion the prerequisite of the var or vec model is the data imported must be stationary. otherwise, a spurious regression will be triggered. thus, testing the stability of the timeseries data is the first procedure of the analysis on the basis of the var or vecm. table 1 illustrates the unit root test results of the construction industry output ppi of all sub-markets in building construction sector in australian six states and two territories. the results suggest that such variables are not stationary at the level form but stationary after the first difference at the 1% and 5% significance levels. in summary, all data are i(1) denoting that the timeseries data integrated at the first difference level. c o n s tr u c ti o n o u tp u t p p i years c o n s tr u c ti o n o u tp u t p p i years australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 20 variables level first difference results model specification (lags) pp test statistics (5%, 1% sig. level) model specification (lags) pp test statistics (5%, 1% sig. level) ln(hppi_nsw) intercept & trend (2) -0.72 (-3.51, -4.17) none (2) -2.64 (-1.95, -2.62) i (1)*** ln(hppi_vic) intercept & trend (2) -3.25 (-3.51, -4.17) none (2) -3.74 (-1.95, -2.62) i (1)*** ln(hppi_qld) intercept & trend (2) -2.02 (-3.51, -4.17) none (2) -2.26 (-1.95, -2.62) i (1)** ln(hppi_sa) intercept & trend (2) -2.69 (-3.51, -4.17) none (2) -2.49 (-1.95, -2.62) i (1)** ln(hppi_wa) intercept & trend (2) -1.35 (-3.51, -4.17) none (2) -2.97 (-1.95, -2.62) i (1)*** ln(hppi_tas) intercept & trend (2) -1.84 (-3.51, -4.17) none (2) -2.74 (-1.95, -2.62) i (1)*** ln(hppi_nt) intercept & trend (2) -1.91 (-3.51, -4.17) none (2) -2.19 (-1.95, -2.62) i (1)** ln(hppi_act) intercept & trend (2) -1.09 (-3.51, -4.17) none (2) -2.33 (-1.95, -2.62) i (1)** ln(orbppi_nsw) intercept & trend (2) -1.49 (-3.51, -4.17) none (2) -2.80 (-1.95, -2.62) i (1)*** ln(orbppi_vic) intercept & trend (2) -1.20 (-3.51, -4.17) none (2) -4.02 (-1.95, -2.62) i (1)*** ln(orbppi_qld) intercept & trend (2) -0.77 (-3.51, -4.17) none (2) -3.38 (-1.95, -2.62) i (1)*** ln(orbppi_sa) intercept & trend (2) -1.67 (-3.51, -4.17) none (2) -3.30 (-1.95, -2.62) i (1)*** ln(orbppi_wa) intercept & trend (2) -1.62 (-3.51, -4.17) none (2) -1.98 (-1.95, -2.62) i (1)** ln(orbppi_tas) intercept & trend (2) -1.93 (-3.51, -4.17) none (2) -4.42 (-1.95, -2.62) i (1)*** ln(orbppi_nt) intercept & trend (2) -2.20 (-3.51, -4.17) none (2) -2.65 (-1.95, -2.62) i (1)*** ln(orbppi_act) intercept & trend (2) -1.66 (-3.51, -4.17) none (2) -3.49 (-1.95, -2.62) i (1)*** ln(nrbppi_nsw) intercept & trend (2) -1.41 (-3.51, -4.17) none (2) -2.73 (-1.95, -2.62) i (1)*** ln(nrbppi_vic) intercept & trend (2) -1.57 (-3.51, -4.17) none (2) -3.61 (-1.95, -2.62) i (1)*** ln(nrbppi_qld) intercept & trend (2) -1.04 (-3.51, -4.17) none (2) -3.05 (-1.95, -2.62) i (1)*** ln(nrbppi_sa) intercept & trend (2) -2.07 (-3.51, -4.17) none (2) -3.87 (-1.95, -2.62) i (1)*** ln(nrbppi_wa) intercept & trend (2) -1.63 (-3.51, -4.17) none (2) -2.59 (-1.95, -2.62) i (1)** ln(nrbppi_tas) intercept & trend (2) -2.06 (-3.51, -4.17) none (2) -4.22 (-1.95, -2.62) i (1)*** ln(nrbppi_nt) intercept & trend (2) -2.61 (-3.51, -4.17) none (2) -2.14 (-1.95, -2.62) i (1)** ln(nrbppi_act) intercept & trend (2) -1.85 (-3.51, -4.17) none (2) -3.65 (-1.95, -2.62) i (1)*** table 2: pp tests of the variables for 1998q3 – 2010q1 notes: the pp tests, which are the unit root test similar to the adf tests, contain three kinds of model specification: only intercept, trend and intercept, and no trend and no intercept. ** and *** denote the 95% and 99% significance level. one of the challenges other than stationary test in the vecm is testing whether or not a long-run equilibrium relationship exists in between variables. in other words, detecting the australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 21 cointegration is the other necessary step for constructing the vecm. hence, the multivariate cointegration test (jj test) proposed by johansen and juselius (1990) is an appropriate method to fulfill this requirement. there are five models of the jj test. model 1 (m1) represents the observed time series has no deterministic trend and the cointegration equation (ce) has no intercept and trend. model 2 (m2) is the model in which the observed series has no deterministic trend but the ce has an intercept but no trend. model 3 (m3) is the model where the observed time series has linear trend and the ce has an intercept but no trend. model 4 (m4) denotes the observed time series has linear trend and the ce has both intercept and trend. model 5 (m5) represents the observed time series has quadratic data trend and the ce has an intercept and a trend. table 3 presents the jj test result summary of the three construction markets of each state in australia. the results indicates that there are long-run equilibrium relationships between construction output producer price indexes of three different construction markets in eight states of australia, implying that the data employed in this study is suitable for formulating the vecm. the number of cointegration for the vecm construction will be based on the results of table 3. states lagged difference model specification results (trace test) results (max-eigenvalue test) nsw 6 m3 2 2 vic 5 m3 1 1 qld 4 m3 1 1 sa 9 m3 1 1 wa 9 m3 2 2 tas 7 m3 2 2 nt 8 m3 1 1 act 9 m3 2 2 table 3: summary of the jj test results of construction output ppi once the vec models are constructed, the granger causality test and generalized impulse response function will be selected to examine the causal and dynamic relationships between variables. table 4 and figure 4 respectively presented the summary of the granger causality tests and causal relationships among house construction output ppi, other-residential building construction output ppi, and non-residential building construction output ppi across six states and two territories of australia. in table 4, the p-values under 0.05 indicate that the null hypothesis (x does not granger cause y) referred in the methodology will be rejected. in other words, there is a causal relationship between two variables. from table 4 and figure 4, it can be firstly identified that changes in the construction prices of house construction markets granger cause the movements in the construction prices of otherresidential building in all states in australia. in new south wales, western australia, and northern territory, the causal relationships between house construction prices and otherresidential building construction prices are bilateral, implying that increases or decreases in australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 22 other-residential building construction prices in such states also granger cause the changes in house construction prices. states directions chi-square p values results new south wales hppi → orbppi 25.42 0.00 y hppi → nrbppi 30.43 0.00 y orbppi → hppi 16.17 0.01 y orbppi → nrbppi 15.89 0.01 y nrbppi → hppi 8.89 0.18 n nrbppi → orbppi 16.43 0.01 y victoria hppi → orbppi 10.55 0.06 y hppi → nrbppi 12.99 0.02 y orbppi → hppi 1.28 0.94 n orbppi→ nrbppi 9.18 0.09 y nrbppi → hppi 2.45 0.78 n nrbppi → orbppi 4.74 0.45 n queensland hppi → orbppi 15.08 0.00 y hppi → nrbppi 14.63 0.01 y orbppi → hppi 3.12 0.54 n orbppi → nrbppi 19.31 0.00 y nrbppi → hppi 2.47 0.65 n nrbppi → orbppi 15.20 0.00 y south australia hppi → orbppi 20.78 0.01 y hppi → nrbppi 17.12 0.05 y orbppi → hppi 7.67 0.57 n orbppi → nrbppi 17.83 0.04 y nrbppi → hppi 7.38 0.60 n nrbppi → orbppi 33.57 0.00 y western australia hppi → orbppi 27.88 0.00 y hppi → nrbppi 18.23 0.03 y orbppi → hppi 16.69 0.05 y orbppi → nrbppi 22.88 0.01 y nrbppi → hppi 18.36 0.03 y nrbppi → orbppi 62.02 0.03 y tasmania hppi → orbppi 19.16 0.01 y hppi → nrbppi 17.20 0.02 y orbppi → hppi 5.61 0.59 n orbppi → nrbppi 2.18 0.95 n nrbppi → hppi 4.70 0.70 n nrbppi → orbppi 19.59 0.01 y northern territory hppi → orbppi 15.59 0.05 y hppi → nrbppi 20.58 0.01 y orbppi → hppi 23.76 0.00 y orbppi → nrbppi 32.40 0.01 y nrbppi → hppi 20.56 0.01 y nrbppi → orbppi 33.44 0.00 y australian capital territory hppi → orbppi 19.03 0.03 y hppi → nrbppi 19.18 0.02 y orbppi → hppi 5.52 0.79 n orbppi → nrbppi 14.23 0.11 n nrbppi → hppi 4.86 0.85 n nrbppi → orbppi 8.21 0.51 n table 4: granger causality tests of construction output ppi in australia australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 23 new south wales: victoria: queensland: south australia: western australia: tasmania: northern territory: australian capital territory: figure 4: causal relationships between prices of construction markets in australia secondly, not only do granger causality exist in between two dwelling (house and otherresidential building) construction markets, but also movements in the prices of the dwelling constructions can spread into the other construction markets of building construction sector non-residential building construction market. the results suggest that house construction prices granger cause non-residential building construction prices in all australian states. in addition, the construction prices of other-residential building construction markets also perform well in the granger causality test associated with non-residential building hpp i orbpp i nrbpp i hpp i orbpp i nrbpp i hpp i orbpp i nrbpp i hpp i orbpp i nrbpp i hpp i orbpp i nrbpp i orbpp i nrbpp i hpp i hpp i orbpp i nrbpp i hpp i orbpp i nrbpp i australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 24 construction markets. the other-residential building construction prices granger cause the non-residential building construction prices in new south wales, victoria, queensland, south australia, western australia, and northern territory. besides, the final causal linkage identified amongst these three construction markets is that the changes in construction prices of non-residential building construction markets granger cause the price variations of other-residential building construction markets in most of states except victoria and australian capital territory. nevertheless, there is no causal relationship within the direction from non-residential building construction market to house construction market. the granger causality test has examined the direct causal relationships between different kinds of construction markets in australia. however, it can not trace out the dynamic response of one construction market to the shocks of the other markets. for this purpose, the girf will be utilised to analyze the sensitivity of one market to the standard deviation shocks of others. figure 5 indicates the accumulated response results of three construction markets in each state in australia. firstly, in all of the figures, a standard deviation of house construction price itself will result in positive increases in future house construction prices in every state. this situation also can be found in other two construction markets, indicating that the impulses of the other-residential building construction prices and non-residential building construction prices will positively affect the future price levels of themselves. the possible reason is that current changes in prices or costs related to building constructions affect the short-run expectations of resource suppliers (e.g. materials and labour) in the construction industry. secondly, as mentioned previously, changes in house construction output ppi granger cause the movement in other-residential construction output ppi and non-residential construction output ppi in six states and two territories in australia. the results of the girf presented in figure 5 further indicate that increases in the output prices of house construction effectively lead to positive movements in construction output prices of other two construction markets in australia. the fluctuations of the responses of the orbppi and the nrbppi to the standard deviation of the hppi are more identifiable in victoria, where the accumulated responses of such two variables (orbppi and nrbppi) keep going up by 30% and 20% following the standard deviation of the hppi. in queensland, south australia, and northern territory, the levels of the responses of the orbppi and the nrbppi to the impulse of the hppi are similar, ranging from 16% to 19% in 10 quarters. moreover, in the cases of other states, involving new south wales, western australia, tasmania and australian capital territory, the accumulated responses of the orbppi and the nrbppi to the standard deviation of the hppi are less sensitive than that of other four states. the maximum values of such responses stay in the intervals from 2.0% to 7.6% (hppi→orbppi) and 1.0% to 6.1% (hppi→nrbppi). the smallest responsiveness of the orbppi and the nrbppi appear in western australia, in which only 2.0% and 1.0% of positive movements of the orbppi and the nrbppi are triggered by the standard deviation of the hppi. australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 25 thirdly, the figures following show that standard deviation originated from the orbppi strengthens the increase trends of the hppi in all states. in queensland, northern territory, and victoria, an accumulative total of about 13% increase in the hppi is produced by the standard deviation of the orbppi in 10 quarters. although the accumulated response of the hppi to the standard deviation of the orbppi in western australia is less sensitive, it is still evident reaching 9.4% within 10 quarters. however, in new south wales, the maximum values of the response of the hppi to the standard deviation of the orbppi are the smallest, only 1.98% in 10 quarters. in the rest of other three states (australian capital territory, south australia, and tasmania), the maximum values of the responses of the hppi to the impulses of the orbppi range from 2.6% to 9.3%. furthermore, the dynamic impact of other-residential building construction on non-residential building construction is evident as well. in summary, increases in the construction output prices in other-residential building construction market have a positive effect on non-residential building construction markets in australia. in the states where these two kinds of market have causal relationships, including new south wales, victoria, queensland, south australia, western australia, and northern territory, the accumulated responses of the nrbppi to the impulses of the orbppi are dramatic, ranging from 6.8% (new south wales) to 21% (queensland and northern territory). finally, apart from the dynamic effects caused by two dwelling construction markets, the positive impact of non-residential building construction has also been identified. figure 5 shows that in all australian states increases in non-residential construction prices drive up the construction price levels of the house and other-residential building construction markets. influenced by the nrbppi, the increase trends of the hppi in victoria and western australia are strengthened by 14% and 17% while in new south wales, south australia and australian capital territory only 3.1%, 2.7%, and 1.9% of positive changes in the hppi have been triggered. additionally, the responsiveness of the hppi to the standard deviation of the nrbppi in queensland, tasmania and northern territory has similar performances – approximate 10% of positive responses. regarding the impact of nrbppi on otherresidential building construction, the accumulated responses of the orbppi in victoria (22.9%), queensland (14.9%), western australia (13%), and northern territory (15.5%) are sensitive. however, in other four states, the values of the responses are much less, ranging from 4.0% to 7.9% within 10 quarters. according to the granger causality test and the girf, the appreciations in construction output prices of dwelling construction markets granger cause and positively influence the output prices of non-residential building construction market in australia. the possible reason is an increasing demand for housings caused by population growth or rise in personal income in australia. the positive change in housing demand is definitely an important dynamics for house prices. theoretically, house price is an activator of new housing construction (quigley, 1998). thus, the level of new housing construction is stimulated up by the inflation of house prices in australia, causing an increasing demand for building materials and construction labours. as a result, the prices of the building materials and the labour wages can be dramatically driven up when the supply of materials and labour australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 26 stays in a relative level. it is knowledge that the construction labour and most of building materials employed in the dwelling construction markets are utilised in non-residential building construction markets as well. so the construction output prices of non-residential building construction are gradually enhanced following the increases in output prices of house and other-residential building construction markets. moreover, the positive changes in non-residential building construction markets have positive impact on house and otherresidential construction markets in all states in australia. this is possibly due to the urban growth initialed by the increases in housing stocks via new housing constructions. this growth may create a lot of new residential districts from existing metropolitan areas to rural areas. these new suburbs provide business developers with an opportunity to make investment in non-residential building constructions, such as schools, hospitals, and shopping malls, owing to a huge demand for necessary living facilities. the perfection of such facilities can positively contribute on the housing prices of the new residential districts because the quantities and qualities of public amenities (e.g. schools, hospitals, shopping malls, and churches) are the major determinants of house prices (sirmans et al., 2005). therefore, the local construction levels of new houses and other-residential buildings are raised again, and then the construction output price will also be positively affected. new south wales: 0 0.005 0.01 0.015 0.02 0.025 0.03 0.035 0.04 0.045 0.05 1 2 3 4 5 6 7 8 9 10 accumulated response of hppi 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 1 2 3 4 5 6 7 8 9 10 accumulated response of orbppi 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 1 2 3 4 5 6 7 8 9 10 accumulated response of nrbppi australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 27 victoria: 0 0.05 0.1 0.15 0.2 0.25 1 2 3 4 5 6 7 8 9 10 accumulated response of hppi 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 1 2 3 4 5 6 7 8 9 10 accumulated response of orbppi 0 0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 1 2 3 4 5 6 7 8 9 10 accumulated response of nrbppi queensland: 0 0.05 0.1 0.15 0.2 0.25 1 2 3 4 5 6 7 8 9 10 accumulated response of hppi 0 0.05 0.1 0.15 0.2 0.25 1 2 3 4 5 6 7 8 9 10 accumulated response of orbppi 0 0.05 0.1 0.15 0.2 0.25 1 2 3 4 5 6 7 8 9 10 accumulated response of nrbppi australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 28 south australia: 0 0.005 0.01 0.015 0.02 0.025 0.03 0.035 0.04 1 2 3 4 5 6 7 8 9 10 accumulated response of hppi 0 0.05 0.1 0.15 0.2 0.25 1 2 3 4 5 6 7 8 9 10 accumulated response of orbppi 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 0.2 1 2 3 4 5 6 7 8 9 10 accumulated response of nrbppi western australia: 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 1 2 3 4 5 6 7 8 9 10 accumulated response of hppi 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 1 2 3 4 5 6 7 8 9 10 accumulated response of orbppi -0.02 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 1 2 3 4 5 6 7 8 9 10 accumulated response of nrbppi australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 29 tasmania: 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 0.2 1 2 3 4 5 6 7 8 9 10 accumulated response of hppi 0 0.01 0.02 0.03 0.04 0.05 0.06 1 2 3 4 5 6 7 8 9 10 accumulated response of orbppi 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 1 2 3 4 5 6 7 8 9 10 accumulated response of nrbppi northern territory: 0 0.05 0.1 0.15 0.2 0.25 0.3 1 2 3 4 5 6 7 8 9 10 accumulated response of hppi 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 0.2 1 2 3 4 5 6 7 8 9 10 accumulated response of orbppi 0 0.05 0.1 0.15 0.2 0.25 1 2 3 4 5 6 7 8 9 10 accumulated response of nrbppi australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 30 australian capital territory: 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 1 2 3 4 5 6 7 8 9 10 accumulated response of hppi 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 1 2 3 4 5 6 7 8 9 10 accumulated response of orbppi -0.01 0 0.01 0.02 0.03 0.04 0.05 1 2 3 4 5 6 7 8 9 10 accumulated response of nrbppi 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 1 2 3 4 5 6 7 8 9 10 hppi orbppi nrbppi figure 5: accumulated response of hppi, orbppi, and nrbppi conclusion this study empirically examined the cross-market interactions of construction prices between three types of construction markets within building construction sector in eight states of australia during the period of 1998q1 to 2010q1. benefited by the granger causality test and generalised impulse response function, the causal and dynamic relationships of construction industry output producer price indexes between house construction market, other-residential building construction market and non-residential building construction market have been identified. in summary, there are several one-way and bilateral causal relationships amongst the three kinds of construction markets. the performance of house construction market is dramatic and its construction prices granger cause the changes in the prices of other two construction markets. however, there is no price causal relationship in the direction from non-residential building construction market to house construction market. moreover, increases in construction prices in each construction market positively influence the price level of other two markets, particularly in victoria, queensland, western australia, and northern territory, where the response of each construction market to the standard deviation shocks of other construction markets are more sensitive. the outcomes of this paper not only empirically support the theoretical perspective that construction prices are not independent but interconnected in different kinds of construction markets, but also provide construction enterprises and policy makers with valuable information to perform well in business operations and market regulations in australia. australasian journal of construction economics and building liu, j and london, k a (2010) ‘convergence among the sub-markets in australian regional building construction sector’, australasian journal of construction economics and building, 10 (4) 11-33 31 references abs (2005) construction industry output price indexes, available at: http://www.abs.gov.au/ausstats/abs@.nsf/dssbycollectionid/63b1f55c25621179ca25 6ed200796d3e (accessed 08 june 2010) abs (2006) australian and new 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(2006) ‘test for long-run granger non-causality in cointegrated system’, journal of time series analysis, 27 (5), 703 – 723 econometric modelling of risk adverse behaviours of entrepreneurs in the provision of house fittings in china rita yi man li, (hong kong shue yan university, hong kong) abstract entrepreneurs have always born the risk of running their business. they reap a profit in return for their risk taking and work. housing developers are no different. in many countries, such as australia, the united kingdom and the united states, they interpret the tastes of the buyers and provide the dwellings they develop with basic fittings such as floor and wall coverings, bathroom fittings and kitchen cupboards. in mainland china, however, in most of the developments, units or houses are sold without floor or wall coverings, kitchen or bathroom fittings. what is the motive behind this choice? this paper analyses the factors affecting housing developers‘ decisions to provide fittings based on 1701 housing developments in hangzhou, chongqing and hangzhou using a probit model. the results show that developers build a higher proportion of bare units in mainland china when: 1) there is shortage of housing; 2) land costs are high so that the comparative costs of providing fittings become relatively low. keywords: imperfect information, risk, entrepreneur, fittings, probit model, housing. introduction in many places, such as australia, the united kingdom and the united states, housing developers provide floor and wall coverings, window frames, cupboards, and electrical fittings as standard equipment. in some cases, developers also provide heated floors and wine storage. there is, however, a completely different norm in mainland china. for instance, the majority of developers in beijing and nanjing sell bare dwellings to home buyers. there are no floor coverings, kitchen cupboards or basic bathroom fittings (li, 2009). table 1 shows the percentage of bare flats in nanjing. among all the residential developments available for sale in 2004 2007 in nanjing, 90% were bare units. table 2 displays a similar phenomenon. it shows the percentage of bare flats in beijing from 1997 2008. of all the first hand residential units sold in beijing districts, more than 70% were sold as bare units. similarly, bare units can also be found in shanghai and hangzhou. this paper aims at finding out the major drivers behind these housing entrepreneurs to build bare residential units in these cities. hypotheses purchasing bare units without any fittings in mainland china implies that buyers need to spend time in identifying relevant parties to decorate their housing units before they move in. why do busy people, often trapped in crammed schedules accept such a time consuming building activity? there has been very limited study of this phenomenon. this paper aims to remedy this and test potential reasons behind this by testing theories of brand name, risk adverse behaviours and information costs etc. specifically, the author proposes four hypotheses on the emergence of bare flats: 1. developers tend to build housing units with fittings in high land price areas. 2. the larger the proportion of low income residents the higher the proportion of bare flats. 3. developers with well renowned reputations (brand names) build more furnished flats. 4. the greater the shortage of residential units, the higher the proportion of bare flats. australasian journal of construction economics and building li, r y m (2012) ‘econometric modelling of risk adverse behaviours of entrepreneurs in the provision of house fittings in china’, australasian journal of construction economics and building, 12 (1) 72-82 73 district total residential developments available for occupation in 2004 2007 1 percentage of bare flats bai xia 32 92 da han 4 50 gao chun 3 100 gu lou 65 94 jian 71 93 jiang zhu 133 98 li shui 11 91 lu he 12 92 pu kou 60 97 qi xia 50 100 qian huai 42 100 xia guan 24 92 xuan wu 35 92 table 1 percentage of bare residential units in nanjing (li, 2010) district residential projects which build bare flats total percentage of bare flats chao yong 618 853 72 chong ping 160 182 88 chong wen 62 74 84 da xing 140 165 85 dong cheng 59 79 75 fang shan 83 90 92 feng toi 260 305 85 hai dian 379 470 81 huai rou 37 44 84 mi yun 43 52 83 shi jing shan 48 54 89 shun yi 102 126 81 tong zhou 194 219 89 xi cheng 62 82 76 xuan wu 88 114 77 yan qing 17 24 71 others 92 110 84 table 2 percentage of bare flats in beijing from 1997 2008 (li, 2009) 1 each of the residential development refers to one residential project. some of the projects consist of up to, or more than 1000 units. the districts refer to small areas inside the city. this applies also to table 2. australasian journal of construction economics and building li, r y m (2012) ‘econometric modelling of risk adverse behaviours of entrepreneurs in the provision of house fittings in china’, australasian journal of construction economics and building, 12 (1) 72-82 74 the first proposition: developers tend to build housing units with fittings in areas with high land prices. while fittings in high land price areas only make up a small proportion in construction costs, fittings in low land price areas constitute a relatively large share. the costs of providing fittings which do not suit the taste of customers are relatively lower in areas with high land prices compared to the costs of providing wrong fittings in areas with low land prices as home purchasers might choose not to buy the flats when developers provide unsuitable fittings. as developers are risk adverse, it is natural that they provide fewer fittings in those areas to avoid the relatively high risks: p(f)/lh < p(f)/ ll where p (f) refers to the price of the fittings, lh refers to high land price area and ll refers to low land price area. the second proposition: the larger the proportion of low income residents, the higher the proportion of bare flats. developers in affluent countries such as united kingdom, singapore, united states offer more fittings as compared to those in developing countries, such as china, ghana, indonesia etc. buying favourite fittings implies that the buyers are investing the time and money in the act of searching information. a man who earns $4 per hour has a low discretionary income but may be happy to search by himself rather than pay the contractor to do all on behalf of him, while a man who earns $ 400 finds it not worthwhile to do so. searching costs him $400 per hour which is more than the cost of letting the contractor do it. in view of this, high income areas theoretically should have a smaller portion of bare flats. developers tend to build more well-furnished flats with fittings to suit the needs of customers. the third proposition: developers with well developed reputations build more wellfurnished flats and vice versa. bare dwellings may avoid losses but do not help the developers to maximize gains from value added. hence, well regarded developers may tend to build more housing units with good fittings to enhance their reputation for quality. for others, it may be better to provide no fittings as the provision of poor fittings may set back reputations which have taken years to build up. the fourth proposition: the supply is so limited that the huge demand lowers developers’ motivations to provide well-equipped units. previous literature shows that shortages may lead to use of unqualified staff and poor materials. compared to many overseas countries, china experiences a shortage of housing by private developers. with substantial excess demand, developers do not need any gimmicks to compete for potential buyers. provisions of kitchen and bathroom fittings are unnecessary. literature review assumptions, functions and factors affecting the supply of entrepreneurs another important role played by entrepreneurs is risk-taking. entrepreneurs are risk-takers (blanchflower and oswald, 1998) who accept the firms‘ risks (carland et al., 1984) when running a business. australasian journal of construction economics and building li, r y m (2012) ‘econometric modelling of risk adverse behaviours of entrepreneurs in the provision of house fittings in china’, australasian journal of construction economics and building, 12 (1) 72-82 75 information, imperfect information and asymmetric information one major problem that the entrepreneurs face is imperfect information. imperfect information affects market power and prices and leads to a dis-equilibrium where firms can charge monopoly prices (granlund and rudholm, 2011). hence asymmetric information is a market failure which undermines the efficiency of product transactions. it is not unusual that consumers are uninformed about risks which affect their ability to choose terms which reflect their preferences correctly. firms often exploit this ignorance by degrading contract quality intentionally and will then have little incentive to offer better deals as these will not increase sales (bechern, 2008). risk-averse human behaviour because of imperfect information, individuals and entrepreneurs make their decisions under risk. risk has been identified as the potential for threat, damage, injury, or other loss (zou et al., 2007, jin and doloi, 2008). it may also be conceptualized as variance in outcome in any project (das and teng, 2001, fellner and maciejovsky, 2007). risk can be managed by catastrophe planning, easing, insurance, control, identification, quantification and shifting it to other agents (zou et al., 2007, jin and doloi, 2008). people‘s attitude to risk affect their behaviour and is important in decision making (richard, 1975, xiao and yang, 2008). people‘s attitude towards risks is not consistent. some people are more risk adverse than the others. buyers cannot obtain information on housing quality from the previous owners when they buy new housing. many of them only know they have bought a poor housing when they open the doors of their units (gwin and ong, 2000). therefore, home buyers often rely on developers‘ reputation and previous residential project to make decisions so as to minimise their risk in home purchases. loss-averse human behaviour apart from risk aversion, many entrepreneurs are loss-averse which refers to a situation when decision-makers are more sensitive to losses than to gains. this phenomenon represents a discontinuity in their utility function (berkelaar et al., 2004), graphically expressed as an abrupt change in the slope of the utility function at the reference point (wang et al., 2009) which distinguishes gains from losses it also signifies that the utility function is steeper for losses than for gains, i.e. the disutility that one experiences in losing money is greater than the utility associated with gaining the same amount. loss aversion has become an important tool to explain all sorts of phenomena which are not explained by traditional theory, such as the endowment effect (tovar, 2009). branded product a brand name is a firm‘s most important asset when it comes to evaluating companies against each another (laforet, 2011). entrepreneurs spent a lot of effort on boosting the name of their companies. branded products have valuable merits to consumers as well as sellers (table 3) as they convey quality information to consumer. as early as 1960s, the american marketing association defined ―brand‖ as: ―a name, term, sign symbol or design, or a combination of these, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors‖ (zilg, 2011, p.284). with asymmetric information in china‘s housing industry, buyers use brand names to assess product quality. reputation is an effective signal which provides quality information because it is firm-specific – gradually built up from the quality of the projects built by a developer in the past. in case where developers have a history of working in a community, home buyers can obtain information on quality of the units by observing previous projects. australasian journal of construction economics and building li, r y m (2012) ‘econometric modelling of risk adverse behaviours of entrepreneurs in the provision of house fittings in china’, australasian journal of construction economics and building, 12 (1) 72-82 76 merits of brand name examples allows firms to escape from the confines of generic prices jensen and drozdenko (2008); lebel and cooke (2008); rotfeld (2004); vukasovič (2009); souiden and pons (2009) easier adoption of a new product rotfeld (2004), vukasovič (2009) price premium corkindale and belder (1985); ; olson (2008); chen (2007) ; li et al. (2009) disagree) enhance perceptions of product or service quality corkindale and belder (1985); horppu et al. (2008); shannon and mandhachitara (2008); vukasovič (2009); facilitate promotional effectiveness corkindale and belder (1985) the ―personality‖ of brand product add value to the consumer charters (2011) increase market share vukasovič (2009) decrease risk vukasovič (2009); matzler et al. (2008) barrier to entry for competitors omar et al. (2009) provides information to the consumer baltas and saridakis (2009); pechtl (2008); pitta and franzak (2008); souiden and pons (2009) product differentiation zilg (2011) to attract a group of loyal customers not likely for housing burnett and bruce (2007); horppu et al. (2008) table 3 merits of brand name shortage and sellers’ goods quality market forces not only affect prices, they also determine suppliers‘ incentives to provide ‗extra‘ value which aims at being perceived as quality improvement. in case of shortage, suppliers do not need to compete with other sellers. as a result, they may minimize production costs by providing only limited accessories to their buyers (hawthorne and birrell, 2002, ingersoll and smith, 2003). housing investment in the planned economy was limited before 1976. the government preferred to spend money on investments other than housing (wang and murie, 1996). private housing investment was allowed after the death of mao and rapid growth in population and subsequent alterations in national urban policy have brought about a rapid urbanization in china. registered urban population has been increasing at a rate of 4% annually since 1980 (wu, 1999). residential unit supply never met demand. housing shortages problems had became serious by the end of the cultural revolution in 1976 when there was only 3 m 2 of floor space per person on average. despite the large quantity of housing that had been built since 1978, 4 million urban households still live with 4 m 2 per family member in 1994 and 400 000 had an average of 2.5 m m 2 living space per person (wang and murie, 1996). in view of the above, does it mean that the popularity of bare units in china is the results of a shortage of housing, risk adverse behavior by developers or something else? research method – probit model to find out the reasons behind the sale of bare units in china, the probit model will be used. covariates are measured from errors in regression model estimates. in binary dependent variables, the error term can also be dichotomous in nature, hence normal distribution assumption of error term in ordinary least square is not essential. therefore, ols regression which is suitable for continuous dependent variables may not be the best choice in case of dichotomous dependent variables to estimate an equation (gujarati, 2006). australasian journal of construction economics and building li, r y m (2012) ‘econometric modelling of risk adverse behaviours of entrepreneurs in the provision of house fittings in china’, australasian journal of construction economics and building, 12 (1) 72-82 77 in a binary response model, interest lies primary in the response probability yt* = xt p(y=1|x) = p(y1|x1,x2,…,xk) consider an equation with binary response (0,1) : p(y=1|x)= y(ð0 + ð 1 x1+ ð 2 x2+…+ ð k xk) = y(ð 0+x ð) where x denotes a complete set of explanatory variables, y is a function which takes on values between 0 and 1, that is 0<y(z)<1 where t represents all the real numbers x ð = ð 1 b1+ ð 2 b2+…+ ð k bk (wooldridge, 2003). data analysis data of provincial gdp per capita, construction costs for each year, annual supply of newly built residential units and change in number of household, background information of the residential developments such as developers which built the dwellings were collected to test the four hypothesis listed at the beginning of the paper. year real gdp per capita construction costs (m 2 ) number of development average estimated land cost (per m 2 ) change in no of households (ten thousand) area of newly built dwelling (ten thousand m 2 ) percentage of bare deve lopment (%) hangzhou (hangzhou statistics bureau, 2008, hangzhou soufun, 2009) 2003 32667 2275 26 9350 2.85 516 82 2004 38593 2023 61 11435 3.40 528 83 2005 44555 2459 62 11535 2.90 662 83 2006 51650 2340 51 10484 2.49 580 81 2007 52590 2953 59 6616 2.08 675 81 chongqing (chongqing, 2008, hangzhou soufun, 2009) 2003 7261 827 47 3242 15.32 1232 85 2004 7633 929 80 3281 11.58 1228 90 2005 7745 1074 106 3694 21.82 1714 93 2006 7689 1319 146 2800 20.25 1700 93 2007 7854 1452 151 3023 26.31 1769 93 shanghai (shanghai statistics bureau, 2008, shanghai soufun, 2009) 2003 39128 2987 149 6294 4.29 2 281 88 2004 46338 2958 180 8107 4.52 3 270 83 2005 51529 2960 304 7204 6.11 2 819 84 2006 57695 2963 151 8491 2.85 2 747 80 2007 66367 3014 128 9319 3.75 2 844 80 table 4 economic and housing data 2003 2007 gdp per capita data of the three places deflated by gdp deflator were obtained from statistics bureau in each place (shanghai statistics bureau, 2008, chongqing, australasian journal of construction economics and building li, r y m (2012) ‘econometric modelling of risk adverse behaviours of entrepreneurs in the provision of house fittings in china’, australasian journal of construction economics and building, 12 (1) 72-82 78 2008, hangzhou statistics bureau, 2008). land price was a proxy obtained by subtracting the average selling price of residential units (shanghai soufun, 2009, wooldridge, 2003, soufun, 2009) by construction costs available from the respective statistical year books of (shanghai statistics bureau, 2008, chongqing, 2008, hangzhou statistics bureau, 2008). the table below summarizes the abovementioned information in hangzhou. in this five year‘ period, about 80% of the dwellings were bare units. the number of developments ready for sale has been fairly constant at about 50 60 per year. the real gdp per capita 2 rose from 32667 to 52590 in 2003 and 2007 respectively. construction costs have increased since 2004. estimated land costs have risen from 9350 in 2003 to 10484 in 2006 but dropped to 6616 in 2007. in hangzhou, during this five year period gdp per capita has increased from 32667 in 2003 to 52590 in 2007. construction costs per m 2 and number of residential developments rose from 827 to 1452 and 47 to 151 during the five years‘ observation period respectively. in shanghai, the percentage of bare units dropped from 88 to 80 between 2003 and 2007. number of housing developments rose from 149 to 304 in 2003 and 2005 but decreased afterwards and reached a trough of 128 in 2007. construction costs oscillated around 2900 in this 5 year period. annual change in number of household rose from 42900 to 61100 between 2003 and 2005, dropped to 28500 in 2006 and rose to 37500 in 2007. area of newly built dwellings climbed from 22,810,000 m 2 in 2003 and reached a maximum at 32,700,000 m 2 in 2004 (table 4). research results and analysis to test the hypothesis, five variables ldmv, buildonce, buildonce*log(ccmv), a_changehse, and gdp were included (table 5). table 6 results of probit regression shows the results of the probit regression. variables explanation ldmv land price divided by open market value of the dwellings that is, selling price of the units. buildonce it represents developers which built once only during the study period. as branded developers are characterized by repeated sales, dummy ―1‖ is assigned if the housing development was built by a developer which had built once only and ―0‖ if they had engaged in repeated sales activities from 2004 2007. a_changehse to test the impact of housing shortage on provision of fittings, dwelling space was divided by the change in number of household (powell and ansic, 1997) and it is represented by a_changehse. buildonce*log(ccmv) ccmv denotes the proportion of construction cost in dwelling value. table 5 variables in probit model the probit regression models confirm the hypothesis that there is a significant negative relationship between bare units and land costs: there is a higher probability that developers build bare units when the land costs are low. costs of fittings provisions become relatively high in low land costs areas as compared to the whole construction costs. on top of that, buyers may choose not to purchase units if the fittings do not suit their tastes. china is a newly emerging real estate market as there were no private companies prior to 1978 due to the planned economy. hence many housing entrepreneurs are newcomers to the industry and lack information for predicting buyers‘ tastes in house fittings. in sharp contrast, the well established markets in places, such as hong kong, europe, and australia have enabled 2 all costs and prices are expressed in rmb unless otherwise specified. currently 1usd equals 6.23 rmb australasian journal of construction economics and building li, r y m (2012) ‘econometric modelling of risk adverse behaviours of entrepreneurs in the provision of house fittings in china’, australasian journal of construction economics and building, 12 (1) 72-82 79 local housing entrepreneurs in these locations to learn about the preferences of buyers. housing developers are risk averse. they all aim to maximise their profits without too much risk. to reduce their risk, these entrepreneurs choose not to provide any fittings. furthermore, traditional entrepreneurs relay on many sources of external financing: debt, venture capital, private equity and public stock offerings. investors who commit funds to business start-ups expect to receive back their investment along with a handsome return. entrepreneurs must ask themselves if their goals are congruent with those of possible investors (williams et al., 2006). if housing entrepreneurs make an incorrect decision, such as putting undesirable fittings into their units, investors will be affected and develop negative opinions about these entrepreneurs. potential joint ventures may also become futile if the housing entrepreneurs have a history of incorrect decisions. under the postulate of being risk averse, developers prefer to provide nothing inside the units. the probit regression results also confirm our hypothesis that there is a significant positive relationship between repeated sales activities and furnished units. nonetheless, the results of the interaction term buildonce*log (ccmv) shows that not all ―new‖ developers are equally keen to construct bare housing. the higher the construction cost as a proportion of property price, the higher would be the risk that the monetary return cannot cover the cost. the literature indicated that shortages can lead to lower consumer requirement, and this is supported in this probit model — there is an increase in likelihood of bare units construction in times of housing shortage. however, the insignificant relationship between gdp per capita and bare units, implies that people with higher information costs may not necessarily prefer well-furnished units. dependent variable: bare method: ml binary probit (quadratic hill climbing) included observations: 1704 convergence achieved after 5 iterations covariance matrix computed using second derivatives variable coefficient std. error z-statistic prob. c 2.320284 0.698542 3.321609 0.0009 log(ldmv) -0.645794 0.233331 -2.767715 0.0056 buildonce*log(ccmv) 0.614759 0.129308 4.754215 0.0000 buildonce 0.919487 0.193384 4.754730 0.0000 log(a_changehse) -0.259066 0.100172 -2.586210 0.0097 log(gdp) -0.007551 0.113477 -0.066540 0.9469 mcfadden r-squared 0.106837 mean dependent var 0.861502 s.d. dependent var 0.345523 s.e. of regression 0.325198 akaike info criterion 0.725551 sum squared resid 179.5704 schwarz criterion 0.744708 log likelihood -612.1692 hannan-quinn criter. 0.732642 restr. log likelihood -685.3946 lr statistic 146.4507 avg. log likelihood -0.359254 prob(lr statistic) 0.000000 obs with dep=0 236 total obs 1704 obs with dep=1 1468 table 6 results of probit regression australasian journal of construction economics and building li, r y m (2012) ‘econometric modelling of risk adverse behaviours of entrepreneurs in the provision of house fittings in china’, australasian journal of construction economics and building, 12 (1) 72-82 80 summary an entrepreneur is the major driving force behind production of goods as he/she combines the resources of land, capital and labour. all entrepreneurs share one characteristic: they bear risk and earn profit or suffer losses in return. it is assumed here that housing entrepreneurs are risk averse. they attempt to find ways to reduce their risk. housing entrepreneurs in mainland china who provide bare units provide a vivid example of risk aversion. as there is no guarantee of making a profit and there is imperfect information in our business world, the entrepreneur must assess the risk and, like other entrepreneurs, he/she cannot accept a job that has too high a risk of loss (brue et al., 2009). running a development business is risky; it requires substantial capital investment in land, professional training and recruitment. nevertheless, this huge expenditure does not guarantee a great return, and it is possible to suffer a substantial loss if the entrepreneur makes a wrong decision. provision of home fittings is one of the risks that the housing entrepreneur faces. some home buyers may dislike the fittings and thus decide not to purchase the home. in some places such as hong kong, land supply is scarce, but demand is huge (7 million people live in a small city with a hilly landscape). land price occupies a relatively large proportion of the costs of dwelling production. provision of fittings amounts to only a small proportion of the total costs of construction. entrepreneurs thus focus on land purchases more than provision of fittings. the risk of installing fittings is not very high. furthermore, many developers have run their business for many years and have accumulated sufficient knowledge on buyers‘ taste. provision of fittings to customers is common. yet, in mainland china, especially in areas of low land costs, costs of fittings have become relatively high. the risk of supplying fittings that prospective owners dislike is higher and this leads to the phenomenon of the bare flats‘ sale in china‘s real estate market. a housing shortage reduces the pressure on developers to provide more than the most basic dwellings hence increasing the probability that developments will be sold without fittings. changes in per capita income do not change this tendency in any significant way. conclusion in conclusion, developers exhibit a higher tendency to build bare units when: 1. 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(2007) ‗understanding the key risks in construction projects in china‘, international journal of project management, 25, 601-614 http://sh.soufun.com/ http://www.stats-sh.gov.cn/2004shtj/tjnj/tjnj2008.htm http://www.soufun.com/soufunfamily.htm the australian journal of the australian journal of construction economics & building page (i) editorial it is rare in a professional career that one gets the opportunity to play a part in bringing a new journal to life. this first edition of the ajceb is a result of a joint initiative from the australian institutes of quantity surveying and of building. in part it is a successor to the australian institute of building papers and the australian institute of quantity surveyors’ refereed journal, but is intended to encompass a much wider scope. the journal is intended as a medium for international exposure of research results to interested peer groups. as such the standard has been set at a high level, with the refereeing panel drawn from three continents. it is very satisfying that the balance of the first edition, whilst having a preponderance of papers from australia, also includes authors from four other countries, with australia’s neighbours being particularly active. we start with an outstanding paper by peter smith, in which the uptake of information technology is considered from the point of view of a qs practice. the author’s research is germane to the entire industry and is considered from a well-balanced point of view. i commend this paper to you, not only for the well-researched study and the implications for our future development, but also for the interesting sidelights on the psychology of our professions. a case in point is the observation that there exist non-functional lift close buttons so as to “placate those who measure their time in seconds”. not only do we have studies of overall conditions in different markets, we also present to the reader some other interesting aspects of our professions. the study of the influence of the media in south africa on health and safety records, brings to mind the heady days of the 80’s in hong kong when adverts about construction site safety regularly appeared on prime time television, and yet the safety record was very poor. as befits our international remit, there are papers in this issue, that consider the construction industries, or aspects of them, in australia, south africa, hong kong, sri lanka and papua new guinea. these papers bring a breathtaking international view to this issue of the journal from which we hope to build in future editions. in our many different ways we influence our professions. in particular a major influence is the education process, and we round off this edition with a sometimes-tongue-in-cheek review of the education process affecting our industry. in this the author considers many aspects of education for our professions based on several different models including the infamous bofo methodology. it should be pointed out to non-native english speakers that the description of this by the euphemism “go away, find out” avoids a classical profanity. i trust that the reader of this issue will not only be better informed and brought up-to-date with developing trends, but will also find that this tome presents them with a good and interesting read. alan jeary editor-in-chief august 2001 the australian journal of construction economics and building issn 1445-2634 first issued august 2001 drivers of housing demolition decision making and the impact on timber waste management perry forsythe, (university of technology, sydney, australia) abstract the study investigates housing demolition and timber waste recovery – with the aim to identify ways of improving recovery. using case studies the research focused on demolisher decision making, their onsite processes and the associated network of participants that influence timber recovery. from the data, a process model was developed that identifies and orders the drivers of demolition decision making. one aspect of the model identified the initiators of demolition and the waste created, including issues revolving around the demolition feedstock. another aspect covers organisational business drivers and includes site safety, productivity, economies of scale, market value of waste and supply chain entrepreneurship. a third component deals with project specific drivers including the recurring cost versus income equation that impacts on the viability of project level decisions. the model includes a typology of the operational onsite response to the above drivers. here, the deconstruction approach was found to provide high timber recovery mainly used where high-value timber waste was involved; the miscellaneous salvage approach provided some recovery of high and low-value timber; the crunch and dump approach provided low recovery or dumping at landfill and was used where low and no-value timber was involved. an expected increase in supply of these latter timber categories creates a significant need to increase the market value of currently low value timber groups. designing for deconstruction is also posed as a long term strategy for this. keywords: demolition, waste management, timber, decision making introduction the aim of this study is to investigate housing demolition with a view to identifying and improving timber waste recovery. in 1987 the bruntland report identified the construction industry as consuming natural resources at an unsustainable rate, causing environmental damage to the earth (world commission on environment and development 1987). since then, reducing construction and demolition (c&d) waste has become an important part of the sustainability debate, especially the need to divert waste away from landfill (lélé 1991; klang et al. 2003; duran et al. 2006). motives for interest in this area include: lack of space for landfill (poon et al. 2004), environmental protection (poon 1997; gray 2002; smith and bishop 2005; xing and hendriks 2006), reduction of carbon emissions (krook et al. 2007), improved production efficiency (dainty and brooke 2004; kartam et al. 2004; nabil kartam et al. 2004) and less resource depletion (moriguchi 1999; hendriks et al. 2000; muller 2006) comprehensive waste management has been shown to provide a structured and cost effective means to reduce waste going to landfill (schachermayer et al. 2000; treloar et al. 2003; rodríguez et al. 2007). even so, c&d waste is said to be the major component up to 43% of the solid waste stream going to landfill in australia (standing committee on environment communications and the arts 2008), 38% in hong kong (tam and tam 2006), 20% in the us (alexander 1993; helper 1994), 30% in canada (kalin 1991) and 21% in brazil (gomes et al. 2008). australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 2 many countries have directed legislation towards measures that minimize c&d waste. for instance, options such as landfill taxes increase the cost of landfill which improves the comparative cost of reuse and recycling (skumatz 1993; morris et al. 2002; duran, lenihan et al. 2006; skumatz 2008). even so, it is often difficult to accurately foresee the efficiency and effectiveness of such regulations, especially where trying to optimise market driven methods. this is especially relevant to the management of demolition waste because it easily constitutes the largest proportion of the c&d waste stream (poon et al. 2001; poon, yu et al. 2004; suttie 2004). most countries have large amounts of buildings, which due to age and depreciation gradually draw towards the end of their economic utility (moriguchi 1999). ultimately, these redundant buildings become the feed stock for demolition and create a self perpetuating flow of waste unless redirected into reuse and recycling. muller (2006) explores this further by emphasising that construction and demolition flows follow a cyclic behaviour. his modelling of dutch housing stock indicates that in the first half of the current century there will be decreasing construction and increasing demolition. he impresses that the waste from demolition is so significant that it must be seen as a key resource for ongoing materials consumption, especially given the gradual depletion of newly available resources. given these issues, it is pertinent to point out that many studies discuss c&d waste as a generic construct but in viewing such studies more closely, it becomes apparent that many have an implicit orientation towards new construction projects rather than a specific focus on demolition. an exception to this includes work undertaken by the building research establishment in the united kingdom specifically work by hurley et al. (2001). they provide significant insight into the base principles and operational structure of the demolition industry. in many ways, this paper extends their work in providing greater structure and detail in explaining the selection of demolition processes and the impact this has on waste recovery. as such, this study aims to act at a deeper level than statistically based studies in systematically understanding the decision making of those directly involved in demolition processes. a focus on housing construction and timber recovery this study takes a targeted approach to investigating demolition waste and focuses on housing demolition projects (i.e. low rise, detached and semi-detached projects). building development of this nature makes up a significant proportion of demolition projects. for instance, town planning decisions that foster urban consolidation often require the demolition of low density suburban development to make way for higher density development. housing projects also make for an interesting area of study given the difficulties in dealing effectively with waste because of the dis-economies of scale inherent in such small projects. the study focuses on improving the recovery of timber. this is because timber is commonly used in low density housing construction and it is also a highly sustainable construction material providing a naturally regenerating carbon store. even so, the reuse and recycling of this material is not necessarily as advanced as other construction materials and improvement in this area would help support the sustainability credentials of timber as a construction material. for instance a recent study in australia concerning extended producer responsibility (infield 2007) indicates that the percentage of timber construction waste available for recovery is as high as 71% in australia, 80% in the uk and 44% in the us. in more absolute terms, the australian greenhouse office (2004) estimates that approximately 2.3 million tonnes of solid wood products are placed in australian landfills each year. clearly, large amounts of timber could be saved from landfill and it would seem that demolition is a particularly significant sector to address. for instance in the us, timber waste from demolition is in the order of 3.5 times higher than waste from new construction australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 3 (falk 1997), in the uk it is 2 times higher (suttie 2004), and in australia 1.75 times higher (infield 2007). it is therefore not surprising that the reclamation, reuse and recycling of timber waste from demolition is an area with potential for significant improvement. despite the scale of the problem the nature of timber waste from demolition projects (i.e. including dirt and unseparated materials) makes it hard to efficiently recover from demolition projects. other constraints that can complicate the process further include:  extra time, practical difficulties and adverse attitudes to onsite separation (falk 1997; magin 2001; poon, yu et al. 2001)  contamination brought about by paint coatings and treated timber (solo-gabriele and townsend 1999; krook, martensson et al. 2007)  building regulation and specification (magin 2001)  damage to timber by machine demolition (tanaka et al. 2004)  cleaning, denailing and resizing timber (magin 2001; tam and tam 2006)  transportation and tipping fees (mills and showalter 2001)  availability of established recycling and reuse markets (mcdonald and smithers 1998) given the above, the current study considers the relevance of the above points and the impact they may have on diverting demolished timber away from landfill. research method a case study methodology was undertaken to address the research aims (yin 2008). it was particularly useful in providing an integrated view of the demolition waste stream as a networked system involving different stakeholders, decision makers and processes, both on and off site. in asserting the benefits of this approach it is evident that the case study methodology has the advantage (over purely quantitative methods) of joining linked factors together into systems which is particularly useful where attempting to holistically solve problems. the case study approach makes it possible to concurrently tap into decision making and associated process variables with full context intact. here, demolition contractors formed the basis of each case study and were used to observe how demolition took place on site and how supply chain networks formed in taking waste away from the site to reuse, recycle or dispose of. demolishers also create networked links to other participants in the waste stream. this included specialist salvage subcontractors as well as those involved in transporting, processing, accepting and reselling waste. in each instance, indepth face-to-face interviews were undertaken with the directors or senior managers of the firms involved. interview questions focused on obtaining data capable of mapping work processes, identifying relationships between those involved in the waste stream, and identifying impediments that affected timber waste recovery. in addition, active demolition sites and waste handling facilities were visited for each of the case studies enabling firsthand observations of how waste was received, processed, on-handled and/or sent to end user markets. onsite discussions were conducted with those physically involved in such processes. in total, 9 case studies were undertaken of medium to large scale demolition companies. the case studies were taken in equal proportion from the three most populated cities in australia (sydney, melbourne and brisbane). thematic analysis was undertaken on the data (boyatzis 1998) and this was used to inform the waste management mapping process. it focused on categorising theme frequency rather than content from word frequency. themes were coded according to inductively derived categories. the study is considered reasonably generalisable when applied to demolition markets of similar style in terms of economic, construction and building industry characteristics. australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 4 a key factor in the research involved modelling and mapping demolition work processes. here, the main work of interest to the current study is shen et al‟s (2004) mapping model aimed at assisting the planning of waste management procedures. the main contribution of this work is a systematised method for describing waste management processes using an activity flow chart. lu et al. (2006) built on this by providing a more dynamic ability to simulate different waste management processes onsite and compare them in an experimental way. while both studies are insightful they tend to be oriented towards waste management in new construction rather than demolition projects. given this, the current study utilised similar mapping concepts, but adopted them to suit demolition processes. findings from the data, it was apparent that there were different drivers affecting demolition decision making (and subsequent timber recovery) and that this could be conceptualised as a process. the first stage in the process concerned initiators of demolition and waste creation. the second stage concerned organisational business drivers which determine systematic and strategic ways that demolishers respond to the waste created. the third stage involved project specific drivers which worked within the confines of the organisational strategy, but focused on site specific issues. these drivers of decision making were found to culminate in a set of operational approaches to demolition, which described what actually took place onsite. the following headings deal with each component mentioned above, initiators of demolition and waste creation in exploring this issue it was apparent that the existing building stock determines what will be demolished and what type of waste will be generated – hence this research adopts the term “demolition feed stock” in the context of seeing demolition as part of a production process that leads to waste recovery or waste disposal. as identified by authors such as muller (2005) and moriguchi (1999), demolition typically occurs because existing buildings have reached the end of their economical life. this is either because houses are dilapidated or redundant in meeting the owner‟s/occupier‟s/community‟s needs, or the land that the house is sited upon has a higher and better use than its current, brought about by market forces or rezoning of land use. the two separately influence the predictability of future demolition feed stock, thus affecting the quantity and type of waste that will be generated. the research not surprisingly found that the type of waste that will occur is a function of the type of construction inherent in the demolition feedstock. predicting the type of construction is predominantly defined by the time period in which the demolition feed stock was built and the associated construction style that was common at that time (which may vary according to region, town or even suburb). as a result, timber waste was found to be more prominent in the feedstock encountered by demolishers operating in certain areas or parts of a given city. in such cases, it was observed that demolishers developed standard modes of operation depending on which materials were more prevalent. as the demolition feedstock evolved so too did the specific types of timber construction involved. for instance, sawn hardwood was more prominent in older stock, while sawn softwood and engineered timbers were more common in newer demolition stock. it was therefore evident that in time, there will be decreasing supply of sawn hardwoods and increasing supply of sawn softwoods and engineered timbers. as will become evident later in the paper, this trend has significant ramifications for certain drivers influencing the recovery of timber waste. australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 5 organisational business drivers the next step in the decision making process was the way businesses responded to the previous item, at a strategic level. this involved making decisions that impacted on standardising and systematising demolition, to provide over-arching managerial and operational efficiency. three factors pertaining to this and prominent in the data are discussed further below. systematic management of safety risk demolition safety requirements were found to differ among case studies according to state based safety legislation and this was in turn found to impact significantly on the method of demolition chosen by contractors. for instance, manual demolition was more common where safety legislation was perceived as being unimposing on work methods, whilst machine based demolition was preferred where legislation was perceived as being more imposing, influenced by the way contractors interpreted their duty of care and subsequent exposure to risk, relative to legislative requirements. some demolishers spoke of minimising exposure to manual demolition methods because of the high level of risk involved, the associated increase in project management and the increased costs in terms of insurance premiums and safety infrastructure. these organisations showed a systematic bias towards the use of excavation machinery instead of labour as a means of mitigating risk. this tends to work against timber since most recovery that aims to keep high re-use value intact, relies on manual demolition. strategic productivity and economies of scale similar to the previous point, organisation wide decisions about productivity revolved around the use of machine versus labour based demolition. clearly, machine usage had the potential for higher productivity and safety, but this was potentially offset by other factors favouring manual demolition, such as the ability to separate timber on site with a view to reselling it to offset project costs. contractors showed preference for one or the other method depending on the extent and type of materials they intended to recover and the financial return expected from such materials. as an adjunct to the above point, it was apparent that housing projects did not generate the same amount of waste as large commercial projects, and so the waste stream involved comparatively smaller economies of scale. as a result, demolishers tended to adopt approaches to demolition that were stylised to suit the context of systematising small project dynamics. it was also evident that the more a given material dominated the type of construction, the more it dominated decision making about the approach taken to demolition. brick and concrete waste tended towards use of excavators, whilst in contrast, timber intensive houses tended towards manual demolition where intending to facilitate timber recovery. timber was but one material to be taken into account on a project and not surprisingly was often overshadowed by other higher quantity materials. concrete and masonry often dominated and these heavyweight materials had greater impact on landfill fees because weight was often used as the basis for measuring waste quantity at landfill sites. there was subsequently an inclination during demolition to recover these heavy weight materials for recycling, whilst lighter weight materials such as timber had lower priority. at a more specific level, it was evident that the quantity of timber waste on a typical project spanned a variety of sub-categories. the resulting lack of homogeneity among these categories further limited economies of scale. to demonstrate this point, demolishers perceived: australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 6  highest quantities typically included wall, floor and roof framing.  intermediate quantities typically included floor, lining boards, claddings boards and floor sheeting.  lowest quantities typically included timber skirtings, architraves, doors, jambs, windows, decking boards, railings, and cabinetry to demonstrate the potential for further fragmentation of the above sub-categories, it was apparent from previous discussion, that newer demolition feedstock used different timber materials compared to older feedstock. for instance sawn hardwoods were more common in older stock, whilst in the newer stock softwoods, prefabricated trusses, and engineered wood products (e.g. particleboard, plywood and mdf products) were more common. such fragmentation and the need to strip down the advanced component like trusses did not provide economies of scale and limited development of highly systematised approaches to timber recovery. a developing response to the above is the trend towards lumping timber waste together to try to generate economies of scale. this can only be done for homogenous use such as furnace fuel and in such instances there is a need to be able to filter out impurities and pollutants in process. while this does not provide the highest potential value from the waste, it overcomes many of the difficulties in trying to optimise individual material sub-categories. market value the extent of recovery of materials is largely dependent on the income that can be derived from selling them. this basic fact influenced the costs demolishers were prepared to incur to recover materials as opposed to sending them to landfill. income from timber waste was often driven by both good and bad qualities – as perceived by the market. the grade, type, condition and state of the timber is important. damage from wear and tear and from demolition reduces value, as does the existence of cuts and trenching in framework which reduces the usable section size. the need to pull timber assemblies apart from lining, cladding, frameworks and steel fitments also reduces market value. similarly, paint coatings require extra work to bring them back to a saleable condition. as a result, waste timber from demolition was categorised by the research in terms of “highvalue”, “low-value” and “no-value”. “high value” timber was typically made up of large cross section framing timbers – mainly hardwoods species or douglas fir which has strong consumer demand for architectural features and furniture making, but is relatively hard to procure in the new timber market. “low value” timbers typically include waste that could be easily separated onsite and transformed into the likes of reusable framing timber, bio-fuel and raw materials for particleboard production. “no-value” timber includes materials with no current re-sale potential or where too much work and expense is required to make the materials saleable. such timber typically includes certain softwoods (including roof trusses which are difficult to reuse and recycle) and materials that are inherently difficult to recycle such as engineered timber sheet products – some with bonded laminates and others with volatile compound adhesives. the lack of saleability meant that for many of the cases studied, these materials became an expense to the demolisher by incurring landfill tipping fees and government imposed levies. an important issue arising from the above discussion is that as the demolition feedstock evolves in the future, there is likely to be less high-value hardwood available and more lowvalue or no-value softwood and engineered timbers available. as a result, there is a pressing need to try and improve the viability of reuse or recycling these products. australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 7 supply chain entrepreneurship building on work by other authors (dainty and brooke 2004), it was found that demolishers exhibit supply chain entrepreneurship as a means of adding value to their operations. in short, they become materials traders a step beyond physically demolishing buildings. the entrepreneurship included attention to the cost and reprocessing of materials and finding the best market. a common theme was the need for various forms of organisational integration, and so the following examples of supply chain entrepreneurship were identified in the data:  vertically integrated supply chains – where demolishers operate their own salvage, re-processing, recycling and sales operations including showroom and industrial wholesale settings. in such operations they often target specific materials – including timber – which are re-processed to varying extents to suit consumer demand.  symbiotic supply chains – where demolishers integrate effectively with specialist reuse or recycling operators. for instance the parties would agree on the value of the yet to be salvaged materials, and this would be subsequently factored into the demolisher‟s profit and cost structure for the project. the specialist operator may salvage targeted materials and then cart away for resale or pick up the materials direct from site after demolition. this symbiotic relationship creates a more efficient and stable supply chain in terms of not only improving the cost and efficiency of waste recovery, but the agreed logistics of onsite preparation, packaging, pick-up and eventual processing of recovered timber waste.  site centred supply chains –a more basic supply chain than the previous options because the demolisher sells recovered materials direct from site. here the site acts as a temporary storage facility and shop front. it tends to occur where demolishers have no appropriate offsite storage facilities or where the materials are not worth the cost of offsite cartage, storage and selling. while little infrastructure is required this approach is often not feasible because it depends on available space and time especially where time based cost penalties are written into the contract. where high-value timbers are involved there are good examples of both vertically integrated and symbiotic supply chains in terms of efficiency and value creation. for no-value and lowvalue timbers high cartage costs ultimately reduces the viability of such options. this means that demolishers tend to price a project based on taking waste to landfill and so recovery is an option rather than a standard mode of operation. project specific drivers while the above factors created an overall framework for demolition contractors to make organisation-wide business decisions, it was found that this was then processed down to decision making at project level. relevant drivers of project decision making is observed in the data are detailed below. recurring cost versus income equation the differences between competing approaches to demolition were identifiable according to four cost related sub-variables discussed below. some of these are already defined in the extant literature including (mills & showalter (1999), pun et al. (2006), begum et al. (2006), treloar et al. (2003), skumatz (2008), morris et. al. (2002) and duran et al. (2006). even so, costs are reiterated and redefined here in order to elaborate on context and to provide a holistic framework for the drivers identified in the data, including: australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 8  site process costs site costs are conceptualised to include the act of pulling the building down, separating materials, moving materials to a cartage point, preparing the materials for cartage. for timber this could include disassembling, de-nailing, strapping, loading and placing timber in bins, crates and trucks to facilitate waste recovery. such labour intensive activities are costly compared to machine intensive site processes.  cartage costs – these costs are conceptualised to include all road and trucking costs involved in taking waste from the demolition site to a designated drop-off location (e.g. a transfer station, a recycling depot, a landfill site). these costs could clearly be manipulated separately to site costs. inner city demolition projects typically make use of close proximity transfer stations, vertically integrated demolishers cart to their own recycling and reuse facilities, whilst others avoid cartage altogether by utilising symbiotic supply chain relationships.  government cost interventions – such costs are evident in the sydney and melbourne case studies in the form of landfill levies. even so, the lightweight nature of timber means that such interventions have less cost impact on disposal compared to heavy weight materials, hence reducing the amount of encouragement for reuse and recycling options.  drop-off cost or income –this issue represents the project based realisation of the previous discussion on the market value waste. here, demolishers would get paid for high-value waste, have a free drop off for low-value waste, or incur a cost for novalue waste. income from high-value timber waste is seen as offering the most potential for encouraging improved recovery. occasional factors unlike the above recurring factors, there was also evidence of occasional factors and though less common, these factors still clearly impacted in decision making as discussed below:  client environmental needs government and institutional clients were constantly cited by demolishers as requiring sustainable building practices including responsible c&d waste management. for demolishers to be compliant they are required to submit and implement a waste management plan including details on how they intend to recover and treat materials.  contaminated materials the impact of contaminated materials is not new to the literature including work by authors such as smith and bishop (2005), shibata et al. (2006), and xing and hendriks (2006). in terms of this study, the main insights revolved around lead paint coatings, asbestos cement claddings (attached to timber framing) and certain types of treated timber. the handling of such materials require specific treatment in accordance with regulatory compliance which often entails the use of manual demolition in order to appropriately manage the segregation and removal of such materials. operational approaches to demolition onsite it was found useful to create a typology of the way demolishers pragmatically and systematically responded onsite to the previously discussed drivers of demolition decision making. the three identified approaches included the “crunch and dump approach”, the “deconstructionist approach” and the “miscellaneous salvage approach”. each was found to result in different ramifications for timber waste recovery. australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 9 the “crunch and dump” approach this approach was particularly used for houses constructed with significant brick and concrete content. it appeared to be driven by the way that these heavyweight materials represent the highest cost and quantity to offload at landfill locations – thus making these materials the primary target for recycling. as a result, timber is not regarded highly in waste recovery. here an excavator with a bucket or grapple attachment is used to knock elements over and to scoop or grab materials. the outer brickwork is peeled outwards early in the process, slab on ground construction means that the concrete can be dealt with last in the process, making it possible to recover these materials without significant contamination from other materials. unfortunately, the aforementioned drivers impact to the point that timber and other remaining materials become part of mixed waste and typically go to landfill. in practical terms, this is achieved by virtue of the excavator crawling over the waste, thus leaving mixed waste that among other things was typically rich in the form of crunched and splintered timber mulch. timber is perceived as having insufficient market value to make recovery worthwhile except of use as bio-fuel, particleboard production and landscaping uses (where a number of these options were dependent on advanced off-site mechanical separation facilities). at the time of the study this was a seldom used option, but clearly had potential. other features of the “crunch and dump” approach included:  the process avoids getting involved in many occupational health and safety risks by virtue of minimising manual labour  scaffolding and other costs associated with manual demolition are avoided  the entire operation is very quick and lends itself to standardisation, systematisation and minimal project supervision the deconstructionist approach this approach makes greater use of labour to dismantle the building in an orderly way that aims to maximise timber recovery. it is generally used where timber recovery was worth more than landfill costs it is particularly suited to houses with high hardwood content, with a high resale value. the process typically starts with an internal salvage of floor timbers, bearers and joists. other internal hardware, fit-out, fixtures and cabinets are salvaged on a more selective basis, saved according to expected resale value. other items such as doors, skirtings and architraves often have limited resale value unless involving large section sizes, rare timbers or are suitable for the heritage renovation market. following the above, roof coverings are removed followed by roof framing timbers. again recovery is found to depend on resale value and items such as customised roof trusses typically go to landfill. as discussed earlier, salvage specialists often came on-site for specific aspects of the work, mainly where high-value timber is involved. as the process onsite proceed, timber is manually stacked into metal crates or strapped into slings ready for easy transport offsite. specific features of the process include:  there is considerable hand demolition involved and careful attention must be paid to site safety procedures. australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 10  risks associated with safety may act as an impediment to using this approach. scaffolding and similar safety infrastructure costs may be high  this approach is considerably slower than the “crunch and dump” approach. the extra time means that clients must be committed to a resource recovery approach otherwise the lost time may limit usage of this approach. the economic viability of this approach is dependent on resale at stable market prices in order for demolishers not to incur unnecessary risk. demolishers must be actively involved in supply chain entrepreneurship i.e. vertically integrated, symbiotic or in site centred supply chains. the miscellaneous salvage approach to housing demolition “miscellaneous salvage” is a combination of the “crunch and dump” approach plus opportunistic addition of parts of the “deconstruction” approach – primarily internal and roof timber salvage and occasional removal of contaminated materials. as discussed under the “deconstruction approach”, “miscellaneous salvage” is dependent on the market value of timber, the ease of removing it from the building and the appropriate supply chains. this is often more realistic for internal timber but not cost effective for roof timber salvage unless high-value timbers were involved. it is apparent that even though some timber is recovered, much is still sent to landfill because the entire basis of this approach is opportunistically salvage of high-value timber, rather than all timber. discussion and development of a process model this provides a framework that merges the practical and conceptual understanding of timber waste recovery in demolition processes. key drivers are identified and presented in the form of a model that summarises and orders the previous discussion, as presented in figure 1. the model incorporates the three operational approaches to demolition onsite where each carries different outcomes for timber recovery. here, the deconstruction approach was found to provide high timber recovery but is mainly used where high-value timber waste was involved; the miscellaneous salvage approach provided some recovery of high and lowvalue timber; the crunch and dump approach provided low or no recovery, and was used where low and no-value timbers were involved. unfortunately, there is a reverse order in terms of onsite productivity and as result, the crunch and dump approach is often used where timber waste is perceived to be of low value. demolishers prefer what they perceive to be the cheapest and fastest option. conclusions a process driven decision model for demolition and waste recovery has been developed. in making use of the model for the specific purposes of timber recovery, a number of conclusions can be made, each carrying implicit recommendations for future actions, as discussed below. in terms of the initiators of demolition and the potential waste created, it is concluded that there will gradually be a depleting supply of sawn hardwood waste and an increasing supply of sawn softwood and engineered timber waste. timber recovery and recycling strategies need to adapt to suit this future supply. market value is the single biggest organisational driver impacting on timber waste recovery. timber waste can vary widely in value and there needs to be an industry re-think about how to generate more value out of softwood and engineered timber waste to make them more worthwhile to recover and making timber more prominent in terms of the demolition processes selected. australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 11 figure 1: process model of demolition decision making and timber waste recovery site safety requirements may limit the viability of the deconstruction approach to demolition because of its exposure to safety risk. since this approach provides the best recovery of timber it is worth considering ways of improving and retaining its longer term viability. consistent with the previous point, there is considerable potential to extend usage of the miscellaneous salvage approach by developing excavator driven attachments to assist in organisational business drivers (in selecting a demolition process) initiators of demolition and waste created construction type (from feedstock) externally motivated drivers:  market value of recovered waste  supply chain entrepreneurship o vertically integrated chain o symbiotic chain o site centred chain internally motivated drivers:  systematic safety risk management  strategic productivity demolition feedstock  housing redundancy  land opportunity cost/ rezoning potential waste/recovery e.g. timber recovery project drivers (in selecting demolition process) occasional impact factors  client sustainability needs  contaminated materials needs demand side waste recovery markets recurring cost versus income equation  site process costs  cartage costs  government cost interventions (e.g. levies)  drop-off cost/income timber waste recovery timber waste to landfill applied response onsite deconstruction approach miscellaneous salvage approach crunch and dump approach high recovery low/no recovery some recovery mainly high-value and some low-value timber strategic engagement required to lift timber waste value australasian journal of construction economics and building forsythe, p (2011) ‘drivers of housing demolition decision making and the impact of timber waste management’, australasian journal of construction economics and building, 11 (1) 1-14 12 separating and recovering framing timber via advanced grabbing attachments, sawing attachments and bucket based sieve attachments. fragmentation and low economies of scale are likely to cause trends towards lumping different categories of timber waste together for low value uses such as bio-fuel, landscaping mulch and particleboard manufacture. this suits the crunch and dump approach and may offer a viable short to mid-term solution for low-value timber recovery but is reliant on increased development of offsite mechanised processing facilities capable of extracting timber from mixed waste. the main disadvantage of this approach is that it brings all timber down to the lowest common denominator, thus achieving the lowest rather than highest value return on the timber. a mid to long term industry goal should be to work towards retaining higher value. there is a need to re-think and evolve supply chains to more efficiently cater for timber waste of different value – especially the increasing supply of no-value and low-value waste timber. this could be assisted by developing a standard means for grading, qualifying and quantifying timber waste to assist categorised trading of recovered timber and to facilitate the highest value use of recovered timber. there is also the need for improvements in collection and aggregation points for low-value timber waste to improve economies of scale and reduce cartage costs. further, there is a latent ability to increase the efficiency of site centred supply chains by focusing on quick transactions using web based e-commerce. while the above points tend to focus on short to mid term considerations, there is also scope to consider longer term needs to rethink the design of buildings for greater reuse and deconstructability of buildings. this could be developed in conjunction with other moves towards standardised and industrialised methods of construction with the aim to provide greater re-use of timber components, greater safety in dismantling construction and the potential to attain higher value from recovered timber components. such a move would also be consistent with sustainable building practise. the scope of the model developed here is limited by the context of the research method and its application to housing demolition, but is presented in a way that makes it testable and usable beyond these limits including application to other building types and building materials. with this in mind, future research may confirm the validity of the model across a broader range of demolition projects and use it as a tool for understanding and diagnosing impediments to the recovery of different 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(2008), case study research: design and methods, thousand oaks, california, sage publications the australian journal of the australian journal of construction economics & building page (i) editorial once again it’s a pleasure to commend an edition of the australian journal of construction economics and building. this, second edition in year 2001, marks a successful first year for the journal, and if this edition receives the same type of feedback as did the first, then we will be well pleased with it’s reception. the balance between the professions has been comfortably maintained, and provides what we believe is a wide breadth of interest to readers. the content on this occasion, maintains a healthy international focus, yet has a healthy selection on australian themes. the paper by ai-lin and runeson on the subject of market differentiation is particularly recommended with its’ theme of minimising risk by diversification into new markets being particularly timely given the state of the current economic cycle. since the appearance of the first edition of the ajceb, our perception of the world and the risks that we run in everyday life has altered substantially with the occurrences in new york city on september 11 th of this year. much of our concept of values and risk in everyday life is based on the assumption that things will remain substantially similar to the way we find them now. indeed the professions that we serve tend to assume that risks traditionally associated with the construction, operation and maintenance of built facilities are constant and predictable. we now face an epoch in which even such a simple underlying principal may be called into question. this could create a revolution in our professional lives. the papers in this edition of the journal have been produced in the lead-up to the terrorist attacks in the united states. i imagine that in the editions during the coming year, potential authors may well consider the changed landscape that we may now be working in. whilst the headlinegrabbing outrages are visible it is clear that we are vulnerable in many more subtle ways as well, and that disaffected people have discovered that it is easier to destroy than it is to build. much of the world is now considering whether it is possible to change our philosophy of building, and whether we should now pay a higher price so as to give our societies a little more certainty about the lifestyles we have adopted. it would appear timely for us to consider the implications, both in australia, and worldwide. the editorship of the journal will rotate amongst the universities in australia, and i am pleased to announce that from january, associate professor craig langston of the university of technology sydney will become editor in chief for a period of twelve months. there will again be two editions during the coming year. it merely remains for me to offer thanks to everyone who has been concerned with bringing the journal into being, especially to maureen everett who has regularly performed wonderful charettes that have turned all of our good intentions into finished articles. alan jeary editor-in-chief december 2001 the australian journal of construction economics and building issn 1445-2634 first issued august 2001 building maintenance management in malaysian university campuses: a case study building maintenance management in a malaysian university campuses: a case study olanrewaju abdul lateef, mohd faris khamidi and arazi idrus, (department of civil engineering, universiti teknologi petronas) abstract university buildings require maintenance in order to create a conducive environment that supports and stimulates learning, teaching, innovation, and research. the prime objective of maintenance is to ensure, as far as practicable, the continued peak performance of the building throughout its design life. this paper seeks to report the maintenance management system of a university institution in malaysia. primary data was gathered through the analysis of a case study. the objectives of the case study are to identify, describe and assess the maintenance management system used by the university. the major conclusion drawn from the case study was that although university building maintenance practices are corrective and cyclical there is a lack of a comprehensive maintenance management framework that guides the decision-making processes. the case study also revealed irregularities in the university’s maintenance management system. keywords: service delivery, university buildings, maintenance management, maintenance, malaysia introduction maintenance means different things to different people. the term has been defined and redefined by different authors. however, the various definitions suggest that maintenance revolves around building care. nevertheless, in this paper maintenance is defined as the required processes and services undertaken to preserve, protect, enhance and care for the university buildings’ fabrics and services after completion, in accordance with the prevailing standards to enable the building and services to serve their intended functions throughout their entire life span without drastically upsetting their basic features and uses. university buildings are a factor of production; they are used to produce future leaders, captains of industry, entrepreneurs, scientists, engineers and managers. a building is an asset whose value changes in accordance with the quality (and quantity) of maintenance invested in them. this paper illustrates with a case study how a university organization manages its maintenance services in malaysia. the word “model” in the research is synonymous with the decision-making framework or guidelines for managing university buildings maintenance. thus, a university building maintenance management model means a decision-making framework for the maintenance of university buildings. in this context, the model consists of personnel, procedures (and materials, tools, equipment and facilities), activities, tasks and guidelines. this paper proceeds in section 2 to reviewing the existing literature on building maintenance procedures in malaysia. in section 3, the research design and methodology are described. the fourth section of the paper introduces a case study in which the maintenance management of a university is assessed, evaluated and discussed. this analysis provides insight on various procedures of the university building maintenance system. section 5 presents the summary of the observations made on the case study. the concluding remarks are provided in section 6. literature review on university building maintenance management in malaysia education is a very significant and integral part of the malaysian strategic thrust. the economy of malaysia has since independence been planned on five year strategic plans. in each of the plans, the education sector features prominently in terms of value and policy australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  77 implementations. there has been an expansion of more than 420% in allocation to the education sector for the last 20 years. see table 1 for the federal development allocations to the education sector from 1990 to 2010. the increase in the allocations is part of the government’s commitment to improve the performance of the education system in order to produce human capital with intellectuals capable of competing locally and internationally (ministry of higher education, 2006). the allocation to the education sector 2.1% of the gdp (ministry of higher education, 2006). (rm million) sectors 6mp 7mp 8mp 9mp education 7,469.8 17,948.5 18,660 40,356.5 training 615.4 2,237.3 4,000 4,792.6 total 8,625.2 20,185.8 22,660 45,149.1 table 1 development allocations for the educational and training sectors (government of malaysia, 1996, 2001, 2006) in tandem with the expansion in the allocations to the education sector at all levels, the allocations at the tertiary level are also increasing substantially. as an illustration, under the eighth malaysian plan, the sum of rm8, 900 million was allocated to institutions of higher learning out of the rm18, 660 million allocated to the education sector (government of malaysia, 2001) while under the ninth malaysian plan, allocation to institutions of higher learning was increased to rm16,069 million (government of malaysia, 2006). this represents an increase of more than 80%. as a percentage of total public expenditure, 4.4% was attributable to the higher institutions of learning (ministry of higher education, 2006). higher education in malaysia is both a source of employment as well as source of foreign exchange and it is gradually becoming a major contributor to the economic sector and becoming a strong export source (ministry of higher education, 2006). malaysia is now an educational destination to nationals from different countries particularly those from africa, the middle east, pacific and other asian countries. malaysia’s quest to transform into a knowledge based economy (k-economy) where science, technology, and engineering are integrated into the production process. this is also where creativity, imagination, and design capability are embodied in well-educated skilled workers who are the main source of national prosperity and wealth is not open to compromise (government of malaysia, 2006). in order to achieve this objective however, the assets of the universities must be adequate in all respects. university buildings constitute a significant part of the assets. these buildings and the associated engineering services require maintenance. university buildings are procured to create a suitable, conducive and adequate environment that can support, stimulate and encourage learning, teaching, innovation and research activities. a failure in the supply of these essential services is a loss in value of the building to the university institution, the community, the students, staff and other stakeholders. recent studies (housley, 1997; fleming and storr, 1999; amaratunga and baldry, 2000; price, matzdorf, smith and agahi, 2003; green and turrell, 2005; leung and fung, 2005; wong, fellows and liu, 2007; fianchini, 2007 and lavy and bilbo, 2009) have affirmed the positive correlations between performance of educational buildings and quality of education. it is through the university buildings, that future leaders, captains of industry, entrepreneurs, professionals and scientists are produced (mat, et al., 2009). universities these days use the nature, design and condition of their buildings to entice students. in malaysia, universities that in the past relied on the applications sent to them through the ministry of education, now use their buildings as a variable to attract students (rohaizat, 2002 and yosuf, ahmad, tajudin and ravindran, 2008). constructing new buildings helps to upgrade educational facilities and provide a better quality of education, but it is also necessary to maintain the existing buildings to an australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  78 acceptable performance standard that is capable of facilitating the transfer of knowledge and other academic activities. thus, with any inadequacy of the building facilities, the prime objective of the university will be difficult if not impossible to achieve. therefore, a well maintained building is critical to delivering university core business objectives. while there is a concerted effort in increasing the allocation for the maintenance of public infrastructure assets and facilities, there is also a corresponding increase in the maintenance of university buildings. under the sixth, seventh and eighth plans, allocation for maintenance and upgrading as a percentage of the development allocation was 0.2% under each of the plans, while under the ninth plan, the allocation increased substantially to 0.5%. this marked an increment of 150%. in financial terms, the allocations increased from rm 101 million under the sixth plan to rm 203.2 million under the seventh plan. this is an expansion of about 100%. further, there was some 6% expansion under the eighth plan compared to that of the seventh plan. however, under the ninth plan, it further increased from the rm 214.5 million to rm 1,079 million, an expansion of some 403%. in addition, the government has pledged to give more attention to the maintenance of buildings and other infrastructural facilities. however, there is no comparable numerical data on the exact allocations to the maintenance of university buildings, however based on inconclusive data obtained from the ministry of higher education, it suggests that maintenance expenditure has expanded by nearly 85% from 2004 to 2008. for instance, expenditure on maintenance was nearly rm 340 million in 2004 while it increased to more than rm 600 million in 2008 even though the figure for 2008 was the same as july 2008. see table 2 for the breakdown. however, discussions with those concerned in the management of university building maintenance revealed a concern about the amount of funding universities wish to have compared to the amount of funding they are actually receiving. while there is no comparable numerical data on private universities’ investment on maintenance, it would not be difficult to conclude that they also spend substantial parts of their expenditure on building maintenance just like the public universities, if not more. (rm million) however, it is doubtful whether a solution can be found with increases in the allocation to the maintenance sector, but a proactive and systematic approach to maintenance will go a long way in achieving best value for money invested. it will not be very difficult to argue that maintenance as a technique or science is not the problem per se; rather it is the management of the maintenance service. maintenance management seeks to plan, control, coordinate and organize maintenance activities focusing on efficient allocation and utilization of resources in order to improve the value of a building. in other words, it is procedure and process that is used to achieve effectiveness (increase user satisfactions) and efficiency (with optimum resource) in service. proper maintenance management has effect on the reliability, safety, availability and quality of the building. however, efficient and effective maintenance depends on the availability of information on the criteria that influences university building maintenance, criteria that influences users’ satisfaction in university building, nature of defects in university buildings and maintenance performance metrics for the university buildings. with this information, university building maintenance would be more efficiently and effectively initiated and implemented as compared to how it is currently executed. year expenditure rm 2004 338,529,567 2005 470,480,191 2006 508,921,700 2007 580,491,662 2008 619,229,160 total 2,517,652,280 table 2 expenditure on maintenance of public university buildings, (source: adapted from data obtained from the ministry of higher education, malaysia) australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  79 research design and methodology the research integrates a literature review and a case study. while the literature review provides an overview of building maintenance practices, the case study provides qualitative and contextual data on the building maintenance procedures of a typical university organization in malaysia. there are various methods to collect research data. the method to use for the research depends on the nature of the information required and other prevailing circumstances pertaining to the topic and the study area. the case study approach is a very useful tool to collect detailed and contextual information. it gives an opportunity to delve into one aspect of a problem in more detail within a limited timeframe (bell, 2005). according to bell (2005), the case study approach seeks “to put flesh on the bones of a survey research. much of the information for case study strategy is derived from documentation and archival analyses. for instance, documents that could be analysed for maintenance management include periodic reports, minutes of meetings, specialists’ contractual agreements, previous maintenance records and complaint records. however, a major shortcoming of the case study approach is that of generalization of the findings from the particular case studied to other cases even though they may be similar. critics of the approach also believe that there is always a tendency for data distortion since there is no yardstick for data comparison and critics also argued that the approach is very selective (bell, 2005). however, proponents of the case study approach disagreed arguing that the extent of such generalizations depends on the similarity of the case, and the methodology employed in data organization, collection and analysis (bell, 2005). in fact, there is sufficient evidence to suggest that the findings of the case study can be generalized. according to komu (2008), it is not the sample size in research that determines the scientific rigor but the consistent and systematic approach and fitness for purpose that matters. mcniff (1992) also opinioned that, although the case study approach is time consuming, the data obtained is accurate and representative of the case studied. in using the case study approach, various techniques including the interview, survey, observation and experimentation can be used. through the case study approach, the corporate structures, and the information management of the organization under study, can be well understood (barker, 2005). therefore, considering the nature of the information required vis-à-vis the current arrangement of the organization that is studied, it will not be difficult to conclude that the case study approach is appropriate for this study. following, naoum’s classification of the types of case study design; this particular case study is explanatory in nature (naoum, 2007). this is because it is the intention of this study to explore the maintenance management procedures of the university organization in malaysia. the relationship for this study is shown in figure 1. figure 1 a schematic diagram showing the relationship between maintenance management systems and poor service delivery, poor user satisfaction and maintenance backlogs case study of university building maintenance management this section illustrates how a university organization manages the maintenance of their buildings and engineering service maintenance. in this particular university, the property and maintenance management department (pmmd) is responsible for the management of all the university’s physical assets. the mission of the pmmd, as contained in the university’s guidelines, is to deliver comprehensive property management and maintenance services to support the university’s vision and mission as well as its hse policy. the maintenance unit is responsible for maintenance of buildings, engineering services and the landscaping. the unit is also responsible for the provision of management services for minor refurbishment. is related to poor service delivery poor user satisfaction maintenance backlogs maintenance management system australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  80 the case study commenced on 26th of march, 2009 and was completed on 2nd of april, 2009. the maintenance organization is headed by a general manager, who is assisted by five executive officers one each for the mechanical, electrical, civil, property and landscaping units. the property executive is responsible for the general management of all the university’s physical assets. the other four executive officers are responsible for the maintenance of the building structures and services and the landscaping. however, this paper is only concerned with the electrical, mechanical and civil engineering works. the services provided by the other two executives are beyond the scope of this paper. each of the executive officers possess a bachelor’s degree in their area of specialization. none of them possess a postgraduate degree. they have being working in those capacities for a period ranging from four to ten years. each of the maintenance executives were assisted by a varying number of technicians. some of the technicians hold diplomas while the others only hold secondary school certificates. however, in the case of the electrical unit, in addition to three assistants, there were also clergymen. administratively, the clergymen are superior to the technicians. table 3 shows the staff strength of the department. see also figure 2 for the organizational chart. figure 2 structure of the organization chart (source: adapted from chart obtained from pmmd, 2008) position no percentage general manager 1 5.6 electrical executive 1 5.6 mechanical executive 1 5.6 civil executive 1 5.6 technical assistants 11 49.8 clergyman 2 11.6 landscape architect 1 5.6 property manager 1 5.6 clerk 1 5.6 total 18 100 table 3 work force / strength (source: analysis of data obtained from pmmd, 2008) general manager mechanical executive electrical executive civil executive property executive landscape executive clerk assistant assistant assistant assistant assistant assistant assistant assistant assistant clergyman clergyman australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  81 the case study was initially designed to be conducted in the form of a focus group where all the maintenance executives and the researchers would attend. however, the attempt failed due to the executives’ schedules, it became impossible to have them together in a forum. as a result, it was concluded to meet with them one by one for semi-structured interviews. altogether, there are three members in the research team, with one main researcher. before the main case study was conducted; the researchers’ organization formally wrote a letter to the maintenance organization asking for their corporation on the research. they were assured of high confidentiality with all information provided to the researchers. before the interviews, suitable dates were agreed with each of the executives, this was to avoid or reduce the likelihood of not meeting with the executives at the appointed dates. beside the interviews, there were a series of follow-ups for further clarification through sms, telephone conversations and e-mail. in the semi-structured interviews, the interviewer asked questions pertaining to the topic under investigation and then recorded the respondents’ responses. based on the responses, supplementary questions were asked where necessary. this involved prompting the interviewee (fellows and liu, 2008). on average, the interviews took about 45 minutes with each of the respondents. these were apart from the “casual” discussions carried out prior to the formal interviews. the executives were asked a set of pre-determined questions on the maintenance management procedures they were using. however, they refused to provide answers to some of the questions that were addressed to them. they considered such information as sensitive and personal. for instance, when they were asked how much do they receive per annum for maintenance, the researchers were directed to the university finance unit. however, even though an effort was made to contact the finance unit, they were unable to provide the required information. according to them such information cannot be divulged to an “external party”. they submitted that such information was strictly for the university management as it was proprietary or classified information. the major pre-determined questions that were addressed to the respondents included: • what is your current position? • how long have you been working in this position? • what is the size of the built up area of the university? • what is your approximate annual budget for maintenance? • how do you estimate your annual building maintenance budget? • is your budget allocation sufficient for the complaints that you receive? • in case you run into deficit, how do you make it up? • which of the maintenance approaches do you use? • have you conducted any user satisfaction surveys? • if so, what was the outcome of the survey? • how do you think the current maintenance management system can be improved? for purposes of confidentiality, the identity of the university was not given while other information provided was factual. any other information that could reveal the identity of the university was not mentioned. the university integrates old and new buildings and has been operating in the old buildings whilst awaiting the completion of the new buildings. the old buildings previously served as the satellite campus for a different university. prior to commencing operations in the old buildings, there were mass refurbishment, conversion and maintenance activities. this was to enable the buildings and the associated facilities to perform their intended functions. while the old buildings are about 25 years old, the new ones are less than ten years old. the new buildings were constructed and equipped with state-of-the-art material and equipment. there are about 7000 students comprising both postgraduate and undergraduate students on the campus and about 300 academic and nonacademic staff. more than 90% of the students live on campus. australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  82 based on documentary and archival analyses it was found that the buildings cover about 40,000m2 in built-up area, altogether comprising 111 buildings of various sizes with different functions. it was also gathered that there were 34 lifts in the university that are concentrated in the academic, laboratory and administrative buildings and there are 149 air-handling units in addition to about 700 split air conditioning units. generally, all maintenance work, whether it is electrical, civil or mechanical in nature, is classified into major jobs and minor jobs. small contractors operate on a price agreement basis (i.e. electrical maintenance price agreement, civil maintenance price agreement and mechanical maintenance price agreement). under the agreement, a contractor will quote a unit price for specific items of work that will be executed in one operating year. for instance, it will be agreed on how much it will cost the contractor to fix a new bulb or to repair a door lock. during the specified period, a contractor cannot ask for an increase in price and neither can the university demand a price reduction. at the end of each operating year; when the agreement expires, tenders will be open for suitable contractors to bid for the works from which some will be selected based on their quoted price. the existing contractors can also participate if they so wish. contractors are selected on the advice of the respective executive officers. for example, the electrical executive will vet the electrical contractors’ quotations to recommend the selection of a contractor to the general manager. the major works are the types of works that are managed using other strategies like the traditional procurement strategies. for instance, work will be advertised through various means, inviting contractors to bid for the work and the tender will be awarded to a contactor(s) that is/are selected. so far, the maintenance organization has not used modern procurement systems like public private partnership in their building and services maintenance. for operational purposes, the maintenance department has categorized the buildings into administrative buildings, libraries, staff accommodation, offices and hostels, laboratories, workshops, and other supporting facilities. the building maintenance management revolves around a cyclical and corrective maintenance program. on average, for the last five years, the university spent rm15 million on the maintenance of constructed facilities each year. the official working hours are 8.00am to 5.00pm daily, monday to friday. the department does not open for business on saturday and sunday and all public holidays. all maintenance complaints that arise on saturday and sunday are attended to on the next working day. complaints on maintenance are lodged through the warden for each of the hostels while complaints concerning the other buildings are lodged through the technicians in the control room by the users (i.e. lecturers and laboratory attendants). the control room is located in the administrative buildings. if say, there is a problem in a classroom, the lecturer or whoever is in charge of the classroom will call the control room. depending on the type of complaint, the technician will visit the place and issue a docket. if it is an electrical failure, an electrician will inspect and issue a docket that will be passed on to the head office for necessary action. students are not allowed to make complaints directly to the maintenance unit. instead, students will have to lodge complaints through the warden and the warden, in turn, lodges the complaint to the respective executive at the head office. for instance, whenever there is a complaint from the user, the warden will fill in a docket and send it to the maintenance department. a booklet of dockets contains 100 complaint sheets. the maintenance department will, in turn, send it to a contractor to submit a quotation. the docket contains the complainant’s name, a description of the complaint and location of the defect. usually, it takes a minimum of 24 hours for the maintenance department to settle the work with the contractor concerned. complaints received after 5:00pm are directed to the assistant engineers at the control room and will be treated on the following working day. the clerk receives all dockets daily and sends them to the respective executive. all work including filing and sorting are done using traditional computer programs like microsoft word and excel. maintenance complaints are responded to based on their urgency. table 4 describes the response time for the different complaints categories. the response time is the time that the australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  83 maintenance team takes to respond to the call for maintenance and not for completing the task requested. the priority p1 is the category of work that will cause loss of business to the university. for instance, maintenance that will disrupt or disturb classes, and this category of work is attended to within 24 hours. see figure 3 for the complaint reporting procedure. the figure shows the activities involved from the time that a complaint is received to when the job is completed. all complaints are made by phone, email, or their combination. table 4 response time (source: adapted from data obtained from the pmmd, 2008) specifically, electrical maintenance procedures comprise of corrective, inspection and statutory maintenance. statutory maintenance is the type of maintenance that arises as a result of a law governing the performance of buildings and services in malaysia (i.e. electricity act 1990 and electricity regulation 1994). it is done for calibration of protection relay. protective relays are used to detect faults in major equipment. it is conducted on equipment every two years. on average, the electrical unit receives 30 complaints daily, albeit with a slight increase on mondays, apparently because of the backlogs of complaints from the previous saturday and sunday. the electrical unit has one electrical engineer, two clergymen and three assistant technicians (figure 1). more than 95% of the electrical work is out-sourced. the in-house operatives only entertain minor works like changing of bulbs and sockets. the mechanical installations are maintained correctively, preventively and statutorily. the preventive maintenance involves inspecting the equipment bearings, greasing, checking power load for motors and cleaning the filters of the air-handling units every two months. however, apparently due to the age of the equipments, the mechanical equipment in the old building generates more complaints than in the new buildings. all maintenance that relates to the mechanical unit is 100% outsourced unlike in the case of the electrical work. work that falls under the civil unit includes buildings, water supply, sewage, piping, pest control, general building cleaning and sanitary / hygienic services. maintenance work is mainly corrective and cyclical. more than 95% of the work is cyclical and corrective based maintenance. work categorized as cyclical maintenance includes painting and the changing of door locks. walls are painted every five years. however, this is subject to the availability priority categories response time priority 1 (urgent) serious safety hazard / incident irreplaceable / catastrophic loss to the university business operations, teaching and research serious asset damage (e.g. fire/ major leaks which may include water, gas widespread loss of power within 15 minutes (during normal working hours) within 30 minutes (after working hours) priority 2 (normal) low risk safety hazards malfunction of equipment asset requires maintenance – not urgent minimal risk to teaching and research operations within 1 hour (during normal working hour) within 2 working days (after working hours) priority 3 (cyclical) routine maintenance program work work scheduled as per agreement with customers no specified response time jobs in these categories are usually reserved for future execution, the duration of which depends on the volume of works and availability of budget. it could take a year or more australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  84 of funds. the unit entertains about 30 complaints daily and the most frequent complaints include clogging, problems related to water supply, safety issues, doors and door locks. likewise, there is an increase in complaints on mondays. interestingly, fewer maintenance problems emanate from the old buildings than from the new buildings. arguably, a likely reason for this is the quality of materials and workmanship. for instance, the wood used for the construction of the old buildings was of high quality compared to the wood used in the new buildings (with specific reference to the hostels). the big contractors execute works like renovation, major repairs, and the small contractors do alterations and small jobs like the minor repairs. figure 3 maintenance work reporting procedures (source: adapted from the data obtained from pmmd, 2008) summary and observations in summary, based on the case study, the following observations are made: start maintenance complete work work request closed complaint received by warden or technician at the control room docket sent to maintenance department by the warden (s) or technicians maintenance department invites quotation from the contractor inspect and certify yes no australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  85 1. the maintenance management systems are not it based. the computerized maintenance management system (cmms).is not used. all works are done using the traditional computing process through microsoft word and excel (windows 97). the cmms is a software package that keeps a computer database of information of the organization’s maintenance operations. it enables the maintenance organization and their customers to track the status of maintenance work on their assets. essentially it facilitates the decision making process of assets maintenance. tasks that were traditionally done through paper works are done using the software. the traditional method wastes a lot of time, effort and materials. according to ng, gable and chan (2002), time may be wasted on iterative data gathering and service delivery. services including data analysis, tracking of complaints, and workforce distribution can better be handled by a cmms which can lead to tremendous savings in money and time. 2. the current maintenance management system is mainly corrective and cyclical. these approaches to maintenance have been criticized for various inadequacies. they lead to maintenance backlogs and poor user satisfaction. 3. there are no clear key performance indicators. thus, control functions cannot be optimized. in this situation, it will be difficult to make improvements since improvement in user satisfaction and productivity cannot be measured or monitored for necessary improvements. there is the need for a mechanism for measuring performance. the maintenance organization needs to develop or adopt a performance metric that could be used to benchmark their service with what other similar organizations provide to the customers for a meaningful comparison and for improvement. 4. the maintenance department is understaffed and the staff are also inadequately qualified. perhaps it could be expected that professionals including architects and quantity surveyors be employed to advise on aspects that relate to their specialization. for instance, a quantity surveyor could provide professional advice on alternative procurement strategies and make decisions on contractual matters while the architect is also in charge of the building works. presently, the building works are categorized under the civil engineering works. the person in charge has his background in civil engineering. although, during the interview, he claimed to possess the required knowledge and expertise to manage the maintenance of buildings. however, this may not be entirely correct withstanding his working experience. however, much (nearly 90%) of the maintenance complaints he received relate to building and not civil engineering works. there is duplication of responsibilities particularly in the electrical unit; the function of the technician and the clergymen is not clearly defined. other than the fact that a clergyman is technically superior to the technician in rank, their functions overlapped leading to duplication of responsibilities. the clergymen perform some of the functions of the electrical engineer while also giving instructions to the technicians on certain tasks. from observation there is no need for the middle (clergyman) men. 5. the maintenance is budget-driven rather than needs-driven. maintenance is initiated subject to the availability of funds and in many cases cyclical maintenance is put off until such time that funding is available to perform the tasks. 6. although the funding allocated to maintenance may not be sufficient, it is equally clear that the available budget is not effectively or efficiently managed. thus, maintenance cannot be blamed but it is the management system that should be blamed. for instance, even if all the work is carried out correctively, it still requires some more systematic and cost-effective approaches than those currently used. 7. the outsourcing approach is very rudimentary and haphazard. the contractors do not even have offices on the campus. they only come when there is work for them to do. on the one hand, there are some (martin, 1997 and campbell, 1995) who believe that organizations like universities have nothing to do with maintenance since building maintenance is outside the scope of their core services and, therefore, they should outsource such facilitative functions. on the other hand, there are also quite a australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  86 number of authors (sherwin, 2002) who do not entirely agree with them. the opponents of the strategy believe that even though some aspects of maintenance could lend themselves to outsourcing, not all work can be outsourced. shortcomings of outsourcing include loss of skills, loss of control, and exposing the organization to threats by suppliers of maintenance services (shohet et al., 2003). from the study, it could be inferred that outsourcing of the maintenance function reduces maintenance to corrective maintenance and increases maintenance backlogs. there is also some organizational political-proprietary information that the university would not like to expose to external parties. tsang (2002) warned against organizations outsourcing facilitating functions like maintenance. he also warned organizations not to consider outsourcing activities that are critical to their core activities. no doubt building maintenance is very critical to the continuous existence of a university. however, decisions on what to outsource should be based on objective and quantitative facts even though a situation where a university outsources about 95% of its services may not be entirely healthy for any organization. in the opinion of sherwin (2002), it is still too early to say outsourcing maintenance services is an alternative approach to maintenance service delivery. times have changed. it is high time university organizations accept and take care of their buildings (vis-à-vis the maintenance practices) efficiently. it is no longer acceptable for a university to invest only on improving methods of teaching and learning without improving other assets. universities should invest on training their maintenance staff as they would academic staff. it is a failing on the part of the university management to consider the management of their buildings as non-core activities. it is contended that maintenance is also a core activity of the university organizations, since without it the university would not survive. maintenance is inevitable in the building life cycle, thereby assuming a strategic position and function in the building performance. for organizations that pay millions of dollars to acquire the building facilities to claim that it is not their core function is a failing on their part. 8. universities must take care of their interrelated assets namely; buildings, technology and human resources for better performance, a failing in one will also affect the others. 9. the reporting system is fragmented and complicated; there is a need for a single point of contact to report all problems. fragmentation will encourage delays and increase maintenance costs unnecessarily and worsen building users’ frustration and disappointment. 10. not working at all on saturdays and sundays is another serious inadequacy from a management perspective. provision should be made for technicians to be available to assist students in the hostel during the weekend. this would also reduce maintenance backlogs on the following monday or the next working day. in fact, it is apparent on these days that many students only have the time to report complaints because often there are no scheduled classes on saturdays and sunday. except for some of the postgraduate students, most of the students spent most of their time in classrooms, laboratories or and libraries monday to friday with only saturday and sunday left for defect identification days. 11. the technicians were merely performing clerical functions, leading to under utilizations of staff. they perform administrative functions such as receiving calls on maintenance requests; doing paper work and collating data to be delivered to the respective maintenance executive. the technicians ought to be performing technical tasks. the job of the clerk is to perform the secretariat duties. 12. there is no feedback mechanism on users’ satisfactions. the maintenance organizations of universities seldom carry out user satisfaction surveys. this is necessary as they can contribute to efficiency. it is only through user satisfaction evaluation that their requirements can be made known. users are the direct beneficiaries of the service. they are the only people who can define the quality of the service they are receiving. getting them involved will not only result in australasian journal of construction economics and building lateef,  o  a,  khamidi,  m  f and  idrus,  a  (2010)  ‘building  maintenance  management  in  a  malaysian  university   campuses: a case study’, australasian journal of construction economics and building, 10 (1/2) 76‐89  87 commitment to efficient services but also influence the service delivery. apart from the fact that users create their value systems, they have the ability to bring their requirements to notice and to take action if their requirements are not fulfilled (see soderholm, holmgren and klefsjo, 2007). users need to be questioned on the services they are provided with. the findings of the evaluation or survey could be the basis of meaningful performance measurement and management. 13. the dockets are haphazardly completed. for instance, sometimes the docket is filled in prior to the commencement of the repair, while it is sometimes filed after the works have been completed leading to inconsistencies. in a book of dockets, often one could find dockets issued for work done in january preceded by those issued in march. as a matter of fact, the information in the docket is not reliable and not all the works in the docket are executed or implemented. it is therefore difficult to rely on the information in the docket to track complaints, assess the size of work done and other decision making information. concluding comments the paper reviewed related literature and presented the outcome of a case study on university organization. the data obtained through the case study revealed a number of shortcomings with building maintenance management in a university organization in malaysia. despite the significance of maintenance management, many academic organizations view building maintenance and building maintenance management as a burden rather than as a value added strategy. hence its current status in university management processes. maintenance management is not regarded as part of the top management function or duties but as an operational function. it only receives management attention when everything has gone wrong. ultimately, users are not satisfied with the quality of the service they are receiving leading to increased maintenance backlogs. the case study also shows that the major reason why the university focuses more on corrective maintenance was a result of budget constraints and the lack of a competent workforce. deferring maintenance is not effective as the component will continue to degenerate until such a time that the building could be unsafe for use. even if it is repaired before this critical stage, the amount of work involved will have been more and the users will be frustrated with the outcome of the services. building users, as the entity or group of individuals or the organisation, are interested in the adequate functioning of the building, a failing in which increases their dissatisfactions. they are affected by the performance of the building. the inadequacies with the maintenance of the system of the university suggests that there is a need for a maintenance management framework capable of guiding maintenance organisations to ensure that whenever maintenance is initiated and implemented it is consistence, systematic and holistic. building maintenance management involves the establishment of a framework for the maintenance of buildings and its associated services and the upkeep of the building performance. although the conclusion drawn is based on a case study, the situation is likely to be similar in most university organisations. references barker, s. 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(2002) ‘strategic dimensions of maintenance management’, journal of quality in maintenance engineering, 8 (1), 7039 building maintenance management in a malaysian university campuses: a case study abstract introduction literature review on university building maintenance management in malaysia research design and methodology case study of university building maintenance management summary and observations concluding comments references labour productivity in the new zealand construction industry: a thorough investigation van tran, (the university of queensland, australia) john tookey, (auckland university of technology, new zealand) abstract productivity growth is strongly correlated to economic growth and increases in welfare. this fact also holds true at the industry level and is particularly true in the nz construction industry, since productivity growth in this sector may have significant effects on the affordability of housing in the country. in recent years construction in nz has been subjected to a series of reports that have either highlighted „failure‟ to improve productivity or have exhorted the industry to improve its „poor performance‟. however thus far little by way of analysis has gone into the productivity figures that have been quoted, nor has much been done to explain and justify if or why these figures are correct or incorrect. this research seeks to deconstruct construction productivity figures in nz and explain the patterns over recent years of „poor performance‟ in comparison with other industries. i will examine the nature of the nz construction industry and analyse the historic statistics related to its labour productivity. this will provide an overall understanding of the sector as well as those extraneous factors that may have significant influences on the nz construction sector. the research found that while factors influencing inputs of labour productivity measure such as labour and material costs remained stable, factors impacting the corresponding outputs such as house and land prices, value of work in non-residential and infrastructure construction grew significantly between 1997 and 2007. given the positive skewing effect of standard economic indicators (inflation etc) on construction labour productivity figures, the relatively poor performance of construction is worrying for the industry. the paper concludes by demonstrating labour productivity in construction is significantly worse performing than previously suspected. keywords: construction, labour productivity, deconstruction, industry performance introduction productivity addresses the question of how efficiently resources are used in the production of goods and services (holzer & nagel, 1984). it is the key determinant of value, and all other factors that influence value (quality, service, price), of these goods and services. productivity is one of the important factors that have significant impacts on economic growth, standard of living and increases in welfare (heap, 1992; sobhani, 2008; black et al, 2003). at company level, improving productivity is fundamental to survival of firms because it means that they can meet their obligations to workers, shareholders, and governments while remaining competitive (or even improve competitiveness) in the market. at industry level, productivity improvement is essential for the health of the whole sector, as it is seen as the only valid way to pay for increased standard of living (heap, 1992). in the context of the construction industry, productivity improvement is particularly important because inadequate increases in productivity will mean shaper rises in construction costs, with adverse social implications and declining work for the industry (ganesan, 1984). in new zealand, this holds true because productivity growth in the construction sector may have significant effects on the affordability of housing in the country (davis, 2007). however, it has been acknowledged that productivity, especially in the construction industry, has always been very difficult to measure and control (ganesan, 1984; motwani et al, 1995). construction tasks are generally complex and inter-dependent such as those in major projects; and are hard to quantify when australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 42 assessing and measuring productivity. this technical difficulty is compounded by the fact that the sector is influenced by external factors such as economic situations (recession or boom periods), political changes (government commitments or effects of legislations) or innovation. therefore, productivity measures must be treated with care (heap, 1992). in recent years, a number of studies have been commissioned to investigate productivity trends, especially labour productivity, in the nz construction industry. the main reason for this specific consideration is the nature of the industry. construction is generally a labourintensive industry and improving the productivity of labour constitutes a prime target. data required for the construction of labour productivity index series are more readily available than other series. capital productivity series are hard to obtain. statistics new zealand (snz) publishes labour data quarterly, whereas the capital series for construction is given yearly. although these studies vary significantly in details and depth, they nonetheless highlight some worrying signs for the sector. growth of labour productivity in nz construction has been low and productivity level has declined over time. in order to address this issue formally, a productivity taskforce made up of industry and central government leaders was established in 2009 to overlook and develop:  a sector wide skills strategy  an improved approach to the procurement of construction projects this research project was initiated from the lack of understanding of data presented in fig. 1. the objective of the research is to deconstruct “broad brush” statistics into a more meaningful representation of labour productivity in the nz construction industry. without clear delineation between industry section and representation of external impact factors, nz construction‟s “productiveness” cannot be fully understood and therefore may impede the effort to improve the performance of the industry. this research serves as the foundation for further investigations into this subject matter in new zealand. figure 1 labour productivity figure research aims and objectives productivity studies into nz construction have either highlighted „failure‟ to increase productivity or have exhorted the industry to „improve‟ its „poor performance‟ (black et al, 2003; davis, 2007; janssen et al, 2008; taskforce, 2009). little by way of analysis has gone into the productivity figures quoted, nor has much been done to explain and justify if or australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 43 why these figures are correct or incorrect. further, the problem with productivity measurement is a significant issue in nz. currently no official measure of labour productivity exists (davis, 2007). a problem compounded by other extant problems such as the availability and quality of data. previous productivity studies conflate statistics. this is to reduce the complexity of their explanations in order to motivate construction to redouble its efforts to innovate and improve performance. this is a conceptually difficult position to sustain. there would appear to be a tendency for reports citing such limited statistical evidence as those in figure 1 to seek to push an agenda onto the construction industry, and indicate a willingness to selectively cite statistics outside of context. the research reported here sought to investigate these issues and thus “unpack” the complex problem of labour productivity in construction. extraneous factors which may have significant influences on labour productivity, but have been largely ignored or overlooked in previous studies, such as land/house prices; inflation and associated costs (labour, material) are incorporated in order to establish a more complete context intended to be useful for further investigation into the performance of labour productivity in nz. the formulated objectives for the research are stated as follows: i) to re-examine existing studies on labour productivity in nz construction; ii) to identify factors which have significant effects on construction labour productivity; iii) to set up a platform for future research in this area in nz defining productivity productivity was formally defined by the organisation for european economic cooperation as: “the quotient obtained by dividing output by one of the factors of production. in this way it is possible to speak of productivity of capital, investment, or raw materials according to whether output is being considered in relation to capital, investment or raw materials, etc”. it must be noted that productivity is a relative concept with comparisons either being made across time or between different production units. productivity is represented by: where unit of measurement of both outputs and inputs is given in dollar values (nzd$) or in any other relevant unit. index number methodology a productivity index is defined as the ratio of an output index to an input index, that is: where is a labour productivity index, is an output index and is a labour input index. each index represents accumulated growth from period 0 to period t. some of the most common index formulae (laspeyres, paasche, fisher and tornqvist) are included here. suppose information on prices and quantity of i outputs is available for period t = 0…t. denote the price and quantity vectors as and respectively; the laspeyres ( ), paasche ( ), fisher ( ), tornqvist ( ) quantity indices are defined as follows: australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 44 for and and where of these, tornqvist and fisher index formulae are the most widely used by statistics officials around the world. partial productivity partial productivity is the ratio of output to one class of input (labour, capital or material). in this paper, emphasis is on labour productivity because, as janssen et al (2008) noted:  it is closely related to individual incomes and therefore living standard  it can be measured with reasonable reliability labour productivity measures can be based on either a gross output or on the value-added concept. the simplest measure of labour productivity is output per worker. an increase in output per worker can be observed either by requiring workers to produce more in the hours they work or if they work longer hours. the latter is a disadvantage of this definition. the second measure of labour productivity is output per hour worked. the advantage of this method is that it takes into account variations of number of hours worked per worker, rather than the numbers of employees, as the measure of labour input. with an increase in parttime employment, hours worked provides the more accurate measure of labour input. but the main disadvantage is that the hours worked data is less reliable than the employment data. multifactor productivity multifactor productivity (mfp) is the ratio of the value-added concept of output to the sum of associated labour and capital inputs. mfp indices show the time profile of how productively combined labour and capital inputs are used to generate added value. this method serves as an analysis of micro-macro links, such as the contribution of an industry to the economywide multifactor productivity growth and living standards (oecd, 2002). the main advantage of mfp measure is the ease of aggregation across industries and that the data required is directly available from national accounts. however, its main drawbacks and limitations are that the multifactor productivity is not a good measure of technology shifts at the industry level. when based on value added that has been double-deflated with a fixed weight laspeyres quantity index, the measure suffers from the conceptual and empirical drawbacks of this concept (oecd, 2002). in this research, the focus is on partial productivity types of measurements and is based on the value-added concept. methodology interviews with practitioners such as developers, consultants and contractors in new zealand were carried out in order to obtain experience and attitudes to the variety of factors involved in productivity. questions were prepared with the objectives of obtaining information relating to procurement choice and satisfaction with procurement methods used by organisations. the interviews were carried out with willing practitioners using a five point australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 45 scale for data analysis. data collected was analysed using statistical methods to extract meaningful information to aid the understanding of the graph presented in the davis report as well as to provide a valuable resource to build a foundation for future practice in new zealand. literature review as stated, a number of studies have attempted to address the issue of labour productivity in the nz construction industry. here, their findings are summarised to provide readers an overview of the subject matter being discussed in this research. in their working paper for the new zealand treasury, black et al (2003) established a productivity series for the new zealand economy for the period 1988 to 2002. results of this study show that on average, the multifactor productivity growth in the construction industry was the worst in all sectors considered. from 1988 to 2002, the mfp of the construction industry declined by an average of 1.5% per annum while the average growth of mfp of the whole economy is 0.88% per annum. figure 2 illustrates the effect of poor mfp growth in the sector over time. by 2002, performance of mfp in the construction sector was almost 20% lower than that in 1988. this is a significant decline. march year primary mining & quarrying construction manufacturing electricity, gas & water 1988 to 1993 -0.52% -1.91% -4.59% 0.29% 1.11% 1993 to 2002 2.45% 0.72% 0.25% -0.16% -0.93% 1988 to 2002 1.38% -0.23% -1.51% 0.00% -0.21% march year transport & communications business & property services personal & community services retail & wholesale trade 1988 to 1993 6.75% -2.54% 0.82% -0.38% 1993 to 2002 5.52% 0.74% 1.48% 1.40% 1988 to 2002 5.95% -0.44% 1.24% 0.75% table 1 average multifactor productivity growth by industry source: bgm (2003) 0.0 0.5 1.0 1.5 2.0 2.5 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 aggregate primary mining construction manufacturing electricity, gas and water transport and communications business and property services personal and community services retail and wholesale trade figure 2 industry multi-factor productivity series source: bgm (2003) australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 46 davis (2007) report was prepared on behalf of the department of building and housing. it found that there is a problem with the performance of the construction industry productivity, namely:  all three productivity measures in the construction sector is much lower than those in the aggregate market sector  over this period, labour productivity in the construction industry has fallen short of aggregate labour productivity growth by 10 percentage point construction sector aggregate economy labour capital multifactor labour capital multifactor average annual growth rate 0.3% -0.2% 0.3% 1.3% 0.2% 0.9% standard deviation 6.4% 7.9% 6.4% 1.1% 1.4% 1.2% table 2 comparative productivity statistics (1997-2006) source: department of building and housing janssen & mcloughlin (2008) is part of a series of working papers that the new zealand treasury aims at addressing nz‟s long term productivity performance and factors that may be inhibiting nz from reaching its potential; and it “examines the evidence surrounding new zealand‟s productivity performance at an aggregate level” (janssen et al, 2008). table 3 shows that while of labour productivity in the 13 measured sectors considered experience an increase of 0.3% per annum, the construction industry exhibits the lowest level of growth in labour productivity, with a decrease of 3.1% per annum despite its high employment growth. the expansion of employment was mainly due to factors such as high net migration inflow, previously low interest rates, declining household sizes and infrastructure investment (janssen, 2008). it was postulated that the possible cause for the lower-than-expected observed labour productivity growth in recent years was due to changes occurring in the nz labour work force: “during times of high employment growth, new workers tend to dampen observed productivity growth”. this is apparently because as new workers enter employment and even if they have high levels of formal qualifications, they are generally less productive than existing workers. as a consequence, the observed productivity experiences a temporary reduction, until these workers gain sufficient job-relevant knowledge or experience, when productivity should return to its original rate. in 2008, the new zealand centre for advanced engineering (caenz) carried out a study into the cyclical nature of the new zealand construction industry. the aim of this study was to “establish and communicate a shared understanding of the key drivers in the boom/bust cycles of the construction industry in nz” (allan et al, 2008). overall, much of the construction industry boom bust effect in new zealand is caused by the industry‟s own internal system structure and behaviour rather than external shocks. a new thinking must be adopted by the industry and policy makers which:  recognises how co-dependencies and industry dynamics drive behaviours and profitability  adopt structures and cultures that reinforce communication and information sharing throughout the industry, particularly across industry sectors  encourages long-term strategic thinking instead of short-term profit seeking and speculation (allan et al, 2008) australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 47 table 3 output, jobs, labour productivity and contribution to labour productivity growth by industry (seven years to march 2007) on the other hand, the construction industry has provided a significant amount of support to the nz labour market, with number of individuals employed by this industry accounting for nearly 10% of the nz workforce. however, construction employment has suffered from a cyclical pattern of skills shortages in times of peak demand, and surplus workers when demand is low. department of labour found that construction employment tends to expand rapidly during the boom periods (23% on average), with the appearance of many individuals in many construction trades. but, this expansion tends to dampen growth of labour productivity because these individuals often need time to be productive in their work. the labour force also tends to shrink fast during recessionary times like the one currently experienced, principally within the trade workers occupational group. employment of professionals in construction, such as architects and engineers, and employment of labourers often hold up well. the dol (2009) report also notes that any loss of skilled workers and trainees would likely to impair the productivity of the industry when demand picks up again. areas of investigation the nz construction industry comprises a number of sub-industries which can be considered independently. these sub-industries are: civil construction, building services, residential and non-residential and infrastructure construction. in this research, the emphasis is on the last three categories. the rationale behind this lies in the fact that civil construction is a machine dominated sub-industry and as such, workers in civil construction are more “productive” in value-added terms than those in the rest in the construction industry (page, 2010). therefore, it is important that we investigate the lower end of this industry. with this in mind, extraneous factors which had not been included in previous studies such as land and house prices, infrastructure investments in nz etc, were explored in detail in this section. australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 48 inflation inflation has a significant effect on labour productivity. as the cost of labour increases, productivity goes down. as the selling price of the built product increases relative to labour cost, labour productivity goes up. the inflation series in nz are available on snz website. these series date as far back as the first quarter of 1920. figure 3 nz inflation 1991-2009 source: snz, rbnz. note: interest rates are excluded since the introduction of the goods and services tax (gst) in october 1986 and the subsequent gst changes in june 1989, nz inflation in a number of quarters were impacted, specifically, quarter 4 of 1986 to quarter 1 of 1988 and quarter 3 of 1989 to quarter 4 of 1990 respectively. however, since 1991, the impact of gst on inflation in nz is almost nonexistent (fig. 2). as can be seen here, the linear regression line is almost flat. an estimate of inflation growth averaging 3% p.a. is reasonable for the time period. but there seems to be a degree of volatility in inflation. and this volatility may have certain implications on the performance of labour productivity in nz construction. employment employment in nz construction is apparently quite volatile. despite a strong growth of employment in construction between 2001 and 2007 (63% in comparison to the 18.8% employment growth in nz over the same period), year to year growth rates in construction showed a greater degree of variation. after a period of sustained growth (2001-2004), nz construction experienced a slow-down in employment growth, even though the number of employed individuals in the sector was still increasing. employment in construction peaked in 2007 with the number of filled jobs in the industry growing to 123,580. however, by december 2008, the industry had lost some 3000 jobs. table 13 shows the numbers of wage and salary earners identified by being directly involved in various trades in the nz construction sector. the overall employment growth in all sub-industries considered here was quite substantial (54.6%). the greatest change in employment between 2001 and 2006 happened in the “other construction services” category (90.8%). on the other hand, the “building completion services” category had the lowest growth rate among these subindustries (41.4%). however, employment growth in this sub-industry was still 2.5 times higher than that of the whole economy period (16.4%). australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 49 figure 4 employment in nz construction industry (2001-2008) source: snz wage and salary earners in construction industry march years 2001 2002 2003 2004 2005 2006 absolute % building construction 15,672 16,056 18,117 21,003 24,666 27,102 11,430 72.9 non-building construction 17,547 17,928 18,189 19,170 22,164 24,717 7,170 40.9 site preparation services 4,854 5,112 5,622 6,225 7,470 8,103 3,249 66.9 building structure services 4,191 4,305 4,956 5,769 6,543 7,107 2,916 69.6 installation trade services 16,605 17,322 18,468 20,148 21,396 23,718 7,113 42.8 building completion services 10,272 10,251 11,247 12,459 13,917 14,529 4,257 41.4 other construction services 4,512 4,455 5,460 6,126 7,221 8,610 4,098 90.8 total 73,656 75,426 82,062 90,903 103,374 113,889 40,233 54.6 number of people change between 2001 and 2006 sub-industry table 4 wage and salary earners in construction industry source: snz it is apparent that the sustained growth in employment in construction 1997-2007 was accompanied by an almost continuous decline in labour productivity. the causes of this apparent strong correlation are moot. however, a number of potential candidates for this decline have been posited education, training, declining skills, declining popularity of apprentice schemes etc (taskforce, 2009). one has to be careful in interpreting the results presented because certain sub-industries are actually more “productive” in terms of labour than others. for instance the civil construction sector has traditionally been a machinerydominated industry and the personnel employed in that sector are few but most (if not all) are highly specialised. as the result, this sector has always had significantly higher output per man hour compared with other sub-industries in nz construction, which in turns means that labour productivity in this sub-industry is much higher than that of the overall industry. in spite of the skewing effects of civil construction, and the expanded amount of civil infrastructure works of recent years, construction labour productivity is still declining. this is extremely concerning for the nz construction sector. australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 50 labour costs the labour cost series in this research was provided by branz (page, 2010). labour cost index in the construction industry was compared with labour cost indices in other sectors (manufacturing; electricity, gas and water supply) and with those in all industries. overall, labour costs in construction behave much like those in the wider economy and in general performed better than those in some other major industries (electricity, gas and water supply for instance). in terms of earnings in nz, the average for a working person in the country did improve significantly in the 21-year period (from $12.2/hr in 1988 to $25.4/hr in 2009), but the rate at which this improvement takes place is sluggish, averaging 3% over the period. in effect, wage growth tracked inflation almost exactly. growth rates in nz construction in general follow the same patterns as those in the aggregate economy (fig. 9). from 1997 to 2007, both series show strong growth (3.7% p.a.), with actual wages increased from $16.4/hr to $23.2 respectively. this strong performance might have been due to the favourable economic conditions in nz in this period, in which the construction boom from 2001-2004 might have played a significant part. it is interesting to note that despite the strong growth, the labour costs in both the nz construction and the wider economy in effect grew at almost the same rate as inflation over the periods considered. this means the real labour costs in the construction industry have actually remained flat. this finding is significant to the analysis presented in this paper. figure 5 labour costs-wages/salaries only source: snz, branz figure 6 labour costs-all costs source: snz, branz australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 51 figure 7 average hourly earnings source: snz, rbnz figure 8 growth in hourly wages: construction v aggregate (1988-2009) source: snz, rbnz, dol figure 9 growth in hourly wages: construction v aggregate (1997-2007) source: snz, rbnz, dol australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 52 material costs in residential/non-residential construction the materials index series was developed by branz using collections of data obtained from snz, including materials prices for their consumer price and producer price indexes (ppi). all materials have been re-based to 1000 in 1994.the time profiles of these indices are presented, along with their corresponding year over year growth rates (fig. 10 & 11). over the period considered, material costs increased significantly. however, the rate of growth of the series averaged 3% per annum. this finding means that the materials used in nz residential construction tend to grow at a uniform rate in line with the more general inflation rate in the country. the result of the analysis above is similar to findings in the analysis of the labour costs series and it has implications on the analysis of labour productivity of nz construction. figure 10 material price index (all materials) source: snz, branz figure 11 growth rates of material price index (all materials) source: snz, branz australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 53 demand side of nz construction it is essential to explore the supply side as well as the demand side in nz construction in order to obtain a full understanding of the nature of this industry. the supply side was discussed earlier (employment, labour and material costs). in this section as well as the following three sections, the discussion of the demand side will be offered. residential construction: house and land prices unlike previous investigations of labour productivity in nz construction, we look into an important driver of the demand of construction work, i.e. the housing market, and any changes happening in this sub-sector between 1997 and 2007. the purpose of this inclusion is to identify whether the growth in this market had any effects on labour productivity and if they did, to what extent they influence the performance of productivity of the whole industry. another reason for this consideration is that the house prices collectively include all associated costs (labour and material costs). this means in effect the housing market should be a real reflection of all factors discussed earlier. house price data in this research is obtained from rbnz. from 1990-2010, the value of nz housing stock increased from nz$123 billion to nz$591 billion (fig. 12). these figures show housing is a highly inflated market in nz, with the annual inflation rate averaged at 7.5%, in comparison to the rate of 3% in the wider economy over the same period. according to a number of studies by motu economic & public policy research, the increases in nz house prices were mainly driven by the increase in land prices across nz. these studies found that land prices in nz increased significantly in the period from 1981-2004, with the real (inflation adjusted) price of vacant residential sections rising by 286% on average across the country (grimes et al, 2006). these increases are most significant in metropolitan areas such as auckland city (700%), manukau, north shore city (both 460%) or tourist areas such as queenstown-lakes and thames-corromandel (over 400% each). these studies found that on average across the country, a 1% increase in real residential land prices translates into an estimated 0.27% increase in real house prices. statistically, the effect is highly significant. in the absence of real land price increases, grimes et al (2006) predicted that real house prices would have increased by just 16.4% (or 0.7% p.a.) over the 23 year period. figure 12 house prices and value of housing stock source: qv, rbnz australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 54 on average, inflation of residential land price in the period between 1985 and 2009 is 6.5% p.a. combined with results found in motu‟s studies, land prices might have played a major role in the increase of house prices in nz as observed. note that rates of increases of both house and land prices are much higher than the inflation rate of the whole economy over the same period. this is highly significant. property and built product prices are increasing (6.5% pa) at a little over twice the rate that material and labour costs are (an nz economy average of 3% pa). thus rationally it could be expected that construction labour productivity should increase more rapidly than any of its comparable other industries. however, this is not the case. the skewing effect highlighted actually creates an artificially positive result in comparison to other industries. this is highly significant for the industry and needs further understanding in order to be rectified. non-residential construction data for non-residential construction in nz are sourced from snz. these series date as far back as 1999 only. however, they should be sufficient in illustrating the performance of this sub-industry over the period considered in this research. as can be seen from figures 1315, the non-residential sector has enjoyed a strong growth over the 10-year period to 2009. however, since the second half of 2006, demand for this sector seems to have decreased from the strong growth in previous years. number of building consents in this period grew at slower pace and value of work put in place was flat. demand for commercial construction was greatest between 1999 and 2009. given the prosperous period that the nz economy had from 1999-2007, this comes with no surprise. however, with the recession in 2008 and the current economic climate, this demand has dwindled. the recession squeezed firms‟ profits and has left them with low reserves for investing in new buildings. moreover, demand for new commercial buildings tends to lag economic growth. therefore, the non-residential building sector was later to enter a downturn than the residential building sector and will also be later to see an upturn, as there are large areas of vacant office and retail space available. as for non-residential construction in other sectors, work on hospitals and nursing homes recorded the sharpest drop, down 39% in 2009. work on hotels and boarding houses declined 7%, factories and industrial buildings 5% and miscellaneous buildings 11.6%. the only exception to this trend was of the education buildings, in which the growth of 21% in 2009 was observed. the overall result is that value of non-residential building “work put in place” fell 9.0% in the last quarter of 2009. according to the rlb study, in the short run, the sector faces regulatory uncertainty over the government‟s tax reforms (rlb, 2010). the outlook for the non-residential sector is grim with the total value of non-residential building investment is expected to fall a further 17% over the next 12 months, before solid growth of 16% and 12% over the following two years (rlb, 2010). figure 13 annual non-residential building work put in place australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 55 figure14 annual non-residential building consents figure 15: annual non-residential building work put in place by sector figure 136: annual total floor area and average value of consents in the period considered (1997-2007), performance of the non-residential construction sector was generally good. value of work in the sector was consistently increasing (see figures 13 16). this trend was a reflection of the economic prosperity in nz in this period. but, as construction labour productivity performance in this time was in general lower than that in other sectors; one may speculate that the rapid expansion of the labour pool of the industry and the quality of these trade personnel as well as training provided to them might have australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 56 been a major factor. however, at this instance, there is no data or study available to verify this speculation. a more rigorous investigation into this may be necessary. infrastructure construction at present it is not possible to get a measure of building productivity versus infrastructure construction productivity. all construction activity is quoted in a consolidated industry output figure. however, as has been previously noted, labour productivity from the civil sector is likely to be significantly higher than for the building sector. this is due to the different degrees of mechanisation inherent in each sector. however, this “probability” needs to be confirmed through research and/or through improved reporting. construction gdp and underlying economic trends discussions in previous sections established that the three main sub-industries in nz construction indeed make significant contributions to gdp. however, as allan et al (2008) found, these sub-industries together with the construction industry on the whole are subjected to the economic conditions they operate within. consequently, nz construction seems to behave in accordance with the country‟s economic “cycles”. the cyclical nature of the construction industry and its relationship with the economy are best represented by figures 17 and 18. these figures summarise the results of a study into a 20-year cycle in the nz construction sector (rcp, 2005). a number of economic features (share market performances, currency and commodity prices, and import-export trends) were included and summarised here to illustrate their effects on all factors discussed above (interest, house prices and associated costs, investments in the sector). overall, the rcp study demonstrated consistency with the caenz study. figure 17 the economic clock source: rcp australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 57 figure 148 the economic waves source: rcp analyses of these sub-industries have shown that this industry have higher output value than many other sectors in nz economy between 1997 and 2007. this finding should have positive impact on productivity of nz construction given the positive relationship between output and labour productivity as established in section 2. there may be other factors that influence this performance and more research need to be carried out. discussion of research results factors affecting performance of nz construction labour productivity a number of factors such as the national inflation rates, construction employment and construction costs were explored and discussed in detail. in addition, three main subindustries in nz construction were also included in the investigation. these sectors, and their associated extraneous variables, provided some useful information in relation to the “real” performance of nz construction labour productivity. this is in contrast to previous productivity studies in nz, where observed performances were presented by facts and statistical figures without having their causes properly identified. results from analysis show that since the early 1990‟s, while factors influencing outputs (house and land prices) have increased significantly, factors impacting inputs (labour and material costs) have remained relatively stable. given the relationships between outputs and labour productivity established in section 2 and the statistical results from section 6, one would expect labour productivity in the nz construction sector to perform exceptionally well in comparison with other industries. however, despite this logical belief, labour productivity in this industry has remained flat throughout and actually declined during the construction boom (2003-2007). moreover, factors that affect value of construction outputs most significantly are land and house prices, because the period considered (1997-2007) was mainly driven by demand for construction work in the residential area. previous productivity studies in nz seemed to have ignored the effects of these increases in their calculations. despite this omission, their conclusions have been consistent, i.e. productivity in nz construction has been poor. therefore, when these factors, together with value of output of non-residential construction are taken into consideration, labour productivity performance of construction might actually have been much worse than that reported in previous studies. however, more research is required in the future in order to verify these hypotheses. australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 58 based on statistical tests, a set of mathematical relationships between labour productivity and related factors was established as follows: . one key issue that was repeatedly emphasised in the literature is the seasonality of the skill base and the adequacy of skill levels of personnel in the construction industry. the pool of experienced and skilled personnel changes drastically in accordance with underlying economic conditions, i.e. during the boom period, employment in construction tends to grow exceptionally high (mainly in the unskilled occupation categories) while during slow periods, the reverse is true (allan et al, 2008; dol, 2009). this fluctuation in labour availability makes it hard for firms in the nz construction industry to operate efficiently as they tend to experience skill shortages during prosperous periods but difficulties to hold on to their experienced staff in hard times due to the availability of work and to each firm‟s financial health. the direct consequence of this is on the performance of labour productivity, where it tends to exhibit a choppy behaviour as observed. it can be argued that a well-equipped skilled workforce may be a backbone for any future growth in labour productivity if the industry decides to take actions to mitigate this chronic problem. hence, research is required into the relationship between skills and productivity in nz construction. limitation of research results from this research are constrained by the available data. this section offers some discussions on a number of limitations in this research. the most notable restriction on this research is the scope. a number of other influences could have been explored but were omitted such as the effects of innovation in the construction industry. other areas include investigations of sub-industries other than those considered (civil works, demolition and building services for example) which should be considered for a full investigation on productivity of the industry. research summary this research has endeavoured to contribute to the development of an understanding of labour productivity in the nz construction industry. it is undeniable that nz construction plays an important role both directly and indirectly in the nation‟s economic growth, but the industry‟s “productiveness” has decreased over time and this may have significant adverse effects on the nation‟s “quality of life”. a number of studies have attempted to investigate these issues. however, review of recent literature revealed that labour productivity is not well understood in the construction industry. further, these studies seemed to have relied on published statistics to construct their productivity series without trying to fully incorporate the underlying dynamics of nz construction. as a result, their findings may be biased and recommendations tend to be limited in scope. the current research revealed that extraneous factors such as land and material costs have significant influences on labour productivity of nz construction. between 1997 and 2007, the basic construction costs (material and labour) remained stable while values of works grew at significantly higher rates. this result suggests that, in theory, nz construction should have performed exceptionally well in terms of labour productivity. however, productivity statistics showed that overall the performance of nz construction was actually decreasing. this contradiction suggests that when extraneous factors are taken into consideration, labour australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 59 productivity might have performed much worse than we had expected. investigations need to test this hypothesis and to build a concrete foundation for further work in this area. references allan. n, yin. y, scheepbouwer. e (2008) „a study into the cyclical performance of the new zealand construction industry‟, new zealand centre for advanced engineering, christchurch, new zealand apmf study guide (2010) „quantitative research techniques‟, marketing research barr. p.s (2004) „research methodology in strategy and management, volume 1‟, elsevier ltd, emerald group publishing limited black. m, guy. m, mclellan. n (2003) „productivity in new zealand 1998 to 2002‟, new zealand treasury, wellington 6008, new zealand burney. a. (2008) „inductive and deductive research approach‟, department of computer science, university of karachi christou. e. et al (2007) „research methodology in hospitality industry: the role of the inquiry paradigms‟, university of the aegean, mihalon 8, 82100, chios, greece country health information profiles (2010) „new zealand‟, world health organisation, http://www.wpro.who.int/countries/2009/nez/ cumming. g (2002) „caught in a ripple effect from sep 11‟, the new zealand herald, nz davis. n (2007), „construction sector productivity-scoping report‟, martin-jenkins, wellington, new zealand de vaus, d (2005) „research design in social research‟, new york university, new york, usa del siegle (2010) „qualitative research design‟, university of connecticut, connecticut, usa department of housing and building (2009), „report of the building and construction sector productivity taskforce-a modern efficiency and productive new zealand built infrastructure industry‟, department of housing and building, wellington, new zealand department of labour (2008) „construction sector outlook‟, department of labour, new zealand government, wellington department of labour (2009) „skills in the labour market outlook‟, department of labour, new zealand government, wellington department of labour (2009) „labour market outlook‟, department of labour, new zealand government, wellington department of labour (2005) „construction industry-workforce trends‟, department of labour, new zealand government, wellington drew. a (2007) „new zealand‟s productivity performance and prospect‟, reserve bank of new zealand, wellington, new zealand fallow. b (2008) „omen of recession seen in economy‟, the new zealand herald, nz grimes. a & aitken. a (2006) „regional housing markets in new zealand: house price, sales and supply responses‟, motu economic and public policy research, wellington, nz gruber. t. (1993) „a translation approach to portable ontology specifications‟, knowledge systems laboratory, computer science department, stanford university, ca holzer. m, nagel. s.s. (1985) „productivity and public policy‟, sage publications, beverly hills, california, usa http://www.wpro.who.int/countries/2009/nez/ australasian journal of construction economics and building tran, v and tookey, j (2011) ‘labour productivity in the new zealand construction industry: a thorough investigation’, australasian journal of construction economics and building, 11 (1) 41-60 60 hopkins. w. g. (2000) „quantitative research design‟, department of physiology, university of otago, dunedin 9001, new zealand infometrics (2008) „employment profile and future demand for crane operators in new zealand‟, infometrics ltd, new zealand janssen. j, mcloughlin. s (2008) „new zealand‟s productivity performance‟, new zealand treasury, wellington 6015, new zealand mare. d, hyslop. d (2008) „cyclical earnings variation and the composition of employment‟, statistics new zealand, wellington, new zealand merry. a, spearpoint. m (2008) „the building act 2004 and the new zealand fire service‟, new zealand fire service, christchurch, new zealand ministry of agriculture and forestry (2001) „new zealand statistics‟, maf, wellington, new zealand, link: http://www.maf.govt.nz/statistics/forestry/annual/nzstats2000/index.htm new zealand treasury (2010) „overview of new zealand economy‟, new zealand treasury, wellington, new zealand, link: http://www.treasury.govt.nz/economy/overview nzpa (2002) „economic stability has labour market buzzing‟, the new zealand herald, nz oram. r (1999) „house prices take 7pc hit‟, the new zealand herald, new zealand organisation for economic co-operation and development (2002) „measuring productivityoecd manual‟, oecd organisation for economic co-operation and development (2007) „economic survey of new zealand‟, oecd rajasekar. s. et al (2006) „research methodology‟, school of physics, bharathidasan university, tiruchirapalli 620024, tamilnadu, india rankin. k (1995) „new zealand 1995: a miracle economy?‟, department of economics, the university of auckland, auckland, new zealand rawnsley. m (1998) „ontology, epistemology, and methodology: a clarification‟, nursing science quarterly, sage publications rider, levett, bucknall (march 2010) „new zealand trends in property and construction‟, new zealand saravanaperumal. m (2008) „labour market adjustment in the construction industry 20012006‟, statistics new zealand, wellington, new zealand selkirk. d (2010) „the building act 2004: major implications for property developers, builders and vendors‟, fortune manning lawyers, auckland, new zealand statistics new zealand (2009) „a statistical overview of the construction industry from 2000 to 2008‟, statistics new zealand, christchurch, new zealand trochim. w.m.k. (2006) „research methods knowledge base‟, atomic dog publication, cincinnati, ohio, usa university of alabama in huntsville (2010) „types of research designs‟, university of alabama in huntsville, usa http://www.maf.govt.nz/statistics/forestry/annual/nzstats2000/index.htm http://www.treasury.govt.nz/economy/overview every so often a book comes along that reminds us of the fact that building and construction is different from other industries, and highlights some interesting points about those differences book review the lords of strategy: the secret history of the new corporate world walter kiechel iii, boston, harvard business press, 2010, isbn 13: 978-1-59139782-3 (hardcover), 347 pages, usd 26.95, aud 53.95, gbp 18.99. every so often a book comes along that reminds us of the fact that building and construction is different from other industries, and highlights some interesting points about those differences. reading walter kiechel’s lords of strategy was one of those experiences. the strategists of the title were the men who founded the firms and created the modern management consultant industry. these men (and with few exception the characters in the book are all men, many of them with engineering degrees) and their ideas have fundamentally changed the world we live and work in through their effect on the corporate world, and in particular their effect on the largest global corporations that dominate the modern industrial and post-industrial economic landscape. so this book is interesting for several reasons. the first is the story it tells about how management consulting developed from the 1960s and the manner in which it became a central player in business development. the second is that it is really a history of ideas, or from another perspective the intellectual history of an idea. the third is the way the interaction over time between the consultants with their ideas and business facing its challenges changed both. lastly this review will look at the future. on the face of it the story of how management consulting developed and how it became a central player in business development is not a promising topic. but this turns out to be wrong, mainly because kiechel knows so much about his subject after a career spent observing managers of major us corporations. he has been observing us managers for many years, as managing editor at fortune magazine and as editorial director of harvard business publishing, and thus gives an inside account of the birth and evolution of strategy as the dominant business paradigm of the second half of the twentieth century. the founder of the boston consulting group (bcg), bruce henderson, was the originator of business strategy as we know it today. his first insight was the importance of the experience curve, or the decline of unit costs as production volumes increase (also called the learning curve effect). no other idea has had such a large impact on corporate consciousness, despite its weak empirical support: “as the 1960s unfolded, fattish, complacent american companies found themselves confronted with competition from unexpected quarters – foreign manufacturers, smaller upstart enterprises in their own backyard. what was going on? what to do? the bcg had the answer to both questions in the form of the experience curve” (p. 31) the large industrial companies that turned to bcg were of course doomed to decline from their peak in the early 1970s. however bcg gave them the tools to fight back, mainly in the form of detailed data on their costs, capital structure, customers, competitors and market shares, data these firms had never had or needed before. this data was then integrated by bcg into a corporate strategy based on gaining market share (to drive down costs by increasing production), not maximising short-term profits. radical stuff. the best-known concept to come out of bcg is the growth-share matrix. this ubiquitous diagram of cash cows, dogs, stars and question marks pulled together all the elements of australasian journal of construction economics and building de valence, g (2011) book review, australasian journal of construction economics and building, 11 (2) 94-96 95 strategy bcg thought essential. as a single, conceptual device it was a thing of beauty that captured with brutal honesty a corporation’s situation and the decisions to be made. it also made bcg a load of money because analysing a company’s product portfolio was a lot more lucrative than drawing experience curves. in 1973 bcg’s best salesman left to form his own company. bill bain wondered what happened for bcg clients after the consultant’s report was handed in, with all the insights and data it contained. did the clients make more profits? did anyone know? bain and company did not take on projects for clients, like bcg, but had an ongoing relationship, paid monthly, with only one client from an industry, or more exactly one client from a competitive set. with this approach bain stole a march on its competitors by taking on implementation, the nuts and bolts of managing a strategy. bain’s slogan (its value proposition) could have been “we don’t sell advice by the hour; we sell profits at a discount.” the keys to profits were costs and processes, and bain developed the ideas of best practice and benchmarking, and measuring the results by a companies share price growth. if you have wondered where the modern obsession with measurable results originated, bain and company’s work in the 1970s and 80s would be the place to look. the third global consulting firm is mckinsey and company. the oldest of the three it was founded by an accountant in 1926, and in the 1950s and 60s had focused on helping large companies shift from a functional to the new divisional model of organisation. however in the 1970s it was in the doldrums and falling behind its competitors. the book tells the story of how fred gluck went from being a rocket scientist for bell labs to the founder of mckinsey’s strategy practice, and in the process turned it into a firm of “strategy buffs”. indeed, by the mid-1980s mckinsey had arguably become the strategy firm, and had put the full weight of its prestige and reach behind the strategy revolution started by bruce henderson. the next character introduced is michael porter: “who would eventually become the most famous business-school professor of all time. to get there, though, he would have to fight off academic elders who wanted to deny him a job, and then thoroughly disrupt both the curriculum and the pedagogy of the harvard business school.” (p. 117) when porter’s book competitive strategy came out in 1980 it may have built on the consultants’ previous work, but it also laid out the possible choices of strategy (three) more clearly than anything done before, and put strategy at the centre of both business management and business school teaching. the book is now in its sixtieth printing and business education has never been the same since. the story of porter’s experience at harvard is an engrossing example of overcoming entrenched conservatism in academia. one of the criticisms of porter’s ideas is the lack of a human element, his corporations do not appear to have people working in them. in 1982 tom peters and robert waterman’s book in search of excellence put that right, and went to the top of the best-seller lists. peters had left mckinsey a few months earlier and waterman left after the book’s success. they emphasised the centrality of people to a company’s success, although this turned out to something of a short-term victory against the prevailing management view. excellence also turned out to be difficult, within five years half of the 43 companies on peters and waterman’s list were in trouble. the wave of similar books that followed, with their stories of success, all found the same problem. success is transitory, performance is impermanent, but corporations, especially large corporations, go on. more precisely, the human factors like norms and behaviours that make up what we call corporate culture australasian journal of construction economics and building de valence, g (2011) book review, australasian journal of construction economics and building, 11 (2) 94-96 96 persist. this turned the focus of attention onto the implementation of strategy, which is neither as sexy nor as stimulating as solving problems for a new client. what it did do was build client relationships and make porter’s value chain the closest thing we have to a universal concept in business strategy. over the final chapters keichel surveys a number of the key features of the contemporary corporate landscape. these include financial engineering, leverage and buyouts, the arrival and departure of core competencies and capabilities, and the impact of technological development and the internet. this is all interesting stuff, although these chapters lack the focus of the earlier part of the book, and unlike the original ideas in the strategy revolution none of these ideas are secrets because they have been extensively promoted by their authors. what they do is highlight just how influential in forming the contemporary corporate landscape the ideas have been. that is one of the genuinely important insights this book gives us. an extraordinary number of the conventional wisdoms heard from chief executives these days are recycled and retreaded ideas from the early days of the strategy revolution. for better or worse these ideas have been instrumental in developing modern management methods, and in doing so have directly affected the lives of millions. one of the characteristics of a good book is the ease of reading, or the ability of the writer to hold our attention and keep us interested. this is not commonly found with business books, many of which, in this reviewer’s opinion, are either turgid and rather self-serving or lightweight and repetitious. however, kiechel is an experienced author and editor and his book is well-written, holds interest throughout and he has included many vignettes and relevant bits of business history that keep the story moving. this review started by observing how the book shows up differences between the building and construction industry and manufacturing, and later banking and finance, industries where the strategy consultants were most influential. the most significant difference is the limits to strategy in an industry based on tendering and low-price bidding. for the great majority of projects price is the only strategy. there are contractors that specialise in a particular type of work, westfield in shopping malls for example, and some have become geographically diversified through takeovers, but these are the exceptions that prove the rule that strategy is not an important factor for most contractors. the second key difference is the lack of a meaningful experience curve effect. costs are not closely related to volume or market share, so bruce henderson’s idea would not have much impact on a construction firm. closely allied to this is the lack of opportunity and/or unwillingness of most clients to invest in developing long-term relationships with contractors and other industry suppliers. where this has been done there have been clear gains in efficiency and reliability (as with baa’s evolving procurement strategy for example). that said, construction is a more diverse industry than most, in terms of types of projects and characteristics of firms. it may be that the technological or organisational conditions for a strategy revolution in construction have not yet been put in place. gerard de valence university of technology, sydney site coordination problems: an essential determinant to the time performance of subcontractors in the hong kong building projects optimizing the time performance of subcontractors in the building projects andy k.w. ng, (division of building science and technology, city university of hong kong, hong kong) andrew d. f. price, (department of civil and building engineering, loughborough university, uk) abstract the main contractors of hong kong building projects tend to subcontract most of their work. however, many of the subcontractors complain that they are not being fully utilized due main contractors’ poor site coordination of temporary works and interfacing works and plant supports etc. a list of critical site coordination problems caused by main contractors that had adversely influence to the time performance of subcontractors was prepared. a questionnaire survey was conducted to collect data to generate multiple regression equations that explain how the critical site coordination problems affected the time performance of different types of subcontractor. the survey results were validated by neural network analysis. backward elimination method was adopted to identify the ‘most critical’ site coordination problems that enable main contractors to formulate measures to enhance their site management system. keywords: subcontractor, site coordination problem, time performance introduction subcontracting subcontracting is very important to the hong kong construction industry as labour-only subcontractors and fee subcontractors contributed 24 per cent and 42 per cent of the gross value of construction work performed in 2008, according to government statistics. this approach has been in operation for a long period of time in hong kong as a strategy to deal with long-term environmental uncertainties and to buffer the technical core of main contractors against short-term contingencies (sozen, 1999). however, the approach creates problems, such as greater demand in coordination to subcontractors’ work. recently, most subcontractors in hong kong complain that they are unable to efficiently and effectively perform their site works due to main contractors’ poor site coordination. critical site coordination problems nineteen common site coordination problems caused by the main contractors that adversely influence subcontractors’ site work were identified through literature review, observed common industrial practices and advice from experienced industrial practitioners. they were classified into eight groups of problems according to their nature as shown in table 1. among them, six critical problems listed in table 2 were shortlisted by a questionnaire survey that assessed the aggregated importance score of each site problem (ng and price, 2005). an aggregated importance score was designed based on the model developed by kadir et al (2005). it was taken as the combined score of frequency of occurrence and the potential degree of impact to the performance of subcontractors. aim and objectives there has been considerable amount of research aimed at identifying the success factors to a building project; however, most were focused on the main contract level only. the role of main contractor has gradually transformed from a constructor to a manager of subcontractors due to the rapid development in terms of complexity and size of hong kong building projects in the last few decades. frisby (1990) defined the management of the subcontractors as one of the key functions of the main contractor. this paper aims to investigate the impact of the australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    91 critical site coordination problems to the time performance of subcontractors in the hong kong building projects. this aim was achieved through the following objectives. (a) develop multiple regression equations to explain how the critical site coordination problems caused by main contractors affect the time performance of subcontractors. (b) identify the ‘most critical’ site coordination problems by backward elimination method that enables main contractors to develop a framework to improve site coordination. this study only covers building projects as civil engineering projects are not too labour intensive and involves fewer trades. as a result, civil engineering contractors do not subcontract their work to the same degree of building project contractors. group: construction information problems: a. information not detail enough b. unclear or contradictory information group: working programme problems: a. working programme not detail enough b. working sequence not practical c. short notice for commencing site work d. late change of working programme group: preparation for work place problems: a. work place environment not yet prepared such as general site cleaning, fresh air supply, lighting b. inadequate or insufficient site reference points c. inadequate or insufficient temporary work support such as scaffolding, water & power supply group: interfacing work to be completed by other subcontractors problems: a. work not yet completed b. work not accurately completed group: access to work place problems: a. access road not yet ready b. access routing not convenient group: plant support problems: a. late to provide plant support b. type of plant provided not appropriate group: material support problems: a. insufficient amount b. type of material provided not appropriate group: response to site problem problems: a. late response to site problems b. solution recommended not practical table 1 common site coordination problems australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    92 site coordination problem code short notice to commence site work scp1 late to provide plant support scp2 interfacing work not yet completed scp3 interfacing work not accurately completed scp4 construction information not detail enough scp5 construction information unclear or contradictory scp6 table 2 critical site coordination problem coding system research methodology data collection questionnaire survey method was adopted in this study. the questionnaires were distributed to industrial practitioners through private relationship and posted to subcontracting firms based on the information provided in the hong kong builders directory. only the respondents performing a subcontractor role in building projects were included in the data analysis. they were requested to complete the questionnaire based on their current projects or the projects with highest contract sum if they were handling several projects at the same time currently. in the questionnaire, they were requested to rate: from 0 (never happen) to 10 (happen every site activities) with 0.5 interval for the frequency of occurrence for each of the six critical site coordination problems; and from 0 (0%) to 10 (100%) with 0.5 interval for the achievement of time performance in their current projects at the time they filled the questionnaire. achievement of time in their projects was estimated by comparing the actual construction time with the planned programme. statistical technique the flow chart developed by kinnear and gray (2008) classified the nature of the research work into five types for the selection of the appropriate statistical technique for data analysis as per figure 1. as the nature of this research relates to the prediction of outcomes, multiple regression analysis is considered an appropriate approach for this study. figure 1 statistical technique selection flow-chart (kinnear and gray, 2009) australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    93 the literature review undertaken shows that multiple regression analysis is a common method for the researches involving forecasting models. regression techniques often have been used because of their relative simplicity in both concept and application. it has the ability to develop causal models where the structural relationships of the variable can be established in a predictable and explanatory way. walker (1995) used multiple regression analysis to build up models to forecast the time performance for projects in australia based on four variables. chan and kumaraswamy (1999), and leung and tam (1999) applied this technique to establish models to predict the overall duration and the hoisting time for a tower crane respectively for public housing projects. skitmore and ng (2003) adopted the same statistical approach using forward cross validation procedure to forecast the construction time and cost for the projects in australia based on six variables. for the multiple regression equations generated in this study, the time performance is the dependent variable and the six critical site coordination problems are the independent variables as per equation 1. time performance = a + b1scp1 + b2scp2+ b3scp3+ b4scp4+ b5scp5+ b6scp6 where scpi (critical site coordination problems) are the independent variables time performance is the dependent variable a is a constant which is the y-intercept bi is the partial regression coefficient for scp equation 1: form of multiple regression equation some of the variables of the regression equations can be eliminated without having significant impact to the accuracy of the regression equations. an analysis using six independent variables can generate sixty-three different computations. the backward elimination method was adopted to reduce the number of computations. the variable was eliminated if probability of f-to-remove was equal or greater than 0.100. in each stage of elimination process, the most insignificant independent variable was removed. the process would be terminated when no variable satisfied the elimination condition such that the ‘most critical’ site coordination problems were kept in the last stage of regression equation. validation the major conceptual limitation of all regression techniques is that one can only ascertain relationships, but never be sure about the underlying causal mechanism. for cross reference purposes, the neural networks technique was adopted to validate whether multiple regression is an appropriate form to represent the relationship between the site critical site coordination problems and the time performance. neural networks analysis was commonly adopted in recent research because it is designed to capture functional forms automatically, allowing the uncovering of hidden nonlinear relationships between the modeling variables. the models formulated by bhokha and ogunlana (1999), based on eleven independent variables and a three-layered back-propagation network to forecast the construction duration at the predesign stage of buildings in greater bangkok, and the model formulated by khosrowshahi (1999), based on eleven variables and a stochastic back-propagation paradigm with one hidden layer to predict the performance of the contractor at tender stage are typical applications of neural network analysis. this technique was also widely adopted in other studies such as: forecasting the cost index (wang and mei, 1998) and equipment productivity (ok and sinha, 2006); selection of vertical formwork systems (tam et al, 2005); and assessing the maintainability of building façade (chew, silva and tan, 2004). neuroshell2 software was selected for this study. a three-layer back-propagation paradigm neural network model was used to analyse the data. ten per cent of the data were extracted as the ‘test set’ for the network. as the nature of the problem is not a simple problem, complex australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    94 and noisy mode was selected. this action set the learning rate and momentum factors to 0.05 and 0.5 respectively. the number of hidden neurons was set to default number. the calibration interval was set to 50 in order to achieve maximum accuracy. the training was stopped when the new test set average errors was climbing generally or at least not close to the lowest that has been shown. this software would compile a file to compare the actual and predicted outputs, and calculate the correlation coefficient of the hidden network which could be used to measure the reliability of the network analysis. data analysis respondents one hundred and seventeen replies were received in this questionnaire survey. the respondents are classified into three categories and are summarized in table 3. type number of reply finishing work subcontractors 43 structural work subcontractors 34 building services work subcontractors 40 total 117 table 3 type of respondent coding system the coding system shown in table 2 and table 4 is used to simplify the description of the repeated terms and enhance the understanding of the flow of the data analysis work in this paper. in this study, the multiple regression analysis covered one main model that included all replies and three sub-models for each type of subcontractors. model code type of model type of subcontractor time-all main model all type of subcontractors time-fin sub-model finishing work subcontractors time-str sub-model structural work subcontractors time-bs sub-model building services work subcontractors table 4 subcontractor model coding system the regression equations of the models comprised six independent variables. for ease of reference, the regression equation containing all the variables is called standard form regression equation. the last stage regression equation containing the ‘most critical’ site coordination problems generated in the backward elimination process is called the simple form regression equation. table 5 lists the regression equation codes for different models. regression equation code form of regression equation time-all-1 standard form time-all-final simple form time-fin-1 standard form time-fin-final simple form time-str-1 standard form time-str-final simple form time-bs-1 standard form time-bs-final simple form table 5 regression equation coding system australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    95 table 7 correlation coefficients of time-all model descriptive statistics table 6 summarizes the descriptive statistics for the achievements in the time performance in the current projects of the respondents. the mean score is around 6.94. this reflects that most of the respondents were able to achieve around 70 per cent of their target standards in time performance. the standard deviation is not high. only around 10 per cent of the respondents claimed that their projects could fully achieve the planned targets. project outcome mean score for achievement in project outcome standard deviation maximum score minimum score time 6.940 1.579 10.0 1.0 table 6 descriptive statistics for time performance achievement outlier mahalanobis statistical method was adopted to detect extreme cases. two outlier cases were found and deleted from the data pool in order to achieve a more accurate result. one hundred and fifteen cases were eventually included in the multiple regression analysis. analysis for all type of subcontractors (time-all) correlation coefficients of time-all model table 7 summarizes the pearson correlation coefficient (r), which describes how well the model fits the data, of the six site coordination problems in a descending order of priority of their absolute values. all the correlation coefficients are of negative values because the time performance achievement of the subcontractors would be deteriorated with the increase in occurrence of the site coordination problems. four out of the six site coordination problems have good correlation with time performance as their absolute scores are above 0.5. selecting variables for time-all model four stage equations were computed in the backward elimination analysis as shown in table 8. scp1, scp2 and scp3 were kept in the time-all-final regression equation. this shows that subcontractors’ time performance mainly depends on the occurrence of short notice to commence site work (scp1), late to provide plant support (scp2) and interfacing work by other subcontractor not yet completed (scp3). model regression equation time-all-1 time = 11.645 0.229xscp1 0.343xscp2 0.314xscp3 -0.031xscp4 + 0.001xscp5 0.068xscp6 time-all-2 time = 11.647 0.229xscp1 0.342xscp2 0.314xscp3 0.031xscp4 -0.068xscp6 time-all-3 time = 11.594 0.239xscp1 0.354xscp2 0.315xscp3 0.071xscp6 time-all-final time = 11.384 0.259xscp1 0.368xscp2 0.320xscp3 table 8 regression equations of time-all model variable pearson correlation coefficient (r) scp3 -0.666 scp2 -0.650 scp1 -0.627 scp4 -0.560 scp6 -0.411 scp5 -0.392 australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    96 explaining the variability of time-all model r is the absolute value of pearson correlation coefficient (r). r and r square describes what proportion of the variability of the dependent variable is explained by the regression equation. adjusted r square can estimate how well the equation fits another set of data from the same population. table 9 summarizes the r, r square and adjusted r square for the four stage regression equations. all the four stage regression equations are closely related to time performance as their r values are over 0.7. the r values for first two stage regression equations are the same. scp5 and scp4 are thus not too critical to subcontractors’ time performance. model variable removed r r square adjusted r square time-all-1 0.762 0.581 0.577 time-all-2 scp5 0.762 0.581 0.561 time-all-3 scp4 0.762 0.580 0.565 time-all-final scp6 0.760 0.577 0.566 table 9 r, r square and adjusted r square values of time-all model analysis for finishing work subcontractors (time-fin) correlation coefficients of time-fin model forty-three out of the 117 respondents were finishing work subcontractors. the site problems are strongly related to time performance in the finishing work subcontracts as all their absolute r coefficients are above 0.5 as shown in table 10. scp2, scp4 and scp1 are very strongly related to time performance as their absolute values are over 0.75. compared with the time-all model, all the variables of time-fin model have higher absolute value. this indicates that the site coordination problems of the finishing work subcontractors are more correlated to time performance. variable a b c scp2 -0.823 -0.650 0.173 scp4 -0.781 -0.560 0.221 scp1 -0.763 -0.627 0.136 scp3 -0.683 -0.666 0.017 scp6 -0.648 -0.411 0.237 scp5 -0.529 -0.392 0.137 table 10 correlation coefficients of time-fin model a: pearson correlation coefficient (r) of time-fin model b: pearson correlation coefficient (r) of time-all model c: absolute value of the difference between a and b selecting variables for time-fin model the time-fin-final regression equation listed in table 11 shows that time performance of finishing work subcontractors depends mainly on three site coordination problems: late to provide plant support (scp2), interfacing work not accurately completed (scp4) and construction information unclear or contradictory (scp6). the time-all-final equation also consists of three independent variables. however, only scp2 is common in both of the time-all-final equation and sp-time-fin-final equation. australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    97 model regression equation time-fin-1 time = 13.896 0.265xscp1 0.429xscp2 0.094xscp3 0.300xscp4 – 0.158xscp5 0.194xscp6 time-fin-2 time = 13.794 0.293xscp1 0.466xscp2 0.280xscp4 0.166xscp5 0.223xscp6 time-fin-3 time = 13.456 0.256xscp1 0.530xscp2 0.290xscp4 0.282xscp6 time-fin-final time = 13.375 – 0.607xscp2 – 0.384xscp4 – 0.333xscp6 table 11 regression equations of time-fin model explaining the variability of time-fin model table 12 shows that the four stage equations are very strongly related to time performance as their r values are around 0.9. time-fin-final equation is more strongly related to time performance than time-all-final equation as its r value is 0.130 higher. model variable removed r r square adjusted r square time-fin-1 0.906 0.821 0.791 time-fin-2 scp3 0.905 0.818 0.794 time-fin-3 scp5 0.898 0.806 0.786 time-fin-final scp1 0.890 0.792 0.776 table 12 r, r square and adjusted r square values of time-fin model analysis for structural work subcontractors (time-str) correlation coefficients of time-str model thirty-four out of the 117 replies were from the structural work subcontractors. table 13 shows that there are only slight differences in the r values of the variables between time-str model and time-all model. four variables have absolute r coefficients above 0.5. variables a b c scp3 -0.742 -0.666 0.076 scp2 -0.724 -0.650 0.074 scp1 -0.692 -0.627 0.065 scp4 -0.532 -0.560 -0.028 scp5 -0.409 -0.392 0.017 scp6 -0.346 -0.411 -0.065 table 13 correlation coefficients of time-str model a: pearson correlation coefficient (r) of sp-time-str model b: pearson correlation coefficient (r) of sp-time-all model c: absolute value of the difference between a and b. selecting variables for time-str model the time-str-final equation shown in table 14 consists of scp1, scp2 and scp3 which are the same of time-all-final equation. this indicates that time performance of the structural australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    98 subcontractors depends mainly on three site coordination problem: short notice to commence site work (scp1), late to provide plant support (scp2) and interfacing work by other subcontractor not yet completed (scp3). model regression equation time-str-1 time = 12.299 0.350xscp1 0.421xscp2 0.420xscp3 + 0.117xscp4 + 0.119xscp5 0.155xscp6 time-str-2 time = 12.542 0.314xscp1 0.403xscp2 0.422xscp3 + 0.127xscp4 0.137xscp6 time-str-3 time = 12.658 0.285x scp1 0.352x scp2 0.393xscp3 0.114xscp6 time-str-final time = 12.227 0.271x scp10.407xscp2 0.394xscp3 table 14 regression equations of time-str model explaining the variability for time-str model table 15 shows that the four stage equations of time-str model are very strongly related to time performance as their r values are above 0.8. the change in r values is consistent in each stage of elimination process. scp4, scp5 and scp6 have similar amount of influence on the time performance of the structural work subcontractors. time-str-final equation is slightly stronger related to time performance than that of time-all-final equation as its r value is just 0.071 higher. model variable removed r r square adjusted r square time-str-1 0.844 0.712 0.648 time-str-2 scp 5 0.840 0.706 0.654 time-str-3 scp 4 0.836 0.698 0.657 time-str-final scp 6 0.831 0.697 0.660 table 15 r, r square and adjusted r square values of time-str model analysis for building services work subcontractors (time-bs) correlation coefficients of time-bs model forty out of the 117 replies were from the building services work subcontractors. in the building services work, only scp3 is strongly related to time performance as its absolute r coefficient is above 0.7 as shown in table 16. four out of six variables have the absolute r coefficients lower than 0.5. compared with the time-all model, four variables have lower absolute r coefficients. variables a b c scp3 -0.711 -0.666 0.045 scp1 -0.513 -0.627 -0.114 scp2 -0.418 -0.650 -0.232 scp5 -0.394 -0.392 0.002 scp4 -0.371 -0.560 -0.189 scp6 -0.258 -0.411 -0.153 table 16 correlation coefficients of time-bs model a: pearson correlation coefficient (r) of time-bs model b: pearson correlation coefficient (r) of time-all model c: absolute value of the difference between a and b australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    99 selecting variables for time-bs model six stage equations summarized in table 17 were established in the backward elimination analysis. the time-bs-final equation only has one independent variable, scp3. this indicates that the time performance of the building services work subcontractors depends heavily the occurrence of incomplete interfacing work (scp3). this result matches the high absolute r coefficient of scp3. model regression equations time-bs time = 8.906 0.075xscp1 0.120xscp2 0.498xscp3 + 0.191xscp4 0.047xscp5 + 0.062xscp6 time-bs-1 time = 8.907 0.057xscp1 0.108xscp2 0.514xscp3 + 0.160xscp4 + 0.046xscp6 time-bs-3 time = 8.922 0.098xscp2 0.540xscp3 + 0.137xscp4 + 0.029xscp6 time-bs-4 time = 9.018 0.090xscp2 0.536xscp3 + 0.141xscp4 time-bs-5 time = 8.996 0.554xscp3 + 0.097x scp4 time-bs-final time = 9.361 0.506xscp3 table 17 regression equations of time-bs model explaining the variability of time-bs model the r values for the six stage regression equations of sp-time-bs model shown in table 18 are all above 7, which show that they are all strongly related to the time performance. the time-bs-1 equation and time-bs-2 equation have the same r values. scp5 thus has no significant impact to the time performance of the structural subcontractors. the different between the time-bs-1 and time-bs-final is just 0.011, which reflects that scp3 is dominant in the time performance analysis. time-bs-final equation is not as accurate as time-all-final equation in explain the time performance for subcontractors as its r value is 0.049 lower. model variable removed r r square adjusted r square time-bs-1 0.722 0.522 0.435 time-bs-2 scp5 0.722 0.521 0.450 time-bs-3 scp1 0.721 0.519 0.464 time-bs-4 scp6 0.720 0.518 0.478 time-bs-5 scp2 0.716 0.513 0.487 time-bs-final scp4 0.711 0.506 0.493 table 18 r, r square and adjusted r square values of time-bs model neural network analysis the neural network analysis results for different models are summarised in the descending order of priority of their correlation coefficients in table 19. all the models computed by neuroshell2 software fit the data very well as their correlation coefficients are over 0.7. the outputs of time-fin models have the highest r coefficients. australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    100 neural network output a b c d time-fin-1 0.905 10 43 0.0035768 time-fin-final 0.900 8 43 0.0067964 time-str-1 0.832 9 34 0.0007867 time-str-final 0.873 8 34 0.0008179 time-all-1 0.763 14 117 0.0006010 time-all-final 0.763 12 117 0.0006462 time-bs-1 0.706 10 40 0.0000577 time-bs-final 0.772 7 40 0.0000046 table 19 neural network analysis a: correlation coefficient b: number of hidden neurons c: number of patterns processed d: minimum error when the training was stopped table 20 compares the correlation coefficients of the regression equations with the neural network analysis outputs. the correlation coefficients computed by these two methods are quite consistent and the maximum difference is only 0.061. as all the correlation coefficients are high, it is reliable to conclude that multiple regression equation is an appropriate form to explain the relationship between the time performance of subcontractors and the occurrence of the site coordination problems. model a b c d time-fin-1 all 0.906 0.905 0.001 time-fin-final scp2, scp4, scp6 0.890 0.900 -0.010 time-str-1 all 0.844 0.832 0.012 time-str-final scp1, scp2, scp3 0.831 0.874 -0.043 time-all-1 all 0.762 0.763 -0.001 time-all-final scp1, scp2, scp3 0.760 0.763 -0.003 time-bs-1 all 0.722 0.706 0.016 time-bs-final scp3 0.711 0.772 -0.061 table 20 comparison of multiple regression analysis and neural network analysis a: independent variables included in the model b: correlation coefficient computed by multiple regression method c: correlation coefficient computed by neural network method d: difference of b and c conclusion there are increasing complaints from subcontractors that they could not perform effectively and efficiently due to poor site coordination by main contractors in the hong kong building projects. a questionnaire survey was conducted to investigate how the site coordination problems affect the time performance of subcontractors. the survey findings show that subcontractors in the hong kong building projects were only able to achieve on average 70 per cent of their planned time performance targets. only about 10 per cent of them could complete their work according to project programs. australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    101 relationships multiple regression was used to generate equations to explain the time performance of the subcontractors based on the occurrence of critical site coordination problems. the data were also processed by neural network software as a cross check on the accuracy of the regression equations. the analysis covered one main model and three sub-models for the overall data and different types of subcontractors respectively. table 21 summarizes the standard form regression equations for different models in descending order of their r values. the equations may be used to explain the relationships between time performance and site coordination problems as their r values are all above 0.7. model regression equation r value time-fin-1 time = 13.896 0.265xscp1 0.429xscp2 0.094xscp3 0.300xscp4 – 0.158xscp5 0.194xscp6 0.906 time-str-1 time = 12.299 0.350xscp1 0.421xscp2 0.420xscp3 + 0.117xscp4 + 0.119xscp5 0.155xscp6 0.844 time-all-1 time = 11.645 0.229xscp1 0.343xscp2 0.314xscp3 -0.031xscp4 + 0.001xscp5 0.068xscp6 0.762 time-bs-1 time = 8.906 0.075xscp1 0.120xscp2 0.498xscp3 + 0.191xscp4 0.047xscp5 + 0.062xscp6 0.722 table 21 r values for the standard form regression equation ‘most critical’ site coordination problems some of the independent variables (critical site coordination problems) of the regression equations can be eliminated without imposing any significant influence to the dependent variable (time performance). the analysis was conducted by means of backward elimination method. the results of the analysis can enable the local main contractors to focus their efforts in handling the ‘most critical’ site coordination problems which are the independent variables remained in the last regression equations generated in the elimination process. table 22 analyses the importance of the critical site coordination problems. late to provide plant support (scp2) and interfacing work not yet completed (scp3) are the ‘most critical’ site coordination problems to subcontractors’ time performance as they are the independent variables of three out of the four simple form regression equations in this study. main contractor can pay less attention to insufficient construction information problem (scp5) and contradictory construction information (scp6) as none of the simple form regression equation has these independent variables. site coordination problem no. type of subcontractor scp2 3 all type; finishing work; structural work scp3 3 all type; structural work; building services work scp1 2 all type; structural work scp4 1 finishing work scp5 0 scp6 0 table 22 importance of the site coordination problem no.: total number of simple form regression equations consists of that site coordination problem. australasian journal of construction economics and building ng, a k w and price, n d f (2010)  ‘optimizing  the  time performance of subcontractors  in  the building projects’,  australasian journal of construction economics and building, 10 (1/2) 90‐102    102 references bhokha s. and ogunlana so. (1999) ‘application of artificial neural network to forecast construction duration of buildings at the predesign stage’, engineering, construction and architectural management, 1996 6/2, 133-144 census and statistics department (2009) census and statistics, hong kong sar government chan, dwm. and kumaraswamy, mm. (1999) ‘modelling and predicting construction durations in hong kong public housing’, construction management and economics, 17, 351-362 chew m. y. l., silva n d. and tan s. s. (2004) ‘a neural network approach to assessing building façade maintainability in the tropics’, construction management and economics, 22, 581-594 frisby, t. n. (1990) survival in the construction business: checklists for success, r.s. means, kingston, mass kadir, mr, abdul, lee, wp, jaafar, ms, sapuan, sm, and ali, aaa, (2005), ‘factors affecting construction labour productivity for malaysian residential projects’, structural survey, 23 (1), 2005, 42-54 khosrowshahi f. (1999) ‘neural network model for contractors’ prequalification for local authority projects, engineering, construction and architectural management, 6 (3), 315-328 kinnear, pr. and gray, dc, (2008) spss15 made simple, taylor & francis, london leung awt. and tam cm. (1999) ‘prediction of hoisting time for tower cranes for public housing construction in hong kong’, construction management and economics 17, 305-314 ng, k. w. a. and price, a. d. f. (2005) ‘assessing the impact of main contractor’s site co-ordination on sub-contractors’ performance in hong kong’ proceedings of the annual conference 2005, association of researchers in construction management, u.k skitmore, rm and ng, st, (2003) ‘forecast models for actual construction time and cost’, building and environment, 38 (8) 1075-83 ok, sc and sinha, sk, (2006) ‘construction equipment productivity estimation using artificial neural network model’, construction management and economics, 24, 1029-1044 sozen, z. and kucuk, ma, (1999) ‘secondary subcontracting in the turkish construction industry, construction management and economics, 17, 215-220 tam, cm, tong, tkl, lau tct and chan kk, (2005) ‘selection of vertical formwork system by probabilistic neural networks models’, construction management economics, 23, 245-254 walker, d. (1995) ‘an investigation into construction time performance, construction management and economics, 13, 263-274 wang ch. and mei, yh, (1998) ‘model for forecasting construction cost indices in taiwan’, construction management and economics, 16, 147-157 http://eprints.qut.edu.au/4137/ abstract introduction subcontracting critical site coordination problems aim and objectives research methodology data collection statistical technique validation data analysis respondents coding system descriptive statistics outlier analysis for all type of subcontractors (time-all) correlation coefficients of time-all model explaining the variability of time-all model analysis for finishing work subcontractors (time-fin) correlation coefficients of time-fin model selecting variables for time-fin model analysis for structural work subcontractors (time-str) correlation coefficients of time-str model selecting variables for time-str model explaining the variability for time-str model analysis for building services work subcontractors (time-bs) correlation coefficients of time-bs model selecting variables for time-bs model neural network analysis conclusion relationships ‘most critical’ site coordination problems references 502 bad gateway 502 bad gateway nginx microsoft word ajceb vol.2 no.1 compiled sized.doc modelling client satisfaction levels: the impact of contractor performance the australian journal of construction economics and building vol.2 no.1 13 modelling client satisfaction levels: the impact of contractor performance robby soetanto and david g. proverbs university of wolverhampton introduction traditionally, the main participants of the construction project coalition (pc) are the client, the architect and the contractor. the interactions and interrelationships between these participants largely determine the overall performance of a construction project (smith and wilkins, 1996; egan, 1998). the performance of these participants is also interdependent (higgin and jessop, 1965; mohsini, 1989). hence, in order to perform effectively, a reciprocal requirement exists, whereby each participant requires the other participants to perform their duties effectively and in harmony with others. notwithstanding this mutual dependency, the performance of individual participants remains important because overall project performance is a function of the performance of each participant (liu and walker, 1998). uk contractors have long been criticised for their failure to fulfil the needs of their clients (latham, 1994; egan, 1998). in a broader sense, contractors should also perform to the satisfaction of other pc participants (e.g. architects) to maintain harmonious working relationships. this is because harmonious working relationships are essential if projects are to be successful (baker et al., 1988; smith and wilkins, 1996; egan, 1998). there is a need therefore, to investigate contractor performance from the viewpoint of other pc participants (especially clients), from which models for predicting levels of (client) satisfaction can be developed. the objective of this paper is to present and describe the development of such models which were developed using the multiple regression (mr) technique. the models could be used to identify attributes influencing satisfactory contractor performance assessment. this would ultimately help to improve performance and enhance satisfaction for the betterment of overall project performance. conceptual model of performance assessment satisfaction is regarded as an internal frame of mind, tied only to mental interpretations of performance levels (oliver, 1997). that is, a performance assessor (e.g. client or architect) will have their own psychological interpretation of the performance of others (e.g. contractors). this psychological process is subjective and difficult to interpret. based on this theorem, a conceptual model of performance assessment has been developed (refer to figure 1). figure 1: conceptual performance assessment model objective performance assessment subjective performance assessment performance assessment participant performance attributes project attributes project performance assessor and company assessor attributes satisfaction performance attributes satisfaction attributes robby soetanto and david g. proverbs 14 the australian journal of construction economics and building vol.2 no.1 conceptually, the outcomes of performance assessment (in terms of satisfaction levels) can be influenced by two major attributes; those of the performer (i.e. performance attributes) and those of the assessor (i.e. satisfaction attributes). satisfaction attributes are differentiable from performance attributes mainly due to their unique nature, being inherent within an individual (i.e. assessor). that is, performance attributes may reflect on both participants and projects, and will influence both participant and project performance. in contrast, satisfaction attributes reflect solely on the assessor and influence their performance assessment and as such are beyond the control of the performer. performance attributes consist of participant attributes and project attributes. participant attributes represent the characteristics or nature of a particular participant or their organisation, such as company age and turnover. project attributes represent the characteristics/nature of a project, comprising attributes which may be outside the control of the participants. controllable attributes are, for example, forms of contract, procurement route, and extent of design completed prior to work on site. uncontrollable attributes include type of project, ground and weather conditions. satisfaction attributes include the personal attributes of the individual assessor (e.g. experience, vocational background) and attributes of their employer (e.g. company assessor attributes). company attributes are characteristics of the assessor’s company, which may influence their assessment (e.g. company age, turnover, number of employees). figure 1 demonstrates the relationships between these variables. the performance attributes of a participant have a direct influence on their own performance in the construction process. project attributes indirectly influence the participant’s performance since the attributes may enable/hamper the participant in executing their duties. performance assessment in this respect is considered as ‘objective’ (i.e. tangible) in nature. for example, contractor performance may be assessed in terms of cost, time and quality performance (holt, 1995). however, performance assessment goes beyond the objective aspects outlined above since it involves the feelings of the assessor, which in turn are dependent on their background, i.e. frame of reference. this assessment is considered ‘subjective’ and at a higher level. this research embraces both ‘objective’ and ‘subjective’ (or higher level) performance assessment. in this case, satisfaction is measured using predetermined performance criteria, which are explained in research methodology section. a list of all performance and satisfaction attributes (as independent variables) identified from the literature is presented in table 1 (column 1). using the correlation technique, possible significant variables for modelling were selected and are shown in column 2. some degree of multicollinearity was found in several groups of variables. to rectify this problem, those variables which were highly correlated were combined into a single indicator as suggested by lewis-beck (1993). the variables used for modelling are presented in column 3. modelling client satisfaction levels: the impact of contractor performance the australian journal of construction economics and building vol.2 no.1 15 table 1: list of independent variables of clients' assessment of contractor performance identified variables possible significant variables at 5% variables for modelling variable name measure satisfaction attributes assessor rsedu (1,2,3) respondent education nominal rspro involved in project years rscom working for company years rs5yr involved in similar projects within 5 years no. rssatpr satisfaction on project performance likert 0–10 rssatco rssatco satisfaction on contractor performance likert 0–10 rscon1 perception on contractor image likert 0–10 rscon2 rsco24 perception on contractor claims likert 0–10 rscon3 perception on contractor on time likert 0–10 rscon4 perception on contractor contractual likert 0–10 rscon5 rsco57 perception on contractor untidy likert 0–10 rscon6 perception on contractor inefficient likert 0–10 rscon7 perception on contractor technology likert 0–10 company assessor clnat nature of client business nominal cl/arest company establishment years cl/aremp number of employees no. cl/arato company annual turn over sterling (m) cl/arabwno no. annual building works no. cl/arabwva total value of annual building works sterling (m) performance attributes project prtpr (1,2) prtpr (1,2) type of project nominal prtbd (1,2,3,4) prtbd (1,2,3,4) type of building nominal prsto prsto number of storeys no. prgfa gross floor area area (m^2) pr5yr procured similar projects within 5 years no. prrou (1,2,3) prrou (1,2,3) procurement route nominal prctr (1, 2, 3) form of contract nominal prcla clarity and understanding of contract likert 0–10 prdurpl prdurpl planned duration time (months) prdurov prdurov overrun yes/no prdurti prdurti overrun duration time (months) prbudte prbudte tender sum sterling (m) prbudov prbudov overbudget yes/no prbudmo prbudmo overbudget cost sterling (m) prvarse prvarse severity of variations likert 0–10 prvarfr frequency of variations likert 0–10 prvarcl cause of variations by client likert 0–10 prvarar cause of variations by architect likert 0–10 prvarco prvarco cause of variations by contractor likert 0–10 prvarot cause of variations by others likert 0–10 prcomde prcomde design complexity likert 0–10 prcomcs construction complexity likert 0–10 prdesco design completed before work on site percentage prcongr prcongr constraint by ground conditions likert 0–10 prconwe prconwe constraint by weather conditions likert 0–10 prcongo constraint by government regulations likert 0–10 prlocac prlocac ease of access to project location likert 0–10 prlocco remoteness from contractor office likert 0–10 print print interaction between contractor and architect likert 0–10 contractor cosi (1,2,3,4) contractor size (catchment) ordinal coato (1,2,3,4) company annual turn over ordinal coemp (1,2,3,4) number of employees ordinal coest company establishment years cowkdbf no. previous project undertaken by contractor no. cowl cowl architect work load likert 0–10 robby soetanto and david g. proverbs 16 the australian journal of construction economics and building vol.2 no.1 table 1 (continued) identified variables possible significant variables at 5% variables for modelling variable name measure coselco (1, 2) coselco (1, 2) method of contractor selection nominal coevacl/ar coevacl/ar contractor evaluation prior contract award likert 0–10 copayco (1, 2) copayco (1, 2) method of contractor payment nominal codifest difference between estimate and contractor bid percentage codifsec difference between contractor bid and second percentage coinfap influence on appointment of site personnel likert 0–10 coperco coperco previous relationship with site personnel yes/no coattfi coatfisi contractor attributes: financial soundness likert 0–10 coattty contractor attributes: experience in type of proj. likert 0–10 coattsi contractor attributes: experience in size of proj. likert 0–10 coattge contractor attributes: exp. in geographical area likert 0–10 coattre coattre contractor attributes: references likert 0–10 coattpp coatppqu contractor attributes: past performance likert 0–10 coattsc contractor attributes: time reputation likert 0–10 coattbu contractor attributes: cost reputation likert 0–10 coattqu contractor attributes: quality reputation likert 0–10 coattli coatliim contractor attributes: litigation reputation likert 0–10 coattim contractor attributes: claim reputation likert 0–10 coattdi coattdi contractor attributes: director likert 0–10 coattsp coattsp contractor attributes: site personnel likert 0–10 coatths coatths contractor attributes: health and safety likert 0–10 coatttr coatttr contractor attributes: training regime likert 0–10 coattqc coattqc contractor attributes: quality control likert 0–10 coattsu coatsula contractor attributes: subs and suppliers likert 0–10 coattla contractor attributes: labour likert 0–10 coattpl contractor attributes: plant likert 0–10 coattwr coattwr contractor attributes: working relationship likert 0–10 coscrta contractor selection criteria: technical likert 0–10 coscrpe contractor selection criteria: past experience likert 0–10 coscrqp contractor selection criteria: quality and programme likert 0–10 coscrre contractor selection criteria: reference likert 0–10 coscrte contractor selection criteria: tender sum likert 0–10 coscrpu contractor selection criteria: reputation likert 0–10 research methodology in the context of this paper, contractor performance criteria are defined as those used to measure the performance of contractors based on the views of clients. these criteria were determined through interviews with twelve experienced clients and supported by a literature review in the domain of (contractor) performance. these criteria were categorised under several main headings. a full list of the criteria identified is presented in table 2. modelling client satisfaction levels: the impact of contractor performance the australian journal of construction economics and building vol.2 no.1 17 table 2: list of contractor performance criteria based on clients' opinion contractor performance criteria code pre-construction stage ~ first interview and presentation p1 ~ ability and willingness to help develop brief p2 ~ contribution to design and buildability of project p3 ~ plan of work and method statement p4 ~ understanding of contract and specifications p5 construction stage site management ~ site supervision and control s1 ~ site organisation, tidiness and cleanliness s2 ~ ability to plan and programme properly s3 ~ health and safety performance / management s4 ~ compliance to regulations (cdm, etc.) s5 resource management ~ material management r1 ~ man power management (sufficient quantity and quality of craftsmen) r2 ~ equipment and plant management r3 ~ management and co-ordination of subcontractors and suppliers r4 ~ payment to subcontractors and suppliers (on time) r5 ~ strength of contractor site team (i.e. quantity) r6 ~ concern/awareness of environmental issues r7 site personnel ~ co-operation with client (i.e. client representative) e1 ~ individual performance and ability e2 ~ project manager performance and adequacy of authority e3 ~ site manner (i.e. no loud noises and swearing) e4 variations and drawings ~ processing variations (e.g. speed, flexibility) v1 ~ preparation of shop drawings and as-built drawings v2 ~ contribution to development of design drawings v3 completion stage and ease of delivery ~ completion of defects c1 ~ smoothness of operation and hand-over c2 ~ quality of hand-over document (o&m manual, h&s) c3 ~ ease / speed of settlement of final account c4 ~ ease of delivery (general feeling on how things went) c5 principal ~ adherence to schedule (time performance) m1 ~ adherence to budget (cost performance) m2 ~ quality of construction and workmanship m3 quality of service ~ handling of complaints (effectiveness) q1 ~ telephone inquiries and correspondence handled courteously and adequately q2 ~ speed and reliability of service q3 ~ responsiveness to client’s queries q4 ~ ability to make rapid decisions q5 ~ commitment of key person (active & continuous) q6 ~ corporate hospitality q7 ~ administration q8 attitude ~ honesty and integrity a1 ~ collaborative / spirit of co-operation / team work a2 ~ customer focus / proactive to understand client a3 ~ keep the client informed a4 ~ communication (to coalition member & site person) a5 ~ pro-active attitude toward problems a6 ~ avoidance of claims (i.e. not claims conscious) a7 ~ responsibility for their decision (understand the cost of their recommendations) a8 robby soetanto and david g. proverbs 18 the australian journal of construction economics and building vol.2 no.1 the questionnaire to provide the main modelling data, a questionnaire was developed based on the attributes and performance criteria identified. respondents (clients) were asked to identify a recent (within 2 years) uk building project in which they were involved (referred to as the ‘case project’). respondents were asked to relate all their answers to the questions contained in the questionnaire to this one case project. this strategy was designed in order to capture a true and realistic reflection of assessors’ satisfaction/ dissatisfaction feelings. to protect the confidentiality of the other parties involved in these case projects, respondents were not asked to identify projects, nor to name other participants. the survey following the development of the questionnaire and implementation of a pilot survey, a uk-wide questionnaire survey of clients was conducted. distribution involved 536 experienced uk private and public clients, defined as those who regularly procure construction works from the industry. private clients consisted of developers, retailers and financial institutions. retailers and financial institutions were identified from the listing of key british enterprises (dun and bradstreet, 1998) representing the top uk retailers and financial institutions. developers were identified from the estates gazette (1999). public clients, i.e. local authorities or city councils, were identified from the municipal year book (1999). overall, 77 responses were received representing a 14.4% response rate. this relatively low response rate is about the ‘norm’ for construction management research and in many ways can be associated with the ‘confidential’ nature of the questions and the comprehensive nature of the research instrument. dimensions of client satisfaction in this research, satisfaction is measured using an interval scale (i.e. scale 0–10) which assumes that satisfaction is a matter of degree, not an all or none property. to measure an abstract concept such as satisfaction, the concept should be defined at an operational (i.e. lower) level, which is observable and directly measurable (johnson and fornell, 1991). if the relationship between the abstract concept and the operational definition of satisfaction (i.e. performance criteria) is strong, the measurement instrument can be considered as valid and reliable to represent the abstract concept (carmines and zeller, 1979). to derive the dimensions of client satisfaction the factor analysis technique was applied to the performance criteria of 50 responses (case projects). the kaisermeyer-olkin (kmo) measure of sampling adequacy (0.673) confirmed that the factor analysis technique could be meaningfully applied (norusis, 1994: 52–53). this was further confirmed by bartlett’s test of sphericity (chi-square = 3198.153, p < 0.0005). this technique has been previously used in construction research. for example, sawacha et al. (1999) utilised the factor analysis technique to determine the group of factors affecting site safety performance. langford et al. (2000) used factor analysis to identify factors that prompted the strongest effect upon attitudes to safety management. chan et al. (2001) used factor analysis to categorise project success factors into smaller number of groups. the main purpose was to determine the number of common factors (i.e. satisfaction dimensions) that would satisfactorily produce the correlations among the observed variables (kim and mueller, 1978a). the method of extraction was principal components analysis. this method allows for data reduction and is considered as a means of exploring interdependence of variables. the number of factors determined was based on the criterion that the eigenvalue for each factor should be greater than 1 (i.e. kaiser’s criterion) (torbica, 1997; bryman and cramer, 1999). this method is considered the most commonly used procedure to determine the number of initial factors to be extracted (kim and mueller, 1978b). to achieve the simplest possible factor structure in order to obtain more interpretable factors/dimensions, promax oblique rotation with the power (kappa) valued at 4 was utilised. oblique rotation (as opposed to orthogonal rotation) was utilised since it allows the presence of correlations between factors/dimensions. in fact, this assumption concurs with the real life situation since one aspect of performance should be, to some extent, related to other aspects. further, norusis (1994) claimed that oblique rotations modelling client satisfaction levels: the impact of contractor performance the australian journal of construction economics and building vol.2 no.1 19 have often been found to yield substantively meaningful factors since it is likely that influences in nature are correlated. promax has a reputation for demonstrable quality as evidenced in empirical studies (gorsuch, 1983). promax rotation raises the factor loading to a higher power in order that moderate and low loadings need to be lower while the high loadings remain relatively high (gorsuch, 1983.). for example, the original loadings were 0.9 and 0.3. 0.3 is one-third as large as 0.9, but the squared loading for the second variable is 0.09 which is one-ninth as large as the squared loading for the first variable (0.81). by raising the power of factor loadings, the factor structure becomes more interpretable. the power is known as the coefficient kappa (k). gorsuch recommended that the proper power is that which gives the simplest structure with the least correlation among factors. furthermore, he claimed that a good solution is generally achieved by raising the loadings to a power of four (spss default). in this research, kappa = 2 and 6 were trialed, but these did not derive better solutions than kappa = 4. five dimensions of client satisfaction were extracted and altogether represent 76% of the variations in the variables (refer to table 3). the scores of the performance criteria under each dimension were then averaged to obtain the satisfaction measure (i.e. factor score). the factor score serves as an index of attitude towards a particular dimension of satisfaction under investigation (torbica, 1997). from the original 48 performance criteria, 28 were included in one of the five factors. the validity and reliability of the satisfaction measures were confirmed. the validity assessment included the assessment of content, criterion-related and construct validity. the reliability of the measures (in terms of their internal consistency reliability) was assessed using coefficient cronbach’s alpha. for a full description of the validity and reliability of empirical measurement, readers may wish to consult bohrnstedt (1970), nunnally (1978), carmines and zeller (1979) and litwin (1995). in construction, torbica (1997) used a similar method for testing the validity and reliability of satisfaction measures of home buyers. robby soetanto and david g. proverbs 20 the australian journal of construction economics and building vol.2 no.1 table 3: factor structure of contractor performance criteria based on clients' assessment contractor performance criteria code factor loading eigenvalues percentage of variance explained cumulative percentage of variance explained satis1: 'quality of service and attitude of contractor' ~ quality of hand-over document (o&m manual, h&s) c3 0.827 28.873 60.151 60.151 ~ telephone inquiries and correspondence handled courteously and adequately q2 0.864 ~ speed and reliability of service q3 0.833 ~ ability to make rapid decisions q5 0.862 ~ administration q8 0.871 ~ ability to keep the client informed a4 0.930 ~ communication (to coalition member and site person) a5 0.903 ~ responsibility for their decisions (understand the cost of their recommendations) a8 0.764 satis2: 'main performance criteria and completion' ~ completion of defects c1 0.794 2.852 5.941 66.092 ~ ease / speed of settlement of final account c4 0.804 ~ ease of delivery (general feeling on how things went) c5 0.922 ~ adherence to schedule (time performance) m1 0.808 ~ adherence to budget (cost performance) m2 0.898 ~ quality of construction and workmanship m3 0.861 satis3: 'performance in preliminary stage' ~ first interview and presentation p1 0.759 2.067 4.306 70.399 ~ ability and willingness to help develop brief p2 0.839 ~ contribution to design and buildability of project p3 0.727 ~ plan of work and method statement p4 0.900 ~ understanding of contract and specifications p5 0.779 satis4: 'performance of site personnel' ~ co-operation with client (i.e. client representative) e1 0.893 1.374 2.862 73.260 ~ individual performance and ability e2 0.849 ~ project manager performance and adequacy of authority e3 0.870 ~ collaborative / spirit of co-operation / team work a2 0.841 ~ pro-active attitude toward problems a6 0.844 satis5: 'performance in resource management' ~ material management r1 0.908 1.239 2.581 75.841 ~ equipment and plant management r3 0.835 ~ concern/awareness of environmental issues r7 0.824 ~ site manner (i.e. no loud noises and swearing) e4 0.778 modelling client satisfaction levels: the impact of contractor performance the australian journal of construction economics and building vol.2 no.1 21 multiple regression technique as the purpose of the analysis was to develop models to predict levels of client satisfaction (a matter of degree, not an all or nothing property), the multiple regression (mr) technique was chosen as the modelling tool. moreover, preliminary data examination showed a degree of linear relationship between dependent and independent variables. that is, mr represented an appropriate methodology for data of this nature (lewis-beck, 1993). the stepwise method for inclusion/exclusion of independent variables was utilised. stepwise multiple regression is the most commonly used method for model building (everitt and dunn, 1991; norusis, 1995; bryman and cramer, 1999). draper and smith (1981) and kinnear and gray (2000) regarded step-wise as one of the best variable selection procedures. the procedure selects the independent variables step by step. at each step variables already in the equation are evaluated according to the selection criteria for removal, and variables not in the equation are evaluated for entry. this process repeats until no variable in the block is eligible for entry or removal (norusis, 1995). fstatistics with probability of 5% and 10% were employed for entry and removal criteria as suggested by draper and smith (1981: 311). client satisfaction models in total, seven models were developed to predict levels of client satisfaction based on contractor performance (refer to table 4). table 4: mr models of clients’ satisfaction multiple regression models r2 satis1 = 0.01006 + 0.341(coatths) – 0.182(prvarse) + 0.338(coatppqu) + 0.253(coattqc) + 0.853(copayco2) + 0.05308(prdurpl) + 0.837(prtbd3) 0.77 satis2 = 1.268 + 0.446(coatppqu) + 0.317(coatfisi) – 0.175(prvarse) + 0.209(coattsp) – 0.162(rsco24) 0.73 satis3 = 1.404 + 0.524(coatppqu) + 1.055(coselco2) + 0.292(coattqc) – 0.141(prconwe) 0.60 satis4 = 2.411 + 0.491(coatppqu) + 0.294(coattsp) – 0.197(prvarco) – 0.135(prbudmo) 0.68 satis5 = -0.240 + 0.414(coatttr) + 0.327(coattqc) + 0.272(coatfisi) 0.67 avesat = 0.291 + 0.547(coatppqu) + 0.368(coatths) – 0.156(prvarco) + 0.776(copayco2) + 0.674(prtbd3) + 0.09476(prsto) 0.80 totsat = 1.236 + 0.534(coatppqu) + 0.330(coatths) – 0.219(prvarco) 0.195(prbudmo) + 0.05465(prdurpl) – 0.658(prtbd0) 0.78 robby soetanto and david g. proverbs 22 the australian journal of construction economics and building vol.2 no.1 summarisation of the mr models in multiple regression, standardised coefficients (β) can be used to assess the relative importance among the independent variables in determining the dependent variable within one model. suppose, a simple model with two independent variables in standardised form (lewis-beck, 1993) is: *** 2211 xxy ββ += when ys yy y − =* 1 11 1* xs xx x − = 2 22 2 * xs xx x − = y x s s b 111 =β y x s s b 222 =β where: y is a dependent variable, x1 and x2 are independent variables, y x x*, *, *1 2 are standardised variables, y x x, ,1 2 are the means of the variables, 21 ,, xxy sss are the standard deviation of the variables, β β1 2, are beta coefficient or beta weight, b b1 2, are partial regression coefficients. beta weight indicates the average standard deviation change in y associated with a standard deviation change in x, when the other independent variables are held constant (lewis-beck, 1993). from the formula of beta weight, it is obvious that partial regression coefficients are corrected by the ratio of the standard deviation of the independent variable to the standard deviation of the dependent variable. in comparing the importance of an independent variable across several models, beta weights are determined by the standard deviation of the variable in the models. therefore, the standard deviation must be held constant in each model. in the case of comparisons across samples (e.g. a comparison of the importance of an independent variable in two models which were developed from two different samples), unstandardised partial regression coefficients are preferred to beta weights (lewis-beck, 1993: 57–58). in this research, the standard deviation of any independent variable is constant in several models since these models use similar independent variables (i.e. from the same sample). however, the standard deviation of dependent variables is not constant across several models due to the use of several satisfaction measures in the models. this means that beta weights of an independent variable are not comparable across several models. this problem can be overcome by multiplying the beta weight by the standard deviation of the dependent variable. based on this, importance weights (iws) of the independent variables identified were established using the product of the standardised coefficient (beta weight, β) of the independent variables in absolute terms and the standard deviation of the dependent variable (sy ). these weights were comparable across several models developed from the same sample. then, the total importance weight (tiw) of the independent variables was obtained by adding the importance weights (iws) of the variable in each relevant model. table 5 shows the calculation of tiws for independent variables identified as useful predictors of the satisfaction measures. for each satisfaction measure, an iw for each variable was produced (table 5, column 2 to 8). these weights were summed producing a tiw for each variable. these variables could then be ranked according to their tiws in descending order (column 10). in order to ease discussion, based on their tiws, the variables could be grouped into four categories, i.e. extremely important (tiw ≥ 2.0), highly important (1.0 ≤ tiw < 2.0), medium importance (0.1 ≤ tiw < 1.0) and some importance (tiw < 0.1) (last column). modelling client satisfaction levels: the impact of contractor performance the australian journal of construction economics and building vol.2 no.1 23 table 5: summary of independent variables' total importance weights (tiws) derived from clients' assessment of contractor performance independent satisfaction measures tiw ranking importance variables satis1 satis2 satis3 satis4 satis5 avesat totsat category coatppqu 0.404 0.533 0.625 0.586 0.653 0.638 3.440 1 extremely important coatths 0.534 0.578 0.520 1.632 2 highly important coattqc 0.376 0.434 0.485 1.295 3 highly important prvarco 0.415 0.328 0.462 1.206 4 highly important coatfisi 0.498 0.428 0.927 5 medium importance prvarse 0.468 0.448 0.915 6 medium importance coattsp 0.375 0.526 0.900 7 medium importance prbudmo 0.309 0.446 0.755 8 medium importance coatttr 0.724 0.724 9 medium importance prdurpl 0.339 0.350 0.690 10 medium importance copayco2 0.344 0.313 0.657 11 medium importance coselco2 0.488 0.488 12 medium importance prtbd3 0.253 0.204 0.457 13 medium importance prconwe 0.328 0.328 14 medium importance rsco24 0.314 0.314 15 medium importance prtbd0 0.304 0.304 16 medium importance prsto 0.195 0.195 17 medium importance discussion of the models the models identified seventeen independent variables as useful predictors. one variable was classified as ‘extremely important’, namely past performance of contractor in terms of cost, time and quality (clatppqu). this suggests that contractors whose past performance is good are more likely to satisfy their clients. numerous scholars (e.g. russell et al., 1992; assaf and jannadi, 1994; holt et al., 1994; tam and harris, 1996; hatush and skitmore, 1997; ng and skitmore, 1999) have reported that past performance is one of the most important attributes influencing contractor performance. therefore, this aspect should be carefully considered in the contractor selection process in order to achieve higher client satisfaction levels. three variables were classified as ‘highly important’: health and safety past performance and policy (coatths) quality control policy (coattqc) the extent of variations caused by contractor (prvarco). while coatths and coattqc positively influence satisfaction, prvarco negatively influences satisfaction. this indicates that health and safety is a highly important factor for clients, even more so than quality. variations often hamper project performance (thomas and napolitan, 1995; ibbs, 1997) and hence will impact on satisfaction levels. contractors should maintain high levels of safety and quality, and attempt to reduce variations if they are to satisfy their clients. variables classified as ‘medium importance’ comprised contractor, project and respondent attributes. contractor attributes included: robby soetanto and david g. proverbs 24 the australian journal of construction economics and building vol.2 no.1 financial soundness and experience in type and size of project (coatfisi) qualification and experience of site personnel (coattsp) formal training regime of site personnel (coatttr) cost reimbursement method of contractor payment (copayco2) contractor selected through negotiation (coselco2). financially sound contractors who have experience in similar projects are more likely to satisfy their clients. such contractors are more likely to provide an effective level of service. coattsp and coatttr highlight the importance of site personnel to contractor performance and hence client satisfaction. that is, the site personnel represent a key resource in the production process. contractors paid by cost reimbursement methods and selected through negotiation derive higher levels of client satisfaction. this suggests that less ‘confrontational’ methods of contractor procurement (rather than e.g. competitive tendering) are more likely to derive higher client satisfaction levels. project attributes classified as ‘medium importance’ were severity of variations (prvarse) project overbudget cost (prbudmo) planned project duration (prdurpl) residential projects (prtbd3) the extent to which the project is constrained by weather conditions (prconwe) public building projects (prtbd0) number of storeys (prsto). it is no real surprise that clients become dissatisfied when projects are completed overbudget and incur many variations. interestingly, larger projects were found to raise satisfaction levels. this may be connected to the prestige associated with such projects, and the need to involve well resourced and experienced contractors whose performance may be superior to smaller firms. clients were more satisfied on residential projects than public building projects. prconwe suggests adverse weather conditions may hamper contractor performance and hence negate client satisfaction. one client attribute representing perceptions of the assessor was found to be of ‘medium importance’, namely those who perceive contractors to be claim conscious, to fail to deliver projects on time, and to be contractual (rsco24). clients who have such perceptions are likely to suffer lower satisfaction levels. this suggests that some degree of subjectivity is prevalent in the clients’ assessment of contractor performance. model validation to confirm the robustness (in terms of accuracy and consistency) of the models in predicting satisfaction levels, the models were validated using a hold-back sample of 27 case projects. the predictive performance of the models was assessed by examining the residual (i.e. the difference between the actual and the models’ predicted satisfaction levels). these were measured using two prediction performance measures: mean absolute deviation (mad) and mean absolute percentage error (mape) (kvanli et al., 1996). while mad indicates the mean of absolute deviation of the predicted levels from the actual levels, mape indicates the mean of absolute percentage of that deviation from the actual levels. using these measures, it could be concluded that a model yields predicted values with an average deviation of ± mad, which is mape % from actual levels. for data of this nature, mad of 1.5 to 2.0 and mape of 30 to 35% are considered acceptable. mad of less than 1 and mape of less than 20% indicate good predictive performance. the performance of the models was also tested using chi-square (χ2) analysis and pearson’s correlation coefficient (edwards, 1999). results are summarised in table 6. on average, the deviation of the predicted satisfaction levels is 1.12 (mad), which is 22.22% from the actual levels (mape). this is quite good given the subjective nature of satisfaction/dissatisfaction judgements. pearson’s correlation tests confirmed that this level of accuracy is significant. moreover, chisquare tests confirmed that the models have consistent predictive performance. these indicate that the mr models developed are valid and robust. modelling client satisfaction levels: the impact of contractor performance the australian journal of construction economics and building vol.2 no.1 25 table 6: summary of the validation of the mr models chi-square test correlation test satisfaction measures mad mape % d.f. tab. calc. r sig. satis1 1.24 22.25 26 38.885 9.732 0.523 0.003 satis2 1.41 32.42 26 38.885 13.724 0.513 0.003 satis3 0.92 15.95 26 38.885 5.900 0.688 0.000 satis4 0.91 19.02 26 38.885 5.943 0.773 0.000 satis5 0.95 19.38 26 38.885 6.856 0.626 0.000 avesat 1.03 19.84 26 38.885 7.302 0.540 0.002 totsat 1.37 26.68 26 38.885 13.417 0.446 0.010 average 1.12 22.22 38.885 8.982 0.587 0.003 conclusion based on a uk wide questionnaire survey of clients, multiple regression (mr) models have been developed and validated to predict several dimensions of client satisfaction resulting from the performance of contractors. for this research the mr technique was found to be appropriate, given the nature of the problem (i.e. satisfaction being a matter of degree) and results of preliminary data examination. the past performance of the contractor in terms of cost, time and quality was identified as the most important independent variable. this suggests that contractors whose past performance is good are more likely to satisfy their clients. moreover, health and safety, quality control, and the variations caused by contractors were also found to be of importance. health and safety is emerging as a significant determinant of client satisfaction. the most important variables indicate that client satisfaction levels are, to some extent, within the ‘control’ of contractor. the models also suggest that subjectivity is to some extent prevalent in clients’ performance assessment. in sum, contractors should focus on those attributes found to be significant in order to continuously improve performance and enhance client satisfaction levels. in summary, the models developed could be used, specifically by contractors, to improve performance and thereby improve levels of client satisfaction. this ultimately will help to create a performance-enhancing environment leading to harmonious working relationships between pc participants. this also ensures continuous performance 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(1997) total quality management and customer satisfaction in home building. unpublished ph.d. dissertation, university of florida. the inter-firm coordination of the construction project supply three theoretical perspectives for understanding inter-firm coordination of construction project supply chains eduardo luis isatto and carlos torres formoso, (federal university of rio grande do sul, brazil) abstract the success of construction projects is highly dependent on the coordination of a fairly large number of stakeholders, such as client organizations, designers, general contractors, and subcontractors. each of those stakeholders can both affect and be affected by the way a project is managed, and none of them usually has the power or the ability to coordinate project supply chains. however, there is no comprehensive theoretical foundation for describing or explaining the coordination of construction project supply chains. this paper discusses the role of three different theoretical perspectives for understanding the inter-firm coordination process of project supply chains in the construction industry: the theory of coordination, the transaction cost theory and the language-action perspective. although the combined use of theoretical approaches has been suggested in the literature, an indepth discussion on how they complement each other, based on empirical data, seems to be necessary. the contribution of each theoretical approach is pointed out in the paper, and their complementary role is illustrated in a case study carried out in a petrochemical construction project in brazil. keywords: supply chain management, inter-firm coordination, project management, complexity introduction in spite of the attention that supply chain management (scm) has attracted among practitioners and researchers, the translation of its concepts, practices and techniques into the construction industry is still a challenging issue, mostly due to differences that exist between this sector and other industries (o'brien et al., 2004). scm originated in industries where demand is predictable, requirements for variety are limited, and volume is high (christopher, 2000). most contemporary academic work in this field is concerned with high volume industries, where a large-scale (hence economically powerful) manufacturer is supported by smaller (economically weaker) suppliers or subcontractors, based on long-term relationships (bresnen, 1996). in fact, it is often assumed that a single company is capable of controlling and even designing its supply chain. by contrast, construction project supply chains are essentially temporary multi-organizations that are set up with the specific purpose of delivering a construction project. such supply chains arise at the start of the project, develop, and finally disband as the end of it (cherns and bryant, 1984). in such supply chains, inter-firm coordination is a complex task, due to both the large number of firms involved and the lack of knowledge about their individual behavior (grandori, 1997). each of those stakeholders can both affect and be affected by the way a project is managed, and none of them usually has the power or the ability to coordinate project supply chains. much of the research on construction scm has addressed the problem of describing construction supply chains or explaining how they are actually managed (o'brien et al., 2004). one of the difficulties faced by researchers on this task is that distinct and sometimes disconnected theoretical approaches have been proposed for understanding scm. each perspective usually considers only a particular and limited aspect of supply chain australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 2 management, thus not being capable of providing a comprehensive description of their structure, nor an adequate explanation of their behavior (croom et al., 2000; tan, 2001). while such a diversity of perspectives may be a remarkable characteristic of novel fields of research, a movement of convergence is expected to occur as those fields evolve and mature (kuhn, 1962). indeed, in recent years the simultaneous use of multiple theoretical approaches has been suggested as a means to provide a more complete understanding of construction supply chains. o'brien, london and vrijhoef (2004) have proposed an interdisciplinary research agenda for construction scm that combines elements of operations management, analytic modeling, and industrial organization theory, while vrijhoef, koskela and voordijk (2003) have identified transaction cost theory, operations management, language/action perspective, and network theory as potential candidates for devising a comprehensive theoretical framework for this field. however, those papers have simply suggested the combined use of sets of theoretical approaches. none of them has made an in-depth discussion on how they complement each other, based on empirical data. this paper discusses the limited role of three different theoretical perspectives for understanding the inter-firm coordination process of project supply chains in the construction industry: the theory of coordination (tc), the transaction cost theory (tct) and the language-action perspective (lap). these approaches are discussed in the paper, and their limitations and complementarities are illustrated in the description of a case study carried out in a petrochemical construction project in brazil. theoretical approaches for inter-firm coordination core dimensions of inter-firm coordination according to stadtler (2005), supply chain management involves the coordination of three main flows: materials, information and financial flows. value (or product) flows are often regarded as the main purpose of supply chains since they are the means by which value is generated and delivered to the customers (johnston, 1995; ballou et al., 2000). they usually comprise the flows of materials or components being processed, but may also include information, since most products are a combination of physical goods and services. the role of financial flows is to support the cooperation that is necessary for the production flows to occur between supply chain members (stadtler, 2005). dimension flow type purpose main problem addressed production products (materials and information) deliver value to the client coordinate the flow of products (goods or services) among supply chain members economic financial achieve and sustain cooperation among supply chain members coordinate transactions (exchanges) between supply chain members by incentive alignment social information (for coordination) coordinate actions among autonomous actors coordinate the collective action of supply chain members table 1 the three dimensions of inter-organizational coordination of supply chains in situations that involve discrete transactions, understanding value and financial flows may be enough, since the exchange between money and products are easy to evaluate (macneil, 1978). however, most exchanges in construction projects are not so simple, demanding an intense coordination effort among supply chain members. this places the flow of information as one of the pivotal elements to promote the coordination of the collective action among supply chain members (winograd and flores, 1985; crowston, 1991; denning and medinamora, 1995; ballou et al, 2000), both by triggering their action as well as by creating a australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 3 common background among people and organizations that is vital for mutual understanding (winograd and flores, 1985). therefore, each of those flows encompasses a specific purpose that should be considered in order to describe the coordination among supply chain members. each one defines a distinct and important dimension of inter-firm coordination: the production, the economic and the social dimensions (table 1). production dimension: the theory of coordination the production dimension is concerned with both the definition of the necessary tasks to be carried out in the project and the further assignment of those tasks among supply chain members, and the definition of the means to be used to coordinate the dependences among those members. while in other industries those actions occur only a limited number of times, they are much more important in construction due to the unique and temporary nature of project supply chains. the theory of coordination (tc), originally proposed by crowston (1991), and built mostly on the work of march and simon (1958) and thompson (1967), is particularly suitable for understanding this dimension. march and simon (1958) suggested two forms of specialization to guide the process of task decomposition and assignment: (a) specialization by process, grouping people that know only a particular process (e.g. engineering, design, procurement); and (b) specialization by purpose, grouping people that work only in a particular part of the product (e.g. subcontractors that work in the same stage of the project). thompson (1967) proposed a framework to bridge each type of interdependence (pooled, sequential and combined) and the most appropriate solution in terms of coordination mechanisms (standardization, rules or mutual adjustment) (see table 2). kind of interdependence coordination mechanism pooles: each actor contributes to and depend on the whole standardization and rules sequential: one actor depends on another plans reciprocal: the outputs of one actor are the inputs of the other and vice versa mutual adjustment and teams table 2 kinds of interdependence and coordination mechanisms (based on thompson, 1967) tc aims to understand why coordination is necessary and how coordination is actually achieved. according to malone and crowston (1994), coordination is “the act of managing dependences among activities”, involving the design and implementation of specific tasks aimed at this purpose. tc proposes that such tasks can be generalized in the form of coordination methods that are able to solve specific coordination problems, and that adequate coordination methods exist for every kind of coordination problem (crowston, 1991). distinct kinds of coordination problems may arise according to the kind of taskresource dependence that is involved, as shown in table 3. there are some clear connections between the theory of coordination and the framework proposed by thompson (1967). whereas sequential interdependences arise from flow dependences of multiple tasks that use or create a non-shareable resource, pooled interdependences occur when multiple tasks use or create the same shareable and reusable resources. by contrast, reciprocal interdependences cannot be easily modeled, making it australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 4 necessary to adopt the coordination mechanism of mutual adjustment and teams, since standardization, rules and plans tend to be ineffective in those situations. type of task-resource dependence coordination problems flow dependence (one task uses a resource created by another) resources must be made available by one task when it is needed by another (prerequisite condition) quality of resources must be adequate for use (usability condition) resources must be available at the right place (availability) multiple tasks create the same resource shareable resources: eliminate redundant efforts or negotiate the object, choosing the best one non shareable and reusable resources: combine the outcomes of the tasks (integrate) non-shareable and consumable resources: select one or seek economies of scale by merging tasks multiple tasks use the same resource shareable resources: no conflict arises non-shareable and reusable resources: schedule use of resources non-shareable and consumable resources: favour one task instead of another task-subtask dependence create and assign sub-tasks manage dependences among sub-tasks assure that sub-tasks include all the content of the original task (i.e. nothing if left unassigned) table 3 types of dependences and corresponding coordination problems (based on crowston, 1991 and crowston and osborn, 1995) therefore, the effects of task decomposition on the dependences between subtasks play an important role in framing the tc into a dynamic context, as the process of task decomposition and assignment can be itself highly dynamic. if subtasks are well known in advance, it is possible to create a plan for performing the task, while a more adaptive process is required when there is more uncertainty about the subtasks to be carried out (crowston, 1991). as tasks are decomposed into subtasks and assigned to different actors, new dependences will arise (crownston, 1991). the choice of a specific type of specialization can greatly affect the need for further coordination. it is expected that the specialization by process will generate flow dependences among actors because each actor is responsible for a single part of the whole process, and specialization by purpose will demand a greater use or creation of common resources. a serious limitation of tc is that it assumes that actors are essentially cooperative, i.e. there are usually no conflicts between their goals and, when asked to do something, they do it (crowston, 1991). this greatly constrains its application to inter-organizational contexts. while the motivation for cooperation in an inter-organizational context is largely affected by the possibility of achieving economic benefits, this cannot be considered as the only relevant factor for cooperation among firms, since “cooperation is jointly determined by social factors and incentive alignment” (williamson, 1985). economic dimension: the transaction cost theory the problem of governance is particularly relevant in the case of a construction project supply chain, as it relies on the establishment of contractual relationships that may not be recurrent, thus affecting the willingness of its members to cooperate (axelrod, 2000). australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 5 moreover, contracting costs tend to be affected by uncertainty and the degree of asset specificity that is involved in a project. the first step to bridge economic and behavioural aspects was made by ronald coase in 1937 by proposing the transaction cost theory 1 (tct), which was further extended by williamson (1985). it was successfully used by winch (2001) as a conceptual framework to analyze construction supply chains, particularly for explaining the governance of the construction projects. tct is based on two main assumptions: (a) economic transactions occur in a context characterized by the presence of opportunism – “self-interest seeking with guile” (williamson, 1985); and (b) human agents are subject to bounded rationality 2 – their behaviour is “intendedly rational, but only limitedly so” (simon, 1961, p. xxiv). therefore, it is not possible to anticipate all problems that can arise in a contract, being necessary to devise a governance structure to avoid or to solve occasional disputes in the execution of a contract. according to williamson (1985), the frequency of transactions (recurrent or occasional) and the degree of asset specificity involved (non-specific, mixed or idiosyncratic) are the features that will dictate the most adequate governance structure to be adopted for the transaction in terms of minimizing overall transaction costs (table 4). in transactions that involve nonspecific assets, the market (classical contracting) tends to be the most adequate governance form. by contrast, highly idiosyncratic and recurrent transactions should be governed by a unified governance (i.e. inside the firm). in between there is a continuum of governance structures, such as trilateral governance (neoclassical contracting) and bilateral governance (relational contracting) (williamson, 1985). frequency investment characteristics non specific mixed idiosyncratic occasional market governance (classical contracting) trilateral governance (neoclassical contracting) trilateral governance (neoclassical contracting) or unified governance recurrent market governance (classical contracting) bilateral governance (relational contracting) unified governance table 4 alternative governance structures (based on williamson, 1985) classical contracting explicitly recognizes the possibility of an opportunistic behavior from the other party, but does not take into consideration the presence of bounded rationality. these assumptions are reasonable in the context of non-specific assets (commodities), in which the number of possible alternatives for the other party is very large, or in situations characterizes by low level of uncertainty. in both situations, the effects of bounded rationality are not expressive, and then tends not to affect contract execution. by contrast, relational contracting explicitly assumes the presence of bounded rationality, and relies on mutual adjustment to overcome its effects. it often reveals to be the most 1 it is also known as transaction cost economics 2 the concept of bounded rationality has been coined by simon (1961) to refer to the limitations of rational decision-making, based on the assumption that the ability for an individual to make a completely rational decision is always limited by the information that is accessible, the finite amount of time available, and cognitive limitations of the human mind. an interesting discussion about the subtleties and limitations on the concept of bounded rationality can be found in gigerenzer and selten (2001). australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 6 adequate governance structure in situations characterized by recurring transactions that are supported by investments of mixed kind, since the recurrence of transactions justifies the existence of a highly specialized governance structure. in such situations, long-term relationships are driven by trust and mutual interest, and opportunism is assumed to be absent (williamson, 1985). therefore, original agreement often looses its importance as the main reference for the relationship, as new rules and practices are mutually agreed by both parties during contract execution, and the relationship tends to evolve towards partnering as opportunistic behavior from the other party becomes less probable due to the frequency of the transactions and the possibility of new ones (axelrod, 1984). however, neither classical nor relational contracting is able to cope with both opportunism and bounded rationality. in those situations, the neoclassical contracting scheme (trilateral contracting) arises as an adequate governance structure, since a third-party assistance (arbitration) is introduced for resolving disputes and evaluating performance (williamson, 1985). the relevance of the tct for explaining the economic coordination of construction project supply chains arise from the fact that most of the linkages that tie firms together are contracts. additionally, whereas the classical contracting (market governance) is adopted in most of the situations, this is usually due to unawareness of uncertainty and the possibility of opportunistic actions by the other part, as well as the wrong assumption that justice is fast, cheap and reliable enough to enforce contract execution through its completion (williamson, 1985). social dimension: the language-action perspective once the contractual relationships are established, there is a need to manage the collective work by coordinating the actions of supply chain members. task subdivision, their assignments to individuals, and the subsequent coordination of dependences among them can only in part solve the coordination problem. however, as tasks are fragmented in a more detailed level of subdivision, complexity increases, and so the effects of bounded rationality. subtasks and dependences are difficult to anticipate in advance. as a result, neither tc nor tct are able to explain how the collaboration among the members of supply chain actually happens in such context, especially when high degrees of interdependence and autonomy exist, such as in most construction projects. håkansson and ford (2003) point out that, in those situations, the deliberate approach for coordinating supply chains often shows to be ineffective, as the behavior of the supply chain cannot be induced or anticipated by a single company but rather is the result of simultaneous and parallel actions of their members (choi et al., 2001). in this context, the language-action perspective (lap), proposed by flores (1982), arises as a promising theoretical framework for dealing with the social dimension of supply chain coordination. in fact, it has been argued that lap can be successfully used for explaining the management of commitments in production planning and control in the construction industry (vrijhoef et al., 2001; macomber and howell, 2003). flores (1982) pointed out that language can be used to create a mutual orientation among different actors, in a kind of social action which, in turn, results in changes in the real world: “when we speak we engage in commitments, which in turn generate action”. in opposition to the rationalistic tradition that takes language as a representation – a carrier of information, winograd and flores (1986) suggests that language can also acts as a vehicle for requests and commissives, directed towards explicit cooperative action. this kind of performative conversation (and the resulting commitments) relies on a “consensual domain”, which is the result of informative conversation, i.e. the exchange of knowledge, and that creates a common background that assures meaning to the language. in spite of the fact that both kinds of conversation – performative and informative – are equally important and australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 7 complementary, the language-action perspective focuses explicitly on the language for action. as a consequence, information systems can be understood at a more abstract level, where the flow of information arises to support commitments that must be set up and coordinated in order to generate desired actions (flores, 1982; winograd and flores, 1986; van reijswoud and dietz, 1999). thus, the effective coordination of actions can be considered as the same as the effective management of commitments, and the work progress can be traced by watching speech acts in the communications of those coordinating (flores, 1982). denning and medina-mora (1995) suggest that commitments can be viewed as workflow loops in which one party (the performer) promises to satisfy a request of the other (the customer). every loop is made of four phases, and the completion of each phase occurs by the utterance of a specific kind of sentence by the performer or the customer (figure 1). in the request phase, the customer makes a request to the performer or accepts an offer made by the performer (“i request”). the negotiation phase occurs when the customer and performer negotiate on the conditions that will satisfy the customer, culminating in the performer's promise (implied contract) to fulfill those conditions (“i promise”). then the performance phase follows, in which the performer does the work and ends by declaring that it is done (“i am done”). the loop ends with the satisfaction phase, in which the customer accepts the work and declares satisfaction. satisfaction means that the implied contract has been fulfilled; it means neither gratification nor a psychological report about the customer (“i am satisfied”). figure 1 the commitment loop (adapted from denning and medina-mora, 1995) however, the incompleteness of commitment loops cannot be regarded as the causes for breakdowns. the way commitment loops are interconnected to form business processes also play an important role in coordinating actions. in fact, every organization can be depicted as a map of interconnected commitment loops, which can be used for designing work processes and supporting information technologies, managing commitments up to completion, and measuring productivity in order to avoid breakdowns (flores, 1982). thus, the effectiveness of the coordination of collective action relies both on the completeness of commitment loops and on the structure of business processes as a chain of interconnected commitment loops. research method two descriptive case studies were carried out in different projects of the same general contractor. this company had been mainly involved in industrial, commercial, and health care projects for private clients. those projects usually had a high level of complexity, according to the definition proposed by williams (1999): there was a very large number of tasks and interdependences, and uncertainty was very high, mostly due to the overlapping between design and production stages. the role of the company in those projects was both carrying out construction activities and partially coordinating the design process. it was the main connection between the main project stakeholders: owner, most designers, and subcontractors. for that reason, it was considered in this investigation as the focal company of the project supply chain. as suggested by lambert and cooper (2000), choosing a focal australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 8 company is necessary in order to define which members of the supply chain should receive managerial attention and resources. in this article, one case study was chosen to illustrate the limitations and complementarities of the three theoretical approaches for understanding project supply chain. this project consisted of the design and construction of a new laboratory (1607 m²) and the refurbishment of an existing one (832 m²) for a petrochemical company, in the south of brazil. there were clearly two different stages in the project, regarding the coordination process: (a) in the first eight weeks, the supply chain members worked mostly according to the coordination assumptions and coordination structure that was initially established; and (b) after facing several coordination problems, some important changes were introduced in the coordination process. the duration of the case study was 8 months. the aim of this case study was to understand how the coordination of the construction project supply chain was carried out, using the three theoretical approaches described in the previous section. table 6 presents a set of descriptive factors that were used for guiding data collection, and the multiple sources of evidence that were used. illustrative case study phase 1 three departments of the client organization were directly involved in the project: the marketing department, as the main user of the facilities; the maintenance department, responsible for maintaining the facilities; and the financial department, the main decision makers in terms of capital investment. the client organization adopted the strategy of specialization by process, breaking down the project (“installing a lab”) into three major subtasks: “design lab”, “build lab” and “install equipment” (figure 2). they were assigned to the architect, the gc and the maintenance department, respectively. thus, the task-resource dependences that arose were mainly of the flow type. the intention of the client company was to coordinate the information flow about user requirements and architectural design definitions. design coordination meetings were considered to be necessary to assure that such information was properly passed on to the design team. by contrast, the gc decided to break down the overall task of designing and producing subsystems, adopting the strategy of specialization by purpose. each subsystem was assigned to a different specialty subcontractor (figure 2). the intention behind that strategy was to simplify the coordination among design and production for the main subsystems (e.g. foundations, hvac, and precast concrete structure) by delegating that kind of coordination to different subcontractors. however, the general contractor kept the role of coordinating the work of all specialty subcontractors, being responsible for coordinating the information flow of architectural decisions to subcontractors, as well as the flow dependences among the sub-systems on site. that situation posed a new coordination problem since the tasks to be carried out by distinct designers were supposed to be relying upon the same common resource (drawings and specifications), which were used and modified by each of them as a result of their individual work. the responsibility for coordinating the delivery of the building from the general contractor for the installation of equipment remained with the client, and would happen only after the final delivery of the building. even considering that most of the task assignments involved assets with a high degree of specificity, a classical contracting scheme (market governance) between the client and the gc was initially adopted, due the intention of the former to have strict control over the total cost of the project. this contract also established high penalties for project delays. by contrast, most of the contracts between the gc and some specialty subcontractors were far australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 9 more flexible, due to partnership relationships that they had in a number of previous projects. bilateral governance structures (relational contracting) were adopted, as the decision of purchasing entire subsystems resulted in much less control over the process due to the high degree of specialization involved. classical contracting was adopted by the gc for hiring a few labor-only subcontractors, to whom some minor works were assigned. theoretical approach descriptive factors sources of evidence theory of coordination strategy for breaking down processes and assigning tasks to supply chain members participant observation in 28 mediumterm planning meetings, and in 9 design meetings analysis of long and short-term production plans (28 weeks), and design brief project extranet data and e-mails dependencies between supply chain members: types of taskresource dependencies between members, coordination tasks, existing coordination problems participant observation in 28 mediumterm planning meetings, and in 9 design meetings project extranet data (8 weeks) and emails structure of the coordination system: coordination mechanisms adopted, existing interactions between them, effectiveness in managing dependencies participant observation in 28 mediumterm planning meetings, and in 9 design meetings analysis of long, medium and shortterm production plans (28 weeks) project extranet data (8 weeks) and emails transaction costs theory characteristics of economic relationships: scope and characteristics of contracts, frequency of transactions between supply chain members, expectations of recurrent transactions between them. participant observation in 28 mediumterm planning meetings, and in 9 design meetings analysis of long and short-term production plans (28 weeks), and design brief project extranet data (8 weeks) and emails other forms of governance: noncontractual forms of governance adopted, supply chain members involved, effectiveness of those governance forms. participant observation in 28 mediumterm planning meetings, and in 9 design meetings e-mails language-action perspective business processes: main transactions, connections between different commitment loops, actors involved, means of communication used. participant observation in 28 mediumterm planning meetings, and in 9 design meetings project extranet data (8 weeks) and emails interruptions or conflict situations: main interruptions, frequency and causes of interruptions, processes affected, impacts on cooperation willingness and economic relations. participant observation in 28 mediumterm planning meetings, and in 9 design meetings analysis of long and short-term production plans (28 weeks), and design brief project extranet data (8 weeks) and emails table 6 descriptive factors adopted and sources of evidence note: project extranet data includes the number of accesses, frequency of document uploads and downloads, content of electronic documents and drawings australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 10 figure 2 decomposition of the project into subtasks and dependences between supply chain members the high specificity and idiosyncratic nature of the task of installing the lab equipment was the reason that led the client organization to assign it directly to an internal department, adopting a unified governance scheme. no regular meetings between the architect and subcontractors had been planned. it was expected that the architect would send the architectural definitions to the client according to an agreed plan, and client representatives would pass these to the gc, which were responsible for delivering those definitions to subcontractors and production crews. if it was necessary to coordinate the design of any subsystem and the architectural design, it was expected that a subcontractor would informally get in touch with the architect and ask for the necessary definitions. the coordination of actions among subcontractors on site was managed by the gc by using a production planning and control system that was strongly based on the last planner system (ballard, 2000). one-week short term and one-month look-ahead (medium term) plans were produced in two separate weekly meetings, involving representatives of different production teams. the gc decided to carry out also weekly design coordination meetings, involving members of both production and design teams (including the architect and client representatives), aiming to pass on requests for design definitions to the design team, in order to synchronize design and production inter-related tasks. such meetings had also the role of enabling conversations among subcontractors regarding the coordination of the design of different subsystems, not only in terms of establishing the necessary commitments of stakeholders but also making compatible sets of design decisions. the flow of architectural definitions between design and production teams was initially planned to be pushed by the former to the latter. however, as soon as the project started, the client marketing and maintenance departments noticed that some requirements had not been properly considered in the architectural outline design, causing delays in the design process and disruptions in production activities. consequently, the primary concern of design meetings shifted from the delivery of architectural definitions to the identification of the production needs (e.g. the definition of drawings that needed to be delivered first) and to establish deadlines for the delivery of those design definitions by the architect, which australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 11 resulted in a system of pull coordination between design and production. the size of the batches of design information that were transferred between the members had to be reduced in order to speed up the design process, thus increasing the flow of information between them. after eight weeks, the project was at risk of serious delay or even complete interruption due to the lack of design definitions, poor coordination among project members, and conflicts between the client and the gc about the project scope and budget. such difficulties in managing the design process indicated that the adopted contracting scheme was not the most appropriate for that context. the agreement between the client and the general contractor was very rigid in terms of ex-post adaptation. the need for approval of every change by both the client and the gc, plus the need for additional negotiation about the scope of contracts have slowed down the speed of the design processes and increased the risk of project delays. even the high flexibility of the contracts between the general contractor and the subcontractors was not enough to shield those relationships against the effects of the conflicts between the gc and the client. in spite of those problems, the highly specific nature of the object of the contract made it very difficult and expensive for any of the parties to interrupt the previous arrangement. as a consequence, the client and the gc agreed to set the original contract aside and to renegotiate previous conditions, taking into consideration the actual context. from one side, the client stopped introducing further changes in the design and delegated the management of the design process to the gc. in turn, the gc agreed with the establishment of a new deadline for project completion (january 2002). phase 2 after renegotiating the contract and freezing some design decisions, the overall governance structure of the project moved from the original classical (client – general contractor) and relational contracting (general contractor – subsystems contractors) schemes to a trilateral one, in which the product development team played the role of a third party in resolving disputes involving technical matters and evaluating performance of relationships between project supply chain members. that migration from two incompatible governance forms to a common governance structure is illustrated in figure 3. the adoption of the trilateral governance represented an explicit recognition of the possibility of opportunism in the governance structure established to coordinate the relationships between the gc and subcontractors, and of the effect of bounded rationality on the governance structures set up to coordinate the relationships between the client and the gc, and between the client and the architect. opportunism present absent bounded rationality present trilateral contracting (project governance structure) relational contracting (gc governance structure) absent classical contracting (client governance structure) figure 3 changes in the governance structure of the construction project supply chain australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 12 as the design process became more complex and difficult to forecast in the long and medium term, design meetings became crucial for the coordination of the actions, since the management of short-term commitments turned out to be the most effective alternative to coordinate the design process and to negotiate changes in the product. this was effectively managed by using the last planner system, since there was a direct connection between look-ahead production plans and design weekly plans, prepared at the design coordination meetings. the constraints that were identified in the former had to be addressed in the latter. the dependences between subcontractors were managed mostly as they were using and generating common resources, since information concerned with client requirements and design definitions were used by most of the subsystem designers, and such definitions should be well integrated in the design of the whole product. several actions were necessary to manage concurrent dependences. firstly, the full attendance of designers, general contractor and client representatives to the weekly meetings was enforced in order to make it possible to establish the necessary commitments more precisely, enabling the request, negotiation and satisfaction phases of commitment loops and also to negotiate occasional conflicts concerned with design definitions. secondly, the design team decided to exchange electronic versions of the drawings and documents, thus making the design definitions a shareable and reusable resource. thirdly, a project extranet was set up to provide simultaneous access to that information for the design team. fourthly, rules for naming and controlling different versions of production drawings were agreed among the design team, in order to assure the usability of the information to be exchanged among them. figure 4 represents the network of commitments that was gradually built by the project supply chain. it represents an important change, since, at the start of the project, commitments were essentially embodied by the contracts, being aligned with the tasksubtask dependences. production team design team architect subcontractors product definitions p ro d u ti o n p la n s s u b system s' d efin itio n s architectural definitions task customer performer production plans production team subcontractor product definitions production team design team subsystems definition design team subcontractor architectural definition design team architect figure 4 network of commitments among supply chain members discussion the contribution of the theory of coordination for the analysis of inter-firm coordination is mainly related to the purpose of the supply chain in terms of delivering value to the customer, by addressing how tasks are decomposed and assigned to actors, which dependences arise as a consequence of the previous decisions, and how these dependences are managed. due to the adaptive and dynamic nature of the construction project supply chains, many of these decisions had to be changed in the course of the project, as shown in table 7. australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 13 descriptive factors phase 1 phase 2 strategy for breaking down processes  client: specialization by process  gc: specialization by purpose  no change due to contractual bindings dependencies between supply chain members  task – sub-task dependencies: (a) client-architect (b) client-gc  no change due to contractual bindings  main flow dependencies: (a) from architect to client (b) from client to gc (c) from gc to subcontractors  main flow dependencies: (a) from architect to gc (b) from gc to architect (c) from architect to subcontractors (d) from subcontractors to architect (e) from subcontractor to subcontractor  common resource dependencies: among subcontractors  common resource dependencies: among architect, gc and subcontractors structure of the coordination system (coordination mechanisms)  task – sub-task dependencies: set up of milestones and deadlines (plans), and control of deliveries in regular design coordination meetings.  task – sub-task dependencies: sharing real-time information by using a project extranet, and design and production control through weekly short and medium-term planning meetings  flow dependencies: design information pushed from the architect to production teams  flow dependencies: design information pulled at design coordination weekly meetings based on the demands of production teams  common resource dependences: rules, standards and regular meetings.  common resource dependences: resources made shareable, rules, and the establishment of short-term (one-week) commitments table 7 project changes concerned with production coordination however, the assumption that actors are essentially cooperative and that no conflict exists between their goals (crowston, 1991) greatly constrains the application of tc in the interorganizational context. the role of the transaction cost theory resides exactly on approaching the coordination problem from such perspective, complementing tc by including both economic and behavioral aspects, particularly the ex post aspects of contracts and their effects over their ex ante aspects. by addressing the governance of the project supply chain, tct points out the boundaries that limit the space in which cooperation between firms is expected to occur and how the contracts and other governance forms affect this. in the case study, the governance structures that were initially designed by the client and by gc could not cope with the both the effects of high levels of uncertainty and the presence of opportunism. the decision of the construction company in purchasing complete subsystems as engineered-to-order contracts had simplified to a great extent the task of coordinating the activities under its responsibility, since much of the complexity involved in the coordination of dependences between the design, production and installation of each subsystem was transferred to suppliers. however, there was a price for that decision, the loss of ability to coordinate directly much of the process, increasing its dependency on each supplier. this, in turn, resulted in exchanges that involve much more specific and complex assets, which, based on tct, suggests the adoption of trilateral or bilateral governance structures. in fact, after some negotiations australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 14 between the client and the gc, the trilateral governance was informally adopted by the project supply chain (table 8). descriptive factors phase 1 phase 2 characteristics of economic relationships client – architect, client – gc:  occasional transaction involving highly specific assets  contractual relationship was regarded as isolated from previous or future exchanges  opportunism was anticipated assuming a foreseeable future (no uncertainty) gc – subcontractors:  recurrent transactions involving investments of mixed kind  contractual relationships were regarded as a series of exchanges  complexity and bounded rationality were expected to occur in a context of truth and mutual cooperation client – architect, client – gc, gc – subcontractors:  the notion of a project supply chain is supported by contractual relationships which recognize the mutual dependence among its members  limits for changes were agreed by the client and gc in order to explicitly avoid opportunism  design and production teams played the role of a third party forum for solving technical disputes governance forms client – architect, client – gc:  classical contracting (market governance) gc – subcontractors:  relational contracting (bilateral governance) client – architect, client – gc, gc – subcontractors:  trilateral governance, supported by informal adaptation of existing contracts table 8 project changes concerned with economic coordination the fact that governance structures usually grant some degree of freedom to the parties to act autonomously limits the application of tct. as pointed out by grandori (1997), in complex and dynamic environments, such as construction projects, the coordination problem is not limited to regulating exchanges or coordinating dependences among supply chain members, but it is also concerned with governing their collective action. a large number of micro-management decisions cannot be anticipated, and thus are usually left to the operational level in an adaptive manner in order to overcome the project uncertainty (crowston, 1991; grandori, 1997). descriptive factors project start project end completeness of commitment loops lack of satisfaction with commitment loops commitment loops completely fulfilled. configuration of business processes as a network of commitments commitment loops aligned with contracts (vertical coordination) commitment loops aligned with flow dependences (horizontal coordination) table 9 project changes concerned with social coordination the main contribution of the language/action perspective is to explain how managerial processes that occur in the inter-firm context are coordinated even when little control exists over the sequence and content of the activities. additionally, lap suggests how to manage the collective action of supply chain members within the space of possibilities that is limited by the same boundaries. in the case study, lap explained how the last planner system was used to manage the collective action inside the space of possibilities of action delimited by governance structures, evidencing the imminence of breakdowns due to the australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 15 incompleteness of commitment loops or the poor connection of commitments. table 9 presents the main changes related to the social coordination of supply chain. table 10 summarizes the contributions of each theoretical approach, emphasizing the complementarities that exist between them. the connection between tc and tct relies on the idea of assignments that happen in the economic environment, bridging the gap between the coordination of production and economic flows. the combined use of lap and tct explains how coordination processes occur in the space of possibilities that is defined by contracts and other forms of governance that are responsible for defining the expected boundaries of cooperation among the firms. the connection between tc and lap is clearly due to the fact that the commitment loops are essentially a coordination mechanism that is used to guarantee the accomplishment of a task. nonetheless, their complementarities comes from the fact that the tc emphasizes the dependences among tasks and the way tasks are decomposed and assigned, and gives little attention to the design of the information system that will support the coordination, while the lap focus precisely on the essential aspects related to information systems in order to coordinate actions among people through the management of commitments. moreover, lap also extends tc by including situations of execution by demand, in which individuals act in response to a demand of other individuals that depend on the outputs of their tasks. relationship role tct tc lap tct and lap tct explains how to define a space of possibilities for decision-making through contracts and other governance structures. x lap explains how to coordinate collective action in the space of possibilities defined by governance structures through the managed of commitments. tct and tc tct explains how to coordinate transactions among supply chain members by the management of their economic interests. tc explains how tasks must be decomposed and how to manage the connections (dependences) among them. x tc and lap x tc explains how to define the outcomes of business processes and which tasks need to be performed collectively. lap explains how to coordinate the execution of tasks among different stakeholders through the establishment of a network of commitments. table 10 complementarities between tc, tct and lap conclusion this article has pointed the limitations and complementarities of three theoretical approaches in describing the inter-firm coordination of construction project supply chains. based on the literature review, the theory of coordination, the transaction cost theory, and the language-action perspective were chosen for explaining inter-firm coordination from three different perspectives, which are related to the product, financial and information flows, respectively. the theory of coordination has been used to describe the organizational aspects of the supply chain, addressing the problem of coordination from the perspective of managing the resource dependences that occur between stakeholders. the transaction cost theory helps australasian journal of construction economics and building isatto, e l and formoso, c t (2011) ‘three theoretical perspectives for understanding inter-firm coordination of construction project supply chains’, australasian journal of construction economics and building, 11 (3) 1-17 16 to understand how transactions frequency and asset specificity in a construction project can influence the most adequate kind of governance structure to be adopted in each situation, which greatly affect the cooperation among the members of the construction project supply chain. finally, the language-action perspective explains how cooperation can be maintained through the establishment and successful accomplishment of networked commitments among supply chain members, helping to analyze and design more appropriate information systems for managing construction project supply chains. the use of this set of theoretical approaches is especially valuable in complex construction projects. considering that contracts are themselves broad commitments, as uncertainty and complexity rise, project managers face an increasing difficulty to coordinate the project supply chain only by managing contracts, which will in turn result in delegating a larger share of the coordination process to other stakeholders at operational levels. as individuals or firms are awarded more autonomy, the overall coordination burden grows, demanding organizational structures that are able to manage commitment loops in terms of their integrity and effective completion. the discussion on the role of three theoretical approaches, presented in this paper, represents an early step towards the development of a multiple theoretical framework in this field. therefore, much work is still needed for developing a unified theory on the coordination of construction project supply chains. further investigation on the underpinning assumptions of each theoretical approach is necessary, in order to assess to which extend they could form a unified theory. it is not clear yet if the three approaches are commensurable or whether they need to be commensurable and at what level. more work is also needed on establishing the boundaries of this set of theoretical approaches, in relation to other perspectives proposed in the literature. references axelrod, r. 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(1986) understanding computers and cognition: a new foundation for design, boston, addison-wesley a review of productivity analysis of the new zealand construction industry malcolm abbott, (swinburne university of technology, melbourne, australia) chris carson, (unitec, auckland, new zealand) abstract in recent years there has been a rising interest in the level of productivity and efficiency of the new zealand construction industry. this interest has meant that there has been an increased use of statistical techniques to determine the productivity and efficiency of the overall industry. the purpose of this paper is to review the various measures that have been used to gauge the levels of productivity and efficiency in the new zealand construction industry; as well as analyse some of the results to date. finally, it considers potential areas for future research, including possible improvements to measurements techniques that maybe used. keywords: productivity, construction nz introduction in recent years a number of attempts have been made to identify the reasons for the lack of growth in productivity and income in new zealand. one area where this lack of growth of productivity is most marked is in the case of the construction industry. indeed, official statistics seem to indicate that the construction industry in new zealand has a productivity level roughly comparable to what it was in the late 1970s (statistics new zealand, industry productivity statistics). this has raised considerable concern in the industry itself, and more generally, about the degree to which the industry is operating below its full potential (new zealand, department of building and housing, productivity taskforce 2009; van dai tran 2010; new zealand productivity commission 2011).the possible reasons behind this low level of productivity in new zealand are various and could include such things as low economies of scale in the industry, a lack of competition, regulatory impediments, faulty innovation and management practice, poor investment quality and a low levels of skills (davis 2007). the purpose of this paper is to review the various measures that have been used to gauge the levels of productivity and efficiency in the new zealand construction industry and to make suggestions to how these measures might be improved. in meeting this objective the results of the past studies will be analysed in order to identify some of the issues surrounding the apparent stagnation of growth in productivity in the new zealand construction industry. the manner in which this is approached is to compare the different approaches used and to then identify the pros and cons of the different approaches. the final task is to then suggest improved ways to determine productivity change of the new zealand construction industry that would take account of the difficulties that were identified in the previous approaches used. more improved measures of productivity of the construction industry would be useful as the construction industry constitutes a substantial part of the new zealand economy. furthermore in recent years there has been a concern that this sector has been a relatively stagnant one. more improved measures would assist policy makers and industry leaders to determine ways to improve the performance of this industry. australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 2 the paper is structured as follows. in the first section a broad description of the condition of the new zealand construction industry is given. this is followed by a section that examines the various ways in which productivity can be assessed and some of the issues involved in doing so. a section is provided that examines past studies of productivity in the construction industry in new zealand and in the final section some conclusions are made. the construction industry in new zealand the construction industry constitutes a significant part of the new zealand economy. in 2010 the industry made up over four per cent of new zealand’s gdp and employed over eight per cent of the employed workforce (table 1). this high level of employment compared to output reflects the relative labour intensity of the industry. gdp gdp employment employment constant 1995/96 $m % 000 % agriculture, fishing, forestry and mining 9,980 7.7 150.2 6.9 manufacturing 16,395 12.7 247.8 11.5 electricity, gas and water 2,634 2.0 14.4 0.7 construction 5,521 4.3 178.8 8.3 wholesale trade 9,374 7.2 103.7 4.8 retail accommodation and restaurants 9,901 7.6 333.7 15.4 transport and communication 13,891 10.7 135.4 6.3 finance, business &personal and community services. 55,061 42.5 869.3 40.2 government administration and defence 6,754 5.2 121.2 5.6 gross domestic product 129,511 100.0 2163.4 100.0 table 1 gross domestic product and employment by industry, 2010, annual (march years) source: statistics new zealand, gross domestic product; household labour force survey growth of the construction industry was solid from the late 1990s and through most of the 2000s, but tapered off in the last few years of the 2000s (figure 1). over the longer term the construction sector has grown at a similar rate to the rest of the new zealand economy, driven by rising incomes and population growth, although there is evidence that the growth of the industry is more volatile than that of the economy in general (figure 1). figure 1 quarterly growth of gdp and construction in new zealand source: statistics new zealand, gross domestic product australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 3 the construction sector is broadly speaking divided into three sub-sectors:  residential building (houses, units, flats);  non-residential building (offices, shops, hotels);  engineering construction (roads, bridges, water sewerage). the private sector operates predominately in the construction of residential and non residential building, whereas the public sector operates primarily in engineering construction. some major engineering projects are delivered through public-private partnerships, which in its simplest form is a contractual agreement between the government and private sector for the delivery of public infrastructure. despite the growth of the construction industry and its importance to the generation of employment in new zealand, there has been a growing concern that the sector has been a stagnant one in recent times in terms of growth of productivity. indeed some studies have found that the sector’s level of productivity is no higher than it was in the late 1970s (figure 2). a building and construction sector productivity taskforce, for example, was established in 2008 as a joint measure of the industry and government in new zealand to investigate the limited productivity gains in the sector in recent years and reported a number of reasons why this had been the case (new zealand, department of housing productivity taskforce 2009). figure 2 productivity indexes of construction and the new zealand economy, 1978 to 2009 source: statistics new zealand, industry productivity statistics in the past there has been some research undertaken that looks at the growth of productivity of the construction industry at the sector level. most of this past work has been undertaken as part of larger work looking at productivity growth of the larger economy, but in recent times some more focused work has been undertaken (see table 2). to understand the past work that has been undertaken it must first be understood just what approaches can be made to the analysis of productivity. furthermore it is important to policy makers and industry leaders that future productivity analysis accurately reflects changes in the industry and does not give a distorted picture of what is occurring. finally accurate measures can help to raise our understanding or what drives productivity change in the industry, or conversely impedes it. traditional efficiency and productivity measures to understand how productivity analysis has been used in the past to determine change in the new zealand construction over time it is important to understand the different ways in which this can be estimated. the way in which the productivity and efficiency of the construction industry has been analysed in the past has been influenced by the way in which australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 4 productivity analysis has developed more generally over the years. structural reform of the economy by various governments has encouraged the study of the productivity and efficiency performance of a variety of industries and government service providers. in undertaking this research a range of productivity and efficiency techniques have been used. to begin with, efficiency can be defined as being the degree to which resources are used in an optimal way to produce outputs of a given amount. at the level of an industry there are three main aspects of economic efficiency: allocative, technical, and scale (farrell 1957). allocative efficiency indicates the factor input proportions given relative input prices. an allocatively efficient industry produces using the lowest cost combination of inputs. technical efficiency takes place when the maximum output possible is delivered using given inputs (labour, capital, and other inputs). scale efficiency refers to optimal size of an industry (and firms within it). it could be that an industry may be allocatively and technically efficient, but may still be producing too little or too much output. economic efficiency is a combination of allocative and technical and scale efficiency. it helps to identify whether cost reductions can be made. productivity change differs from efficiency in that it is a dynamic indicator of the change in the ratio of outputs to inputs over time. productivity growth reflects changes in allocative and technical efficiency, technological and managerial improvements and changes in the external environment in which the production of an industry occurs. when an industry improves its efficiency, it moves towards a best practice frontier, and in doing so also increases its productivity. when the frontier also shifts outwards, due say to technological change, then productivity also rises. over the years a range of different measures have been developed to quantify how efficiency and productivity levels change over time. these measures include the calculation of indexes, the estimation of cost and production functions, data envelopment analysis and stochastic frontier measures. most of these types of measures have been used in the past to analyse changes in the new zealand construction industry. partial and total factor productivity index measures the initial way in which productivity changes over time were measured was by using an ‘index’ approach. the index approach involves the estimation of index numbers, which can be used to indicate the partial or total factor productivity change of an industry over time. partial productivity measures generally show the ratio of an index of an industry’s output to an index of a single input factor. in the case of the construction industry, for example, an index of the volume of construction activity per employee is a labour-based partial productivity measure. partial productivity indicators have the advantage of being easy to compute, require only limited data and are intuitively easy to understand. this has meant that they are used very commonly in a range of different industries. unfortunately they can also be misleading when looking at the change in productivity of an industry over time. it might, for instance, be possible for an industry to raise productivity with respect to one input at the expense of reducing the productivity of other inputs. partial indices of output to labour, for instance, often tend to overstate the growth of total productivity because over time the use of capital as an input substitutes for labour. a further problem is that capital productivity measures are difficult to calculate given the difficulty that often occurs in measuring capital inputs, and the often very long life of some assets. total factor productivity indexes were developed to overcome the problem of the substitutability of inputs. total factor productivity measures are the ratio of a total aggregate output quantity index to a total aggregate input quantity index. the index approaches used to combine outputs and inputs that might be used include the laspeyres, paasche, or fisher australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 5 approaches. a tornqvist index approach has been used in many total factor productivity studies. total factor productivity growth, therefore, is the difference between the growth of the output and input indices. although there are a few studies of industry level total factor productivity in the construction industry the literature is not as extensive as it is in many other industries. most research on construction industry productivity tends to be concerned more with site level labour productivity, which has a more direct relevance to industry management (ganesan 1984; lowe 1987; maloney 1983; allen 1985; thomas, maloney, horner, smith, handa and sanders 1990; thomas and sakarcan 1994). despite this some measures of the total factor productivity of construction were developed using the index approach. on the whole this occurred as part of efforts to establish the growth of productivity for the entire economy and other industry sectors, rather than exclusively for the construction sector. total factor productivity indexes were first developed at the national bureau of economic research in the united states in the late 1940s. initially studies were undertaken of labour productivity for a range of different industries (including construction). this was followed by the estimation of a range of other non-labour partial productivity measurements such as for capital and in the case of agriculture land and livestock. a range of studies were then undertaken that attempted to combine the various types of inputs together in a similar fashion to the way in which earlier researchers like simon kuznets and colin clark had for output in determining levels of gross national product. in undertaking this work the research by stigler (1947; 1961), barton and cooper (1948); kendrick and jones (1951), schmookler (1952), and fabricant (1954) were important. starting with agriculture this work spread to other sectors of the economy as well as national wide studies. by the mid-1950s the national bureau of economic research had published a great deal of work using total factor productivity indexes for a range of industries (kendrick 1956a, 1956b, 1961, 1973). as part of this work total factor productivity indexes were also determined for the construction industry. over the years studies have also been conducted in a range of other countries besides the united states using the index approach (see for instance hong kong; chau and walker 1988; chau 1990 and singapore: tan 2000). in the case of the new zealand construction industry examples of partial productivity indexes include those by marks (1984), davis (2007), janssen and mcloughlin (2008) and the new zealand institute of economic research (2011), who all estimated new zealand labour productivity figures. in terms of total factor productivity indexes there have been a number of main works undertaken on the new zealand construction industry as part of economy wide productivity estimates. these are by diewert and lawrence (1999), black, guy and mclellan (2003), and statistics new zealand, industry productivity statistics (2011). econometric measures – cost and production functions the index approach to determining total factor productivity assumes that the ratio of inputs used and products produced are kept constant over time. as this seems unrealistic other methods were developed. econometric methods involve the estimation of cost or production functions. the estimated function can then be used to identify changes in productivity or efficiency. the estimation of cost functions has been the most commonly used method of determining the levels of efficiency in the industry, although a number of techniques have been used in estimating cost functions. this approach is also often referred to as the growth accounting approach. dacy (1965) was perhaps the first to use an estimated production function for the united states construction industry (1947 to 1963) and found increasing levels of productivity. later examples of estimated production functions include those by allen (1985); stokes (1981) goodrum and haas (2004), schiver and bowlby (1985), mao, goh, wang and ofori (2003) and kau and sirmans (1983).examples of the use of cost functions estimations include australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 6 those by chau (1993) and chau (2009) who in both cases found rising productivity levels in hong kong; and schriver and bowlby (1985). in the new zealand case a number of researchers used the growth accounting approach to estimate productivity over time by estimating production functions. these include the studies of orr (1989), chapple (1994), philpott (1995), and mason and osborne (2007). in each case they made estimates at the national level and then broke down productivity into various industry sectors including that of construction. one difficulty that arises in using either the index approaches or econometric approaches is that it relies upon there being reliable, market determined prices for both inputs and outputs. in the case of industries such as the utilities where market power distorts prices, and in government service delivery where output prices are often subsidised or non-existent there arose a need to develop productivity measures that was not so reliant on price data. this led to the development of data envelopment analysis (dea). data envelopment analysis (dea) and stochastic frontier measures dea was pioneered by charnes et al (1978) based on the work by farrell (1957) and there are now many texts offering a detailed discussion on dea, including the algorithms used (see, for example, lovell and schmidt (1988), färe, grosskopf and lovell (1985) and coelli, rao and battese (1998)). data envelopment analysis (dea) is a linear programming technique which estimates organisational efficiency by measuring the ratio of total inputs employed to total output produced for each unit. this ratio is then compared to others in the sample group to derive an estimate of relative efficiency. dea identifies the most efficient providers of a good or service by their ability to produce a given level of output using the least number of inputs. other units in the sample group receive an efficiency score determined by the variance in their ratio of inputs employed to outputs produced relative to the most efficient unit in the sample group. dea is therefore a measure of relative efficiency against the sample group’s benchmark best practice. the advantage is that it can be used without input or output prices, which is useful where data of this sort is not available. as well as being used to benchmark units against one another it is possible to use dea to estimate changes in productivity of individual units, or the sample as a group, over time. dea has been used extensively in a number of industries to assess productivity and efficiency levels (especially utilities). in the case of the construction industry only a fewer number have been undertaken, the dea approach was used in the case of hong kong construction by chau and wang (2005), wang (1998); wang and chau (1997, 2001). each study found a rising level of productivity there. in the case of new zealand a single study by fare, grosskopf and margaritis (1996) has been undertaken. stochastic frontier measures involve the use of parametric techniques to estimate technical efficiency by constructing first the production frontier derived from the best practice firms and then comparing the actual output of firms relative to the best practice firms. studies of this sort in the construction industry are rare and in the case of the new zealand industry have not to date been undertaken. although markets for construction tend to be fairly competitive and more market driven than the case of the utilities and government service provision there have been concerns that prices in these markets do face some distortions. for this reason the studies previously mentioned made use of the dea approach at determining changes to productivity over time. issues in addition to the need to use total factor indicators to determine productivity change over time rather than partial indicators and the possible need to use indicators that don’t rely so australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 7 much on price data a number of other issues have arisen. most studies that look at the productivity of the construction industry are centred on the industry in the united states. one element some researchers found was that there appeared to be a degree of stagnation or decline in productivity in the united states construction industry during the 1970s and 1980s. these include work by stokes (1981), allen (1985) and schriver and bowlby (1985). these researchers had some difficulty explaining why this might have occurred, given that it was a period of some technological change and innovation in the industry. tan (2000) found a similar decline in productivity in the singapore construction industry over the period 1980 to 1996, and mao, goh, wang and ofori (2003) found singapore had a slow rate of growth between 1984 and 1998. the explanations of this perceived stagnation are of some interest to new zealand researchers as a similar stagnation has been detected in this country. in the american context some thought that this decline could be explained by the use of inappropriate price indexes (dacy 1965; stokes 1981). in addition a more influential view expressed at the time in the united states was that construction was largely a labour intensive industry and the introduction of new equipment and materials could only increase outputs with a given level of labour and capital. rosefielde and mills (1979), in contrast, argued that official data did not fully account for changes in quality and so tried to adjust for changes in the scale and structure of the quality of output. they argued that as construction is immobile and designed to achieve some particular function, at some specific site, a diverse and changing type off output is produced by the industry. this coupled with a changing composition of materials makes it difficult to measure quality improvements over time, which in turn leads to an underestimation of output levels, and therefore productivity improvements. in using quality adjusted figures for output rosefielde and mills relied upon the work of cassimatis who used the number of rooms per dwelling and square footage of buildings as an indicator of the quality of output. in the new zealand case past studies have all used some constant dollar valuation of the industry’s production as an in indication of output, which assumes that this value reflects any changes that are occurring in quality and size, whether it be in terms of area or other form of quality. this might, perhaps, be a fair assumption but nowhere has it been justified. indeed over the periods looked at by analysts the average size of both residential and commercial properties has risen considerably. it is notable that unlike countries like australia, quality adjustments for the residential building industry are not included in the new zealand estimation of construction value added (bollard and barrow 2012). as most new zealand studies on productivity use some estimation of value added of the construction industry as the indicator of output it is possible that these studies significantly underestimate new zealand productivity growth. schriver and bowlby also found that much of the fall in productivity could be attributed to a change in the output mix from high to low productivity building projects. one problem in the new zealand case is that the past studies have all bundled construction together as a single industry and do not attempt to break it up into its various components (residential, large engineering projects and commercial property). therefore no attempt has been made to account for either changes in quality of changes in the composition in the output mix. in light of the issues that have arisen in determining productivity change of the construction industry more generally a number of measures can be undertaken. first all a total factor rather than partial approach should be undertaken. secondly it is necessary to use an approach like dea or the stochastic approach along with any index or econometric approach to see if there are any price distortions that are important. finally any approach should try to make use of physical values of output, along with monetary ones, in order to ensure that distortions to the estimates of productivity change are not being made. bearing in mind these issues it is possible to observe how productivity analysis has been conducted in the new zealand case. australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 8 past measures of productivity in the new zealand construction industry since the 1980s a number of economists in new zealand have made estimates of new zealand’s productivity change over the longer term. notable examples include marks (1984), orr (1989), smith and grimes (1990), chapple (1994), philpott (1991, 1993, 1995), sarel (1996), grubb, jackman and layard (1982), 1 fare, grosskopf and margaritis (1996) and conway and hunt (1998). in some of these cases sectoral productivity was also identified, including that of the construction sector (i.e. chapple; philpott; fare, grosskopf and margaritis). further work was initiated from 1999 onwards by government agencies as well (diewert and lawrence 1999; black, guy & mclellan; and janssen & mcloughlin (2008). it should be remembered that all the studies, with one exception (davis 2007), undertook a study of construction productivity as part of broader works on productivity of the new zealand economy as a whole. in none of these cases, therefore, was any attempt made to adapt the methods used to account for any special conditions in the construction industry (such as quality adjustments). the separate studies on the new zealand construction industry are listed in table 2. the first work undertaken was by marks (1984), which used an index approach to determine labour productivity growth in new zealand between 1965/66 and 1980/81. marks’ work was published in a work by the new zealand institute of economic research (nzier) on the labour market, funded by the social science research fund committee of the new zealand government. marks was concerned with analysing the slowdown in labour productivity in all industries that had occurred in new zealand from the early 1970s. as well as national figures, however, she also looked at a number of sectors of the new zealand economy, including construction. in the case of the construction industry labour productivity was found to have increased at a, steady rate through the 1960s and 1970s. marks’s work was followed by three related works, which all used a growth accounting approach to calculate total factor productivity change along with labour and capital productivity changes (orr 1989; chapple 1994; philpott 1995). these studies were undertaken as part of a joint project between the nzier and the institute of policy studies of the victoria university, wellington (for the ministry of commerce). orr’s work was the first of these and his work and was later followed by work by chapple (1994). both orr and chapple worked for the nzier which was to retain an interest in productivity analysis and as late as 2011 published work on this theme (nzier 2011). orr’s work ranged from 1961 to 1986 and found that total factor productivity rose over the period at an annual average of 1.75 percent (labour productivity: 2.30 percent, capital productivity: 1.02 percent). chapple’s work ranged from 1971 to 1991 and showed a rise in annual average productivity of 0.7 per cent over the entire period (1.0 per cent for labour productivity and 0.2 per cent for capital productivity). both estimated a cobb-douglas production function and equated one output to that of the inputs of labour hours and net capital stock, using capital stook figures developed by philpot. orr’s work confirmed marks’ earlier findings that productivity rose steadily during the 1960s and early 1970s. chapple also found that productivity rose in the early 1970s. both orr and chapple also found that productivity tended to peak in the years of construction booms in 1975/76 and then again in 1986/87. at much the same time philpott worked on similar figures for the period 1960 to 1995 (chapple 1991, 1993, 1995). he looked at twenty separate industries including construction. his results were similar to that of chapple and orr, in that he found that productivity growth was steady up until 1975, stagnated somewhat after that and surged during periods of construction boom and flagged during recessions. 1 sarel (1995) and grubb, jackman and layard (1982) both undertook studies on new zealand productivity growth as part of wider studies of growth of the oecd countries. australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 9 figure 3 provides an overview of these works on productivity of the construction industry. as can be seen productivity tended to rise through the 1960s and early years of the 1970s before peaking around 1976 and then declining. a recovery in productivity took place in the early 1980s. despite the decline in productivity in the late 1970s the situation in the late 1980s still seemed to be a relatively good one. the productivity of the industry tended to rise over the twenty-five year period (1960 to 1985) and this is reflected in the works of marks, orr, chapple and philpott who all recorded increases in total factor productivity of the construction industry (table 2). figure 3 total factor productivity in new zealand construction, 1972=100 source: orr 1989; chapple 1994 the first study to come to more pessimistic conclusions was that of fare grosskopf and margaritis (1996). these economists used a different approach and undertook a study on a national basis and looked at twenty industries (including construction). they used the dea approach and equated value added as the output to labour hours and capital using the perpetual inventory method as the input for the years 1973 to 1994. they found for construction that although productivity rose slightly between 1973 to 1984 (annual average of 0.3 per cent) it declined over the period 1984 to 1994 (-1.2 per cent). for the entire economy between 1973 and 1974 productivity rose by 1.46 per cent, mainly due to technological change rather than efficiency changes. because their study concentrated more on the period from the mid 1970s onwards their results overall showed stagnation in the growth of construction productivity. in 1999 diewert and lawrence in work commissioned by the department of labour, the reserve bank of new zealand and the treasury used labour hours and net capital stock (valued using a user cost formula which accounted for depreciation, a rate of return and capital gain) as inputs and an index of total national output to compute labour productivity, capital productivity and a total factor productivity between the years 1972 and 1998. in doing so it used the index number approach. in this work the construction sector showed a worse performance compared to other sectors, although it enjoyed a trend annual total factor productivity growth of 0.6 per cent although it was the subject of cyclical downturns, especially in 1980 and 1993 (diewert and lawrence 1999, p. 74). statistics new zealand received funding from the growth and innovation framework in 2003 to develop official productivity statistics for new zealand. in doing so they built on the earlier work undertaken by diewert and lawrence (1999) and black, guy and mclellan (2003). the results of the work by diewert and lawrence, black, guy and mclennan and statistics new zealand are all summarised in figure 4. in each case productivity does seem to have stagnated across the whole of the period covered with especially low levels of productivity australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 10 encountered during the recessions of the late 1970s and early 1990s. there does, therefore, seem to some evidence that productivity in the construction industry correlates to business cycles. figure 4 total factor productivity of the new zealand construction, 1978=1000 construction industry source: statistics new zealand 2011; diewert & lawrence 1999, black, guy & mclellan 2003 additional studies have been undertaken by janssen and mcloughlin (2008), davis (2007), and mason and osborne (2007). each of these studies has tended to concentrate on the periods from the mid-1990s to the end of the 2000s. given that these studies miss the downturns in productivity of the early 1990s and late 2000s they tend to provide more positive results. regardless of the periods selected it appears from the various studies that although productivity increased to some degree up until the mid-1970s, since then the results have been mixed. this appears to be the case even though there have certainly been a range of technological changes that have occurred in the industry since then. new tools and equipment have been introduced that have tended to be labour savings. this has meant the introduction of hand held powered tools (nail drivers, sanders, saws and drills), and improved lifting and moving machinery (cranes, loaders, earth movers, graders, forklifts). new materials and processes have also been introduced along with a greater use of prefabricated materials. the introduction and greater use of new equipment, materials and processes has meant that it is hard to explain why growth in the productivity of the new zealand construction industry has been sluggish. it is possible that the various studies of productivity growth may have underestimated the growth in output of the industry, and therefore productivity, for the reasons explained by rosefielde & mills, and schriver & bowlby; namely the lack of quality adjustments in value added data and the shift of construction from high productivity to low productivity activities. in the future, therefore, it would be useful if studies made greater use of output measures that have some quality adjustment, and that greater use is made of techniques that rely less on pricing. australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 11 author(s) date measures period studied approach, variables & results marks 1984 labour productivity 1965/6 to 1980/1 index approach output: sectorial real gdp. input: labour employed lp: 1.0% per annum orr 1989 partial and total factor productivity 1961 to 1986 growth accounting production function output: gross domestic product. inputs: employed, net capital stock tfp: 1.75% per annum (lp: 2.30%; kp: 1.02%) chapple 1994 partial and total factor productivity 1972 to 1991 growth accounting production function output: value added. inputs: labour hours, net capital stock tfp: 0.7% per annum (lp: 1.0%; kp: 0.2%) philpott 1995 total factor productivity 1960to1994 growth accounting production function output: sectorial real gdp. inputs: employed, average of gross &net capital stock. tfp: 0.3% per annum (lp: 1.0%; kp: -1.4%) fare, grosskopf & mararitis 1996 total factor productivity 1973 to 1994 dea approach output-value added. inputs-labour hours, net capital tfp: -0.4% per annum diewert & lawrence 1999 partial and total factor productivity 1978 to 1998 index approach inputs: labour hours and net capital stock. tfp: -0.4% per annum black, guy & mclellan 2003 partial and total factor productivity 1988 to 2002 index approach output: sectorial real gdp. inputs: labour hours, net capital stock tfp: -1.51% per annum janssen & mcloughlin 2008 labour productivity 1989 to 2007 index approach output: sectorial real gdp. inputs: labour hours. lp: -3.1% per annum davis 2007 labour productivity 1997 to 2006 index approach output: sectorial real gdp. input: labour hours lp: 0.3% per annum mason & osborne 2007 labour and total factor productivity 1995 to 2004 growth accounting production function output-real value added. inputs: labour hours and net capital stock tfp: 1.12% per annum (lp: 0.84% per annum) nzier 2011 labour productivity 1989 to 2006 index approach output: value added. input: labour employed, net capital stock tfp statistics new zealand 2011 partial and total factor productivity 1978 to 2009 index approach output: sectorial real gdp. inputs: labour hours, flow of capital services generated by capital tfp: -0.2% per annum (lp: 0.4%;kp: -1.9%) table 2 past studies on the productivity of the new zealand construction industry australasian journal of construction economics and building abbott, m and carson, c (2012) ‘a review of productivity analysis of the new zealand construction industry’, australasian journal of construction economics and building, 12 (3) 1-15 12 summary over the years there has been an interest in the performance of the construction industry in new zealand and its contribution to national output. in this paper we have reviewed the various measures that have been used to gauge the levels of productivity growth in the industry and some of the key findings, as well as made recommendations on improved measures. from the past research that has been undertaken to date on the productivity growth of the new zealand construction industry a few conclusions can be made. the first of these is that in all probability growth in productivity in the industry was higher in the 1960s and early 1970s then it was in subsequent decades. the apparent stagnation that occurred since the mid 1970s, however, might not have been as great as it first appears given that some form of value added, rather than quality adjusted measure of output, has always been used. even given the difficulties associated with determining levels of output, productivity growth in the industry probably was greater in the period up until 1975. the second factor that can be identified from past studies is the strong cyclical nature of productivity in the industry. strong periods of growth in productivity in the industry are associated with strong periods of growth in demand. sharp falls in productivity are also associated with slumps in building activity and recessions. this is especially true during the recessions in new zealand of the early 1980s and early 1990s. typically in industries productivity slumps during recessions because companies have to regard some of labour and most of their capital as fixed and so output slumps relative to inputs. during boom periods the opposite occurred. one associated problem with this phenomenon is that those studies that cover only a limited number of years are generally dominated by the predominate business cycle (i.e. boom or recession). any study of productivity change in the construction industry in new zealand really has to cover a long period of time if it is to net out the impact of cyclical fluctuations. finally no attempt has been made in the new zealand context to determine if there is any reallocation within the construction industry of activity from high to low productivity areas of activity which might be affecting estimates. it appears that research stills needs to be undertaken in these areas in the future if we are going to be able to make informed inferences about the performance of the industry in terms of productivity. in 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(1998) an analysis of the technical efficiency in hong kong’s construction industry, unpublished phd thesis, university of hong kong, hong kong wang, y.s. and k.w. chau (1997) ‘an evaluation of the technical efficiency of construction industry in hong kong using the dea approach’, proceedings of arcom97 conference, cambridge, 690-701 wang, y.s. and k.w. chau (2001) ‘an assessment of the technical efficiency of construction firms in hong kong’, international journal of construction management, 29,105-122 construction delays causing risks on time and cost a critical review chidambaram ramanathan, sp narayanan and arazi b idrus, (universiti teknologi petronas, malaysia) abstract there is an increase in the number of construction projects experiencing extensive delays leading to exceeding the initial time and cost budget. this paper reviews 41 studies around the world which has surveyed the delay factors and classified them into groups. the main purpose of this paper is to review research which has categorized the causes responsible for time delays and cost overruns in projects. the intention was to see whether these causes are valid for projects being executed in sabah east malaysia allowing a mitigation plan to be prepared. the collected list has 113 causes for delays which were categorized into 18 different groups. most of the research has analysed the responses from questionnaire surveys. the collected data are used to rank the problem factors. the data are further used to investigate and analyse the reported “importance index, frequency index, severity index, relative importance index, relative importance weight, weighted average, mean, standard deviation and variance”. the collective comparison has revealed that the ranking given by all the researchers is not the same. further each and every study has different rank ratings from different group. this review paper attempts to provide an updated compilation of the earlier studies on ranking of the delay causers, which are never similar and constant for universal projects. from the critical review, it is concluded that this type of research requires a different method or approach to generate meaningful answers and that there is a strong case against opinion surveys. keywords: construction delays, cost risk, time risk, project management introduction the purpose of this study is to critically review and identify the applicability of past studies on determining the factors causing time delays and cost overrun in current projects. this goal has been accomplished by reviewing articles published during the last 15 years (since 1995) in various project management journals like: international journal of project management (ijpm), journal of construction management economics (jcme), journal of management in engineering (jme), engineering construction and architectural management journal (ecamj) and others. the biggest customer of the construction industry in most countries is the government (okpala and aiekwu, 1988). to the dislike of owners, contractors and consultants, many government projects experience extensive delays and thereby exceed the initial time and cost estimates (odeh and bataineh, 2002). this problem is more evident in the traditional type of contracts in which the contract is awarded to the lowest bidder. this procurement strategy is adopted by majority of government projects in developing countries. the latham report (latham, 1994) suggested that ensuring timely delivery of projects is one of the important needs of clients of the construction industry. severe criticisms of the industry arise if it takes much longer than the stipulated project time (bennett et al., 1979; flanagan et al., 1986). completing projects on time is an indicator of an efficient construction industry (nedo, 1988). contractors are primarily australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 38 concerned with quality, time and cost and yet the majority of construction projects are procured on the basis of only two of these parameters, namely time and cost (bennet and grice, 1990). the literature emphasises time as an indicator for project success. the construction process can be divided into three important phases, i.e. project conception, project design and project construction. usually, the vast majority of project delays occur during the ‘construction’ phase, where many unforeseen factors are always involved (chan and kumaraswamy, 1997). in construction, delay could be defined as the time overrun either beyond completion date specified in a contract, or beyond the date that the parties agreed upon for the delivery of a project. it is a project slipping over its planned schedule and this is a common problem in construction projects. to the owner, delay means loss of revenue through non availability of production facilities and rentable space or a dependence on present facilities. in some cases, delay causes higher overhead costs to the contractor because of longer work period, higher material costs through inflation, and due to labour cost increases. completing projects on time is an indicator of efficiency, but the construction process is subject to many variables and unpredictable factors, which result from many sources. the sources are the performance of parties, resources availability, environmental conditions, involvement of other parties, and contractual relations, and the completion of a project within the specified time is rare (assaf, 2006). cost and schedule overruns occur due to wide range of factors. if project costs or schedules exceed their planned targets, client satisfaction would be compromised. the funding profile no longer matches the budget requirement and further slippage in the schedule could result (kaliba et al., 2009). according to ahmed et al. (2002), delays on construction projects are a universal phenomenon and road construction projects are no exception. delays are usually accompanied by cost overruns. these have a debilitating effect on contractors and consultants in terms of growth in adversarial relationships, mistrust, litigation, arbitration, cash-flow problems, and a general feeling of trepidation towards other stakeholders (ahmed et al., 2002). this problem is not unique to developed countries and is being experienced in most of the developing economies. when projects are delayed, they are either extended or accelerated and therefore, incur additional cost. the normal practices usually allow a percentage of the project cost as a contingency allowance in the contract price and this allowance is usually based on judgment (akinsola, 1996). although the contract parties agree upon the extra time and cost associated with delay, in many cases there are problems between the owner and contractor as to whether the contractor is entitled to claim the extra cost. such situations result in questioning facts, causal factors and contract interpretations (alkass et al., 1996). therefore, delays in construction projects cause dissatisfaction to all parties involved and the main role of the project manager is to make sure that projects are completed within the budgeted time and cost. several studies have been undertaken on factors causing delays and cost overruns, and affecting quality, safety and productivity, etc. and specific problems in special types of projects. these studies usually focus on specific aspects of project performance. practitioners need to develop the capacity to foresee potential problems likely to confront their current and future projects. identification of the common problems experienced on past projects in their construction business environment is a good option (long et al., 2004). frimpong et al. (2003) revealed that project management tools and techniques play an important role in the effective management of a project. pmbok defines project management as the application of knowledge, skills, tools and techniques to project activities to meet the project requirements (pmi, 2008). project management involves managing the resources— australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 39 workers, machines, money, materials and methods used (giridhar and ramesh, 1998). some projects are effectively and efficiently managed while others are mismanaged, incurring much delay and cost overruns. any construction project comprises two distinct phases: the preconstruction phase (the period between the initial conceptions of the project to awarding of the contract) and the construction phase (period from awarding the contract to when the actual construction is completed). delays and cost overruns occur in both phases. however the major instances of project overruns usually take place in the construction phase (frimpong et al., 2003). unfortunately, due to various reasons, project successes are not common in the construction industry, especially in developing countries. from several studies and empirical evidence it is clear that project overruns comprising delays and cost overruns occur during the ‘construction’ phase. therefore, professionals and scholars have been motivated to take steps to meet this challenge. review of construction delays across the world realistic ‘construction time’ has become increasingly important because it often serves as a crucial benchmark for assessing the performance of a project and the efficiency of the contractor (kumaraswamy and chan, 2002). this study aims to identify the uncertainties and to foresee potential problems likely to confront the current and future projects, helping project teams to be proactive in managing their projects in which potential problems are fully anticipated (long et al., 2004). research literature from all around the world has been collated and consolidated for the better understanding and to conceive the overall picture of the issues. this critical review is presented in five sections; firstly identification of factors and category, secondly the research methodology adopted in earlier studies (reorganizing and tabulating the data from literature), thirdly analysis of data, fourthly results and discussions and fifthly conclusions. identification of factors and category the factors identified in the research articles are collated and grouped into 18 categories. the set of factors studied by different authors are collected and presented in table 1. different authors focus on selected categories for study and analysis. table 1 tabulates the type of effect studied by different authors and the respective category as classified in their studies. from the review it is observed that certain factors have been categorized under different groups by different authors. this has been tabulated in detail and discussed in following section of this paper. category no. category no. of causes / factors / problems type of effect studied references 1 financier 4 time delay long et.al 2004 3 time delay assaf et.al. 1995 2 project 6 time delay assaf and hejji 2006 5 time overrun chan & kumaraswamy 1997 3 project attributes 8 time and cost overrun long et.al 2004 australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 40 table 1 cont’ category no. category no. of causes / factors / problems type of effect studied references 4 owner / client 10 time and cost overrun assaf and hejji 2006 10 time and cost overrun long et.al 2004 5 time delay alaghbari et.al. 2007 4 time delay odeh & battaineh 2002 4 time overrun chan & kumaraswamy 1997 5 contractor 13 time and cost overrun assaf and hejji 2006 17 time and cost overrun long et.al 2004 12 time delay alaghbari et.al. 2007 6 time and cost overrun odeh & battaineh 2002 4 time overrun chan & kumaraswamy 1997 6 consultant 7 time and cost overrun assaf and hejji 2006 7 time and cost overrun long et.al 2004 6 time delay alaghbari et.al. 2007 4 time and cost overrun odeh & battaineh 2002 7 design 8 time and cost overrun assaf and hejji 2006 3 time overrun chan & kumaraswamy 1997 8 coordination 7 time and cost overrun long et.al 2004 9 materials 7 time and cost overrun assaf and hejji 2006 2 time and cost overrun odeh & battaineh 2002 4 time overrun chan & kumaraswamy 1997 5 time and cost overrun assaf et.al. 1995 10 plant / equipment 5 time and cost overrun assaf and hejji 2006 1 time delay odeh & battaineh 2002 4 time overrun chan & kumaraswamy 1997 5 time and cost overrun assaf et.al. 1995 australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 41 table 1 cont’ category no. category no. of causes / factors / problems type of effect studied references 11 labour / manpower 5 time and cost overrun assaf and hejji 2006 2 time and cost overrun odeh & battaineh 2002 4 time overrun chan & kumaraswamy 1997 3 time and cost overrun assaf et.al. 1995 12 environment 9 time and cost overrun long, et.al 2004 4 time and cost overrun assaf et.al. 1995 13 contract 2 time & cost disputes odeh & battaineh 2002 14 contractual relationships 3 time & cost effects odeh & battaineh, 2002 14 time delay assaf et.al. 1995 15 external 12 time and cost overrun assaf and hejji 2006 4 time delay odeh & battaineh 2002 2 time overrun chan & kumaraswamy 1997 8 time delay alaghbari et.al. 2007 16 changes 7 time delay assaf et.al. 1995 17 scheduling & controlling 11 time delay assaf et.al. 1995 18 government relations 4 time delay assaf et.al. 1995 table 1 factors and categories research methodology chan and kumaraswamy (1997) adopted a questionnaire survey with 83 hypothesized delay factors which was designed in late 1994 on the basis of a pilot survey. the 83 factors have been grouped into eight major factor categories. odeh and battaineh (2002), frimpong et al (2003), long et al (2004), assaf and al-hejji (2006), abdul-rahman et al. (2006), sambasivan and soon (2007), alaghbari et al. (2007), adnan (2008), and kaliba et al. (2009) also designed their research methodologies with questionnaire surveys comprising individual set of well recognized causes of delay. the questionnaires were designed to evaluate the frequency of occurrence, severity and the importance of the identified causes (assaf, 2006). the questionnaire was distributed to contractors, consultants and clients. in the field survey the respondents were asked to indicate the level of importance of each cause using five-point likert scale ranging from 1 (not important) australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 42 to 5 (extremely important). the number of firms that completed and returned the questionnaire sets are listed in table 2 and graphically represented in figures 1 and 2. figure 1 shows the total number of questionnaires distributed and the total responses of the individual study. figure 2 shows the response rate of individual sectors of respondents in percentage. questionnaire design and methods: the questionnaire study adopted by each author has a different approach. they have been designed based on previous literature, current construction practice, personal experience and location of the project. assaf et al. (1995) conducted the investigation in two phases. the first phase included a literature search and interviews. the first phase identified 56 causes of delay. in the second phase a questionnaire was developed using these delay causes. his scope was limited to large public building projects in the eastern province of saudi arabia. the total population consisted of contractors, architects/engineers (a/es), and public owners (government agencies). chan and kumaraswamy conducted two studies in 1997 and 2002. in the earlier study, a pilot study was carried out in early 1994 to investigate the principal causes of construction delay of both building and civil engineering projects which were completed in hong kong between 1990 and 1993. the latter survey was supplemented by site visits by industry experts with the aim of identifying the principal factors facilitating faster construction in hong kong projects. odeh and battaineh (2002) distributed the questionnaire to a random sample of 100 contractors and 50 consultants representing different specializations in large projects. the sample size of each specialization is proportional to the distribution of the population of the different specializations. given the sample size, the samples were selected randomly from the population in each specialization. sambasivan and soon (2007) adopted the same method in their study on the causes and effects of construction delays. long et al. (2004) developed their questionnaire survey to investigate several issues relating to large construction projects focusing only on the problems experienced. to suit the vietnam construction conditions, the preliminary questionnaire was pilot tested. six experienced professionals in the vietnam construction industry were involved in the pilot test. their comments were used to revise and prepare the final questionnaire. responses to the questionnaire were then collected and analysed. the analysis included ranking the problems in terms of degree of occurrence and level of influence. frimpong et al. (2003) developed a questionnaire of 26 factors designed from previous preliminary investigations conducted in groundwater drilling projects between 1970 and 1999 in ghana. the questionnaire was directed towards three groups in both public and private organisations: owners of the groundwater projects, consulting offices, and contractors working in the groundwater works. alaghbari et al. (2007) distributed the questionnaire among government bodies, main contractors, consultants and developers who were connected with the building systems construction projects. in order to accomplish this, the researchers contacted professional institutions, agents and government bodies. the sample was restricted to building system companies. the respondents were contractors, consultant, developers, subcontractors, engineers and architects who were involved in building system construction projects. australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 43 all the other studies were conducted by the random sampling of the three principal construction parties (owners, consultant and contractor). figure 1 total number of questionnaires distributed and response figure 2 response rate for different categories for the questionnaire 144 287 125 60 200 200 60 502 450 320 150 400 164 285 110 180 57 109 72 30 150 166 37 78 187 82 147 22 87 91 143 0 100 200 300 400 500 600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 no. of questionnaire total respondents total distributed 4 0 % 3 8 % 5 8 % 5 0 % 7 5 % 8 3 % 7 % 1 7 % 5 8 % 5 5 % 3 7 % 1 3 % 3 1 % 8 3 % 7 9 % 2 6 % 3 3 % 3 9 % 4 5 % 3 0 % 1 4 % 2 3 % 2 9 % 7 % 3 3 % 3 2 % 2 6 % 3 2 % 7 0 % 1 9 % 4 0 % 7 7 % 3 2 % 5 9 % 4 0 % 4 2 % 3 5 % 2 3 % 4 3 % 6 7 % 3 7 % 2 3 % 4 0 % 3 4 % 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 authors surveyed overall owner consultant contractor australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 44 sl. no . description of study questionnaires distributed questionnaire respondents proportional response rate* references total owners consultant s contractor s total owner s consultant s contractor s overall owner consulta nt contractor 1 causes of delay 144 27 51 66 57 15 19 23 40% 26% 33% 40% assaf and hejji 2006 2 large projects in vietnam 287 82 85 120 109 36 27 46 38% 33% 32% 42% long et.al 2004 3 causes of delay ghana case study 125 55 30 40 72 28 19 25 58% 39% 26% 35% frimpong et.al 2003 4 risk in d&b projects in malaysia 60 30 50% adnan et.al 2008 5 causes and effects of delay in malaysian projects 200 100 50 50 150 67 48 35 75% 45% 32% 23% sambasivan & soon, 2007 6 quantify schedule risk in projects 200 166 83% luu et.al. 2009 7 schedule delays and cost escalation in zambia projects 60 30% 70% 43% kaliba et.al. 2009 8 delay mitigation in malaysian projects 502 8 81 413 37 5 7 25 7% 14% 19% 67% abdul-rahman et.al. 2006 9 factors causing delays in malaysia 450 78 17% 23% 40% 37% alaghbari et.al. 2007 10 schedule delay causes in bot 320 187 58% yang et.al. 2010 11 delays in traditional contracts 150 100 50 82 63 19 55% 77% 23% odeh & battaineh, 2002 12 time overrun in hongkong 400 147 50 49 48 37% chan & kumaraswamy 1997 13 compressing duration hong kong 164 22 13% chan & kumaraswamy 2002 14 delay and cost overrun in vietnam 285 87 31% le-hoai. et. al. 2008 15 delay in jordan projects 110 30 30 50 91 26 29 36 83% 29% 32% 40% sweis et.al. 2007 16 time, cost and quality managt. 180 30 90 60 143 10 84 49 79% 7% 59% 34% bowen et.al. 2002 table 2 details of the questionnaire distribution in various studies and their response * the decimals more than 0.5 are rounded to next whole number australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 45 data analysis abbreviation proposed expression parameters reference place of study importance index i where i = importance index; ai = constant expressing the weight of the ith response, where ai = 0,1,2,3 for i = 1,2,3,4, respectively; xi = frequency of the ith response given as a percentage of the total response for each cause; i = response ategory index. assaf et.al. 1995 saudi arabia rank correlation coefficient where, d= difference between ranks given by one party and the rank given by another party for an individual cause and n= umber of cause or groups. assaf et.al. 1995 saudi arabia relative importance index rii where w = weighting given to each factor by the respondentsand ranges from 1 to 5 where '1' is 'not significant' and '5' is 'extremely significant', a = highest weight (i.e. 5 in this case), and n = total number of respondents. chan & kumaraswamy, 1997 hong kong relative importance index rii where r = rating given to each factor by the respondents and ranges from 1 to 5 where '1' is 'not significant' and '5' is 'extremely significant', a = highest rating (i.e. 5 in this case), and n = total number of respondents. chan & kumaraswamy, 2002 hong kong relative importance index rii where i = response category index, wi = the weight assigned to the ith resonse. xi = frequency of the ith response given as percentage of the total responses for each case. odeh & battaineh, 2002 jordan relative importance weight riw where: xj=the sum of the jth factor; j=the factors 1, 2, 3, 4, . . .. . .n; n=total number of factors (26); ai=constant expressing the weight given to the ith response: i=1, 2, 3, 4, 5 frimpong et al. 2003 ghana frequency index (%) f.i. (%) a is the constant expressing weighting given to each response (ranges from 1 for assaf and hejji 2006 saudi arabia australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 46 rarely up to 4 for always), n is the frequency of the responses, and n is total number of responses. severity index (%) s.i. (%) a is the constant expressing weighting given to each response (ranges from 1 for rarely up to 4 for always), n is the frequency of the responses, and n is total number of responses. assaf and hejji 2006 saudi arabia importance index (%) imp.i. (%) assaf and hejji 2006 saudi arabia relative importance index rii where w = weighting given to each factor by the respondentsand ranges from 1 to 5 where '1' is 'not significant' and '5' is 'extremely significant', a = highest weight (i.e. 5 in this case), and n = total number of respondents. sambasivan & soon 2007 malaysia mean score ms where ms is the mean score, f is the frequency of responses to each rating (1-4), s is the score given to each factor by the respondents (ranges from 1 to 4), and n is the total number of responses concerning that factor alaghbari et al. 2007 malaysia frequency index (%) f.i. (%) a = constant expressing the weight assigned to each responses (ranges from 0 for no happen to 4 for always), n = frequency of each response, n = total number of responses. le-hoai et al. 2008 vietnam severity index (%) s.i. (%) a = constant expressing the weight assigned to each responses (ranges from 0 for no happen to 4 for always), n = frequency of each response, n = total number of responses. le-hoai et al. 2008 vietnam relative importance index rii le-hoai et al. 2008 vietnam table 3 data analysis expressions used for various studies reported in literature. australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 47 analysis of data each and every study has a different scope and different conclusions. hence, different approaches have been used and the data analysed with different expressions. table 3 includes the expressions used by individual researchers to produce the results to meet the set objectives. it shows the data analysis approaches with abbreviations and the equations used to calculate the results. the table explains the parameters used in the expressions. the place where the study was performed is denoted in column 6 of the table 6. results and discussions the data from the responses were analyzed by the authors of each and every study and the groups were ranked as shown in table 4. it has collective listing of 18 different groups/category. the respective rankings results of the studies have been summarized to obtain an over view on the groups that are highly responsible for the project delays. the review findings shows that the group and factor ranking differs based on the location like hong kong, jordan, vietnam, etc. sambasivan and soon (2007) stated that “the effects of delays in construction projects can be country-specific” whereas other studies has proven that project characteristics may even be region-specific. none of the studies is comparable to any other and each study has different rankings for the groups/categories/sources of the delays and cost overruns. the groups most influential in earlier studies (in 1995) are now (2010) not considered high risk factors. the possible variations in the ranking results are most unlikely to be because of the different respondents. table 4 clearly outlines that the studies have yielded different results. even sambasivan & soon (2007) adopting the same 28 factors derived by odeh & battaineh (2002) has obtained different results of group influence and their responsible levels. figure 3 shows the scatter diagram of the ranks obtained from the various related studies. as there is no correlation in the ranking of the different studies, the first five rankings influencing project delays and cost overruns from the entire set of results of each author has been collected. in the different studies the groups with rank 1 to rank 5 has been listed. the groups which appear more than once have been identified. this is tabulated in table 5. even though the groups like owner (rank 1), contractor (rank 2), design related and plant and equipments (rank 3), labour (rank 4) and consultant and contractual relationships (rank 5) fall more frequently within the first 5 rank category, other groups like finance related, materials, schedule and controlling, coordination, changes are also found in some studies but occurs only once in the collated studies. so out of all 18 categories 7 categories appears among the first five ranks and other 11 categories are rated consistently below rank 5. this provides an overall view of the study, and is shown in table 5. the critical review has resulted in a consolidated list of factors/causes and their ranking (table 6). this review study has identified 113 factors from the studies discussed in this article. further analysis ranked all these factors according to the results in the respective studies. table 6 compares the results of ten studies in 12 different sectors of the projects. the corresponding factors and their group wise categories are mentioned in the last column of the table 6. this comparative study brings together the results of various studies and combines the factors / causes, ranking and group classification. the serial numbers in row 1 of table 6 represents authors, whose details are as follows: column [1] assaf et.al. 1995, col.[2] chan & kumaraswamy 1997, col. [3] odeh & battaineh australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 48 2002, col.[4] frimpong et.al. 2003, col.[5] long, et.al 2004, col. [6] sambasivan& soon 2007, col.[7] alaghbari et al. 2007, col.[8] le-hoai. et al. 2008, col.[9] luu et al. 2009 and col.[10] tumi et al. 2009. also (a) indicates “contractor”, (b) “consultants”, (c) “occurrence” and (d) “influence”. from the list of factors obtained in table 6 from the previous studies, the first five important causes of delay and cost overruns in different developing countries are determined and summarized in table 7. the problem of delays in the construction industry is a global phenomenon. in saudi arabia, assaf and al-hejji (2006) found that only 30% of construction projects were completed within the scheduled completion dates and that the average time overrun was between 10% and 30%. in nigeria, ajanlekoko (1987) observed that the performance of the construction industry in terms of time was poor. odeyinka and yusif (1997) have shown that seven out of ten projects surveyed in nigeria suffered delays in their execution. ogunlana and promkuntong (1996) conducted a study on construction delays in thailand. al-momani (2000) carried out a quantitative analysis on construction delays in jordan. frimpong et al. (2003) conducted a survey to identify and evaluate the relative importance of the significant factors contributing to delay and cost overruns in ghana groundwater construction projects. chan and kumaraswamy (1997) studied delays in hong kong construction industry. conclusions the critical review undertaken in this paper covers research studies in the area of construction delay with time and cost risks. totally 18 categories of causes were identified from the various related studies reported in the literature. these 18 categories or groups are (1) financerelated, (2) project-related, (3) project attributes, (4) owner/client, (5) contractor, (6) consultant, (7) design-related, (8) coordination, (9) materials, (10) plant/equipment, (11) labour/manpower, (12) environment, (13) contract-related, (14) contractual relationships, (15) external, (16) changes, (17) scheduling & controlling and (18) governmental relationship. generally, all the research studies were conducted by questionnaire surveys using randomly sampled responses and analysis of data obtained from the responses. the review study has ranked the responsible groups by combining the analysis results which are: owner (rank 1), contractor (rank 2), design related and plant and equipments (rank 3), labour (rank 4) and consultant and contractual relationships (rank 5). these fall into the first 5 rank categories. each study has a unique approach and unique results are derived from the questionnaire response data. various indices like importance index (i), rank correlation coefficient, relative importance index (rii), frequency index (fi), severity index (si) and mean score (ms) have been determined to assess the impact of the factors at various angles based on the requirement for the project. each study has rated the groups or factors with ranks of influence. these ranks are compared for better understanding. but two studies have similar rating of ranks. each and every group in the various studies arrived at different weights of ranks. it would appear that the groups and factors causing delays are country, location and project specific and that there are no root causes that can be generalised. australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 49 sl. no. group overall / average ranking studied assaf et.al. 1995 chan& kumaraswamy, 1997 odeh & battaineh 2002 long et.al 2004 assaf and hejji 2006 sambasivan& soon 2007 combined ranking contractors consultants occurrence influence frequency severity importance 1 finance – related 1 7 7 2 project – related 5 7 9 8 3 project attributes 6 5 4 owner / client – related 7 1 1 5 3 1 1 1 4 5 contractor – related 1 3 2 2 4 2 2 2 1 6 consultant – related 6 4 1 1 3 5 5 7 7 design – related 2 5 3 3 8 coordination 3 6 9 materials 2 8 7 5 6 6 6 2 10 plant/equipments 7 6 2 3 9 7 9 3 11 labour 6 3 2 3 4 4 4 3 12 environment 9 4 2 13 contract 4 7 6 14 contractual relationship 3 5 6 5 15 external 4 8 8 8 8 7 8 16 changes 4 17 scheduling and control 5 18 government relationship 8 table 4 group rankings figure 4 scatter diagram of rank distribution 0 1 2 3 4 5 6 7 8 9 10 0 2 4 6 8 10 12 14 16 18 20 r a n k s groups assaf,s.a, et.al. 1995 chan,d.w.m & kumaraswamy, m.m 1997 odeh,a.m & battaineh,h.t.2002 "contractor" odeh,a.m & battaineh,h.t.2002 "consultants" long, n.d, et.al 2004 "occurrence" long, n.d, et.al 2004 "influence" australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 50 research study groups results place of study rank 1 rank 2 rank 3 rank 4 rank 5 assaf et.al. 1995 finance-related materials contractual relationship changes schedule and controlling overall saudi arabia chan & kumaraswamy, 1997 contractor design labour external project – related overall hong kong odeh & battaineh, 2002 owner plant and equipment contractor contract contractual relationship contractor’s response jordan owner contractor plant and equipments consultant materials consultant’s response long et.al 2004 consultant contractor coordination environment owner occurrence vietnam consultant environment owner contractor project attributes influence assaf and hejji, 2006 owner contractor consultant labour design frequency saudi arabia owner contractor design labour consultant severity owner contractor design labour consultant importance sambasivan & soon, 2007 contractor materials plant and equipment owner contractual relationship overall malaysia many occurrence (no.) and % owner (5) 50% contractor (5) 50% design (2) + plant & equipment (2) 40% labour (3) 30% consultant (2) & contr. relationship (2) 40% table 5 factors securing the first five rank in different studies australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 51 sl. no. factors / causes [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] groups (a) (b) (c) (d) 1 slow payment for completed works 5 4 2 1 4 7 6 9 financing 2 contractor financial difficulties 2 5 14 5 2 4 4 4 financing 3 cash problems during construction 1 7 5 financing 4 inflation 4 financing 5 financial difficulties to owner 1 3 1 4 6 necessary variations of works 8 7 project 7 obsolete technology 9 9 project attributes 8 unsatisfactory site compensation 10 7 project attributes 9 lack of involvement through project life 16 19 project attributes 10 incompetence project team 20 12 project attributes 11 slow site handover 5 8 12 owner interference 2 4 20 13 long waiting time for approval of drawings 3 owner / client 14 client initiated variations 5 18 19 owner / client 15 unrealistic contract durations imposed by client 13 13 6 18 24 owner / client 16 unrealistic client initial requirement 20 owner / client 17 low speed of decision making 4 8 5 26 13 8 4 owner / client 18 slow site clearance difficulties 2 1 13 owner / client 19 delays in subcontractors’ work 9 9 3 5 13 6 contractor 20 poor site management and supervision 11 5 13 17 2 5 1 11 6 contractor 21 unstable management structure and style of contractor 12 15 20 contractor 22 shortage of technical, managerial and supervisory personnel 15 20 7 4 14 contractor 23 construction method 5 17 15 13 8 contractor 24 improper planning 10 8 1 contractor 25 mistakes during construction 17 11 22 10 6 16 9 17 contractor 26 inadequate contractor experience 3 1 8 3 2 10 contractor 27 severe overtime 5 contractor 28 excessive contracts and subcontracts 18 11 contractor 29 lack of responsibilities 10 contractor 30 contract management 12 7 19 11 consultant 31 delay in work approval 18 11 consultant 32 preparations and approval of drawings 21 19 16 consultant 33 quality assurance/control 25 21 25 22 11 consultant 34 waiting for information 24 11 35 long waiting time for approval of test samples of material 16 18 15 25 23 11 consultant 36 poor contract management 2 consultant 37 supervision too late & slowness in making decision 3 15 11 38 slow to give instructions 4 39 lack of consultant’s experience 9 10 40 poor project management assistance 2 australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 52 sl. no. factors / causes [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] groups (a) (b) (c) (d) 41 delay in design information 2 design related 42 inadequate design team experience 6 15 design related 43 mistakes and discrepancies in design 7 10 3 design related 44 impractical design 19 11 design related 45 slow information flow between project team 10 17 coordination 46 lack of communication between consultant and contractor 14 20 14 9 2 coordination 47 lack of communication between client and consultant 17 20 14 9 2 coordination 48 shortage 11 11 10 15 6 4 9 3 3 materials 49 change in type & spec. 6 materials 50 procurement 3 materials 51 slow / late delivery 16 11 7 13 materials 52 damage in storage while needed at site 45 materials 53 delay in special manufacturer from foreign country (imported) 16 17 materials 54 quality 26 23 12 materials 55 escalation in prices 6 materials 56 difficulty in obtaining at official current prices 13 materials 57 failure 42 7 16 16 8 plant/equipments 58 shortage/availability 36 7 16 15 6 17 8 16 plant/equipments 59 unskilled operators 50 plant/equipments 60 slow / late delivery 41 11 plant/equipments 61 poor productivity 41 plant/equipments 62 shortage / supply 27 16 12 21 7 19 manpower 63 labour skills/productivity 27 1 9 11 19 manpower 64 nationality of labour 49 manpower 65 hot weather effect on construction activity 42 environment 66 rain / inclement weather effect on construction activity 55 18 23 24 8 27 20 12 21 environment 67 insufficient available utilities on site 51 environment 68 social and cultural factor 54 environment 69 project delivery systems used. (#) 33 17 contract 70 mistakes and discrepancies in contract documents 14 22 10 18 contract 71 deficiencies/inaccurate in cost estimates 10 12 15 8 contract 72 low warded bid price 14 7 contract 73 conflicts between contractor & consultant 20 21 contractual relationship 74 uncooperative owner 9 contractual relationship 75 slowness of owner’s decision–making process 2 19 26 contractual relationship 76 joint owner ship of project 51 contractual relationship 77 poor organization of contractor or consultant 11 22 18 25 contractual relationship 78 difficulty of coordination with various parties in the project 11 contractual relationship australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 53 sl. no. factors / causes [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] groups (a) (b) (c) (d) 79 insufficient communication between the owner & design in the design phase. 21 contractual relationship 80 unavailability of professional construction management 31 contractual relationship 81 controlling subcontractors by general contractors in execution of works 6 contractual relationship 82 unavailability of financial incentive for contractor to finish ahead of schedule 32 contractual relationship 83 negotiations and obtaining of contracts 46 contractual relationship 84 legal disputes between various parties in the const. project 46 15 20 14 contractual relationship 85 problems with neighbors 28 27 28 external 86 unforeseen ground conditions 24 25 23 18 6 external 87 fraudulent practices and kickbacks 11 external 88 price fluctuation 12 10 89 design changes by owner 9 19 26 3 13 21 5 14 changes 90 design changes made by designers (*) 14 3 13 21 5 14 changes 91 foundation conditions encountered in the field 33 1 changes 92 mistakes in soil investigation 27 16 changes 93 water table conditions on site 24 changes 94 geological problems on site 46 12 changes 95 errors committed during field construction on site 27 changes 96 inaccurate time estimates 1 3 1 scheduling & control 97 planning and scheduling deficiencies 8 13 6 scheduling & control 98 preparation and approval of shop drawing 11 scheduling & control 99 waiting for sample materials approval 27 scheduling & control 100 preparation of schedule networks and revisions by consultant during construction 33 scheduling & control 101 lack of training personnel and management support to model construction operation 24 scheduling & control 102 lack of database in estimating activity duration and resources 16 scheduling & control 103 poor judgment and experience of involved people in estimating time and resources 6 scheduling & control 104 inadequate early planning of project 16 scheduling & control 105 inspection and testing procedures used in project 36 scheduling & control 106 application of quality control based on foreign specification 42 scheduling & control 107 traffic control regulation practiced at site 53 scheduling & control 108 accident during construction 56 scheduling & control 109 inadequate control procedures 19 scheduling & control 110 obtaining permits from government 21 4 2 21 govt. relations 111 obtaining permits from labourers 24 21 govt. relations 112 excessive bureaucracy in project-owner operation 11 8 14 7 govt. relations 113 building codes used in design of projects 8 27 28 26 govt. relations table 6 consolidated list of factors / causes and their ranking * (due to unfamiliarity with local conditions and environment) # (design & build, general contracting, turnkey, etc.) australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 54 major causes author 1 2 3 4 5 vietnam (a) poor site management and supervision poor site management and assistance financial difficulties of owner financial difficulties of contractor design change le-hoai et. al. 2007 malaysia (b) improper planning site management inadequate contractor experience finance and payments of completed works subcontractors sambasivan, 2007 jordan (b) financial difficulties faced by the contractor too many change order from the owner poor planning and scheduling by the contractor presence of unskilled labours shortage of technical professionals with the contractor sweis, 2007 south korea (b) public interruptions changed site conditions failure to provide site unrealistic time estimation design error acharya et al. 2006 hong kong (b) inadequate resources due to contractor/lack of capital unforeseen ground conditions exceptionally low bids inexperienced contractor works in conflict with existing utility lo, 2006 uae (b) preparation and approval of drawings inadequate early planning of the project slowness of the owner’s decisions making process shortage of manpower poor supervision and poor site management faridi, 2006 nigeria (b) contractor’s financial difficulties client’s cash flow problem architects incomplete drawing subcontractor’s slow mobilization equipment breakdown and maintenance problem aibinu, 2006 saudi arabia (b) changes in orders by owner during construction delay in progress payments insufficient planning and scheduling shortage of labour difficulties in financing contract assaf 2006 kuwait (b) change orders financial constraints owner’s lack of experience materials weather koushki, 2005 (c) contractor materials financial constraints change orders weather ghana (a) monthly payment difficulties poor contract management material procurement inflation contractor’s financial difficulties frimpong, 2003 jordan (b) poor design changes in orders/design weather unforeseen site conditions late deliveries al-moumani 2000 saudi arabia (b) cash flow problem financial difficulties difficulties in obtaining permits “lowest bid wins” system al-khal 1999 lebanon (b) owner’s more concern in financial issues contractors regarded the contractor relationship the most important consultant considered project management most important mezher et al. 1998 saudi arabia (b) slow preparation and approval of shop drawings delays in payment to contractors changes in design/design errors shortage of labour supply poor workmanship assaf et al. 1995 table 7 comparison of previous studies on delay and cost overrun in construction projects in different countries (a): delay and cost overruns; (b): delays only; (c): cost overruns only australasian journal of construction economics and building ramanathan, c et al. (2012) ‘construction delays causing risks on time and cost – a critical review’, australasian journal of construction economics and building, 12 (1) 37-57 55 this study has identified 113 distinct factors classified into 18 groups responsible for delays through critical review of 41 previous research studies performed in the relevant field. this gives all the combination of factors and categories responsible for construction delays. but this critical review of forty one studies also demonstrates that none of the studies can be generalised and directly applicable ‘as is’. this presents a strong case against opinion surveys when as in this case, statistical analyse of actual projects could be done which potentially could generate meaningful answers. references abdul-rahman, h., berawi, a.r., berawi, a.r., mohamed, o., othman, m. and yahya, i.a. 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(2010) ‘evaluating schedule delay causes for private participating public construction works under the build-operate-transfer model’, international journal of project management, 28, 569-579 http://www.hindunnet.com/2007/07/06/stories/2007070657310100 microsoft word ajceb vol.2 no.1 compiled sized.doc foreign market selection factors in the australian construction services sector the australian journal of construction economics and building vol.2 no.1 107 foreign market selection factors in the australian construction services sector faiza a. el-higzi queensland university of technology introduction recent efforts to improve construction industry performance in australia have revealed the need for companies to become more competitive internationally (construction queensland, 1997). the potential advantages of this for individual companies are manifold: diversification of market portfolios (strassmann and wells, 1988), and products and services (hoopes, 1999; smyth, 1999; wolf, 1975; wolf, 1977); new sources of competitive advantage (ghoshal, 1987; porter, 1985); the locational and ownership advantages of overseas markets (dunning, 1988); increased strategic and operational flexibility to deal with macroeconomic risks (kogut, 1985); and enhanced global learning (bartlett and ghoshal, 1989). the first step in this is the selection of target foreign markets — an important issue in global expansion and market diversification that has been well researched by international business and marketing scholars (eg. andersen and strandskov, 1998; o'farrell and wood, 1994; papadopoulos and denis, 1988). a related issue is the selection of an appropriate entry mode (terpstra and sarathy, 2000). these influence both the amount of staff and capital, i.e. labour, skills, equipment, finance and intangible capital, as well as reputation and risk management capability (strassmann and wells, 1988) that firms need to commit to foreign markets, and the performance and longevity of the foreign operations (anderson and gatignon, 1986; hill, hwang, and kim, 1990; li, 1995; root, 1994). the construction industry, however, currently lacks an export culture (disr, 1998; el-gamal, 1993), with companies being faced with a “…bewildering array of countries and markets throughout the world…” (douglas, craig and keegan, 1982: 27). little is known of the factors that influence construction companies’ decisions to internationalise operations, how they interplay to influence the choice of a foreign country for entry and the risk factors involved. in seeking to rectify this, this paper considers whether international construction marketing can be approached in the same manner as the marketing of other services. in doing so, this paper aims to contribute to a better understanding of the international marketing of construction services and respond to calls for more research into the foreign entry strategies of various subsectors within the services industry in general (domkedamonte, 2000; ekeledo and sivakumar, 1998; erramilli and rao, 1990). target country selection factors company-specific factors internationalisation of activities and the level of control required to achieve objectives in a foreign market is determined by the corporate objectives and strategic motivations of the firm (morgan, 1997; douglas and craig, 1995; ekeledo and sivakumar, 1998). the ‘defensive strategy’ (smyth, 1999; white, griffith and ryans, 1998) of maintaining client following is one of the first strategies internationalising services companies employ (erramilli, 1990; li and guisinger, 1992; sapir and winter, 1994; terpstra and yu, 1988). often, firms expand into international markets at the invitation of existing or potential clients (phillips, doole and lowe, 1994), suppliers and business partners (erramilli and rao, 1990), with service firms tending to follow domestic clients overseas (terpstra and yu, 1988). this may involve offering new or modified services (smyth, 1999). strategic expansion to new clients, through geographic diversification (cooper and kleinschmidt, 1985) is often achieved by opening branch offices in one country as a gateway or springboard for neighbouring countries (white et al., 1998) to secure a niche in, or capitalise on, a larger market (hoopes, 1999; white et al., 1998). the risks are much greater, however, as companies face greater competition for, and uncertainty in the acceptance of, the target customers (smyth, 1999; strassmann and wells, 1988). faiza a. el-higzi 108 the australian journal of construction economics and building vol.2 no.1 entry mode decisions are influenced by the degree and type of control desired (douglas and craig, 1995). sole ownership (i.e. fdi, branch/subsidiary) provides the most control but demands substantial financial and human resources to enforce patents and contracts, achieve economies of scale and absorb marketing costs (stopford and wells, 1972; hood and young, 1979). firms with limited resources tend to favour licensing or indirect exporting, but with little control over the marketing effort (johansson, 2000). a firm’s technological expertise and knowledge influences both its choice of target market (el-gamal, 1993; porter, 1985; sugimoto, 1990) and entry mode (buckley and casson, 1976; caves, 1982; dunning, 1977; williamson, 1985). thus, larger firms tend to favour sole ownership or joint venture as there is less chance of exploitation by a local partner (doz, 1988). a highly committed company, however, is more likely to choose equity entry modes over those offering less control (root, 1994). factors such as attitudes of managers, corporate strategy, degree of success in foreign markets and level of international experience are also important (root, 1994). experience in international business, as reflected in the number of foreign markets currently served, ratio of foreign sales to total sales, and knowledge of host country(s) affects entry mode and market selection (ekeledo and sivakumar, 1998; erramilli, 1991; li and guisinger, 1992). there is a linear relationship between preference for sole ownership and international experience generally (gatignon and anderson, 1988; johanson and vahlne, 1977). in the case of services, however, there is a u-shaped relationship (erramilli, 1991). as their experience increases, service firms tend to choose markets that are culturally less similar to their home country (erramilli, 1991; weinstein, 1977; ball and tschoegl, 1982). also, increased international operations experience is favoured by banks and advertising agencies (terpstra and yu, 1988) due to the companies’ increased ability to evaluate competition and customer needs, estimate costs and returns and assess the potential of target markets (cavusgil, 1982; davidson, 1980a). host country factors several economic theories have contributed to understanding trade between nations and foreign entry decisions. the heckscherohlin factor proportions theory regards labour and capital as the two factors of production, with technology as the means of combining the two to create a product. thus, products which are relatively labour intensive tend to be exchanged for capital intensive goods and vice versa (heckscher, 1949; ohlin, 1933). despite its paradoxes (leontief, 1953) the theory is useful in predicting trade in construction services between developing (labour abundant) and industrialised (capital abundant) nations. transaction costs theory and eclectic theory, on the other hand, both focus on the trade-off between preferences for control and resource commitment (hill et al., 1990). the transaction costs perspective implies entry mode is an individual transaction (gatignon and anderson, 1988), so that its choice reflects the transaction costs associated with uncertainty, imperfect market knowledge and possible exploitation in contracting agreements. thus firms begin with direct exporting activities, progressing to more involved entry modes as transaction costs decrease with experience (meyanathan and munter, 1994). transaction costs are also minimised if firms first enter culturally close markets and then move into more distant ones. eclectic theory suggests that the choice of entry mode is contingent upon transaction-specific advantages, internalisation-specific advantages and ownership-specific advantages (dunning, 1988), while stage theory suggests that an export capability is established through a developmental and sequential process (crick, 1995; johanson and vahlne, 1977). there may be as many as six distinct stages in a firm’s progression to entering more risky, less culturally similar markets and making equity investment in offshore sales and manufacturing outlets or fdi (andersen, 1997; coviello and martin, 1999: 226). the decision to enter a foreign market is made by a firm's managers, and their judgements shape the firm's internationalisation and its consequences (chetty and holm, 2000). the normative international market selection (ims) model (papadopoulos and denis, 1988) proposes several factors for assessing the potential attractiveness of a target market including user profiles (root, 1994), market size and growth (davidson, 1980b; stobaugh, 1969), competition (knickerbocker, 1973), servicing costs (davidson, 1982), and the host country’s foreign market selection factors in the australian construction services sector the australian journal of construction economics and building vol.2 no.1 109 political, economic and social environment (ostler, 1998; root, 1987; toyne and walters, 1989). by describing the organisation, input-output relationships, size and other features of typical industry and government clients, a profile of actual or potential client organisations can be outlined. this enables the selection of indicators of market size and growth such as industry and company sales potential (agarwal and ramaswami, 1992; terpstra and yu, 1988), gdp (or gnp) growth and per capita data as well as other relevant socio-economic data (ostler, 1998; root, 1994). firms often establish operations in an unprofitable foreign market simply to monitor competitor activity (hill et al., 1990; kim and hwang, 1992). there are also inherent political, economic and social risks involved in entering foreign markets (miller, 1992; ostler, 1998; root, 1994). political risk poses threats to market potential (miller, 1992) and the safety of personnel (ostler, 1998), with typical signals being riots, war, revolution or irregular changes in political regimes (coup attempts, coup d'etat) (shubik, 1983; ting, 1988) and changes in governments and heads of state (cosset and roy, 1991; cukierman, edwards and tabellini, 1992; mckoll-kennedy and kiel, 1999). similarly, fiscal and monetary reforms, threats of expropriation, barriers to earnings repatriation (strassmann and wells, 1988), tax discrimination and changes in levels of trade barriers (barker and kaynak, 1992), government price controls, attitudes towards foreign investment (miller, 1992), the adequacy of the legal system and efficiency of public officials (root, 1994), and inadequate government policy covering the provision of public goods, such as transportation and communications (miller, 1992), need to be considered. linked to political risk are macroeconomic uncertainties (oxelheim and wihlborg, 1987; root, 1994), which include movements in input prices (i.e. raw materials and labour), limited hard currency for international business, and foreign exchange and interest rate fluctuations (barker and kaynak, 1992; yang, leone and alden, 1992). construction also faces special risks in the form of delays in site availability, inclement weather, degree of urbanisation (akhter, 1995; cukierman et al., 1992; jiuan, 1993), inappropriate subsoil conditions, labour availability and unrest, raw materials and input shortages (miller, 1992; strassmann and wells, 1988). geographic proximity is important as firms may ‘creep’ into close, new markets where existing plant and equipment are nearby (davidson and mcfetridge, 1985; jiuan, 1993; ostler, 1998; white et al., 1998). cultural differences can make managers feel ignorant and fearful of their capacity to manage, so that their companies stay in "easy" culturally similar markets (cicic, patterson and shoham, 1999; jiuan, 1993; langhoff, 1996; petersen and pedersen, 1996; white et al., 1998) — a tendency known as psychic distance (johanson and vahlne, 1977; johanson and wiedershheimpaul, 1975). as a firm's experience in international business grows, the effects of psychic distance decrease (langhoff, 1996). improved market knowledge also encourages companies to invest more resources in the overseas ventures (johanson and vahlne, 1977), as uncertainty and risks are reduced (cavusgil, 1982). likewise, familiarity with the indigenous construction environment encourages alliances with indigenous contractors (ostler, 1998). unfamiliarity with business protocols and practices (cheong and chong, 1988; morgan, 1997; yang et al., 1992) can also influence ims and entry mode decisions. also of importance is the attractiveness of the project (ostler, 1998). the project might be fraught with technical or contractual difficulties. overall, the potential mismatch between a firm's expertise and local needs needs to be minimised (craig and yetton, 1994; cutler, 1994). home country factors porter's (1990) diamond model is appropriate for analysing the international competitiveness of an industry (öz, 2001). the potential influencing factors are: demand conditions, firm strategy and rivalry, related and supporting industries, and factor endowments, with government and chance influencing their interrelationships (porter, 1990; australian trade commission, 1994; disr, 1998). limited venture capital to fund export involvement and the high cost of finance has an adverse affect on small and medium companies (australian trade commission, 1994; white et al., 1998). limited market intelligence has also been identified as an organisational export barrier (barker and kaynak, 1992; white et al., 1998). faiza a. el-higzi 110 the australian journal of construction economics and building vol.2 no.1 global factors international finance and aid programs are important (australian trade commission, 1994; ostler, 1998). international competition is also intense (disr, 1999; ostler, 1998; sugimoto, 1990) and can act as a barrier to trade (sapir and winter, 1994). multinational companies are known to utilise their global strategic motivations (hill et al., 1990; morgan, 1997) and economies of scale (sugimoto, 1990) to remain competitive. data collection a mailed questionnaire obtained details of companies, export profiles and the factors influencing market selection in terms of host country factors, home country factors, company-specific factors and global factors following el-gamal (1993), jiuan (1993), erramilli (1990), root (1987), ostler (1998) and the australian trade commission (1994). answers were solicited using the five point likert scale with 1 being least important and 5 most important. this was treated as an interval scale as it communicates interval properties to respondents (schertzer and kerman, 1985), and is in line with previous studies (jiuan, 1993; el-gamal, 1993; sugimoto, 1990). as australian construction services companies were the focus of the research is it was essential to access as many companies as was practically possible in these segments. it was also important that the characteristics of the data collected represent the characteristics of the total population (saunders et al., 1997). to ensure that this process was adhered to the population sample was chosen from kompass australia (1999). kompass australia is an internationally recognised commercial company directory. the web version of this directory was accessed for the provision of preliminary information about the research sample. the kompass australia directory divides the building and construction industry companies into groups and sub-groups according to their technical representation. all these groups were considered and only companies registered as exporters of construction services were used in the survey sample. building materials contractors and suppliers were excluded. the sub-groups chosen for the survey sample are referred to as cluster samples (emroy and cooper, 1991). it was also decided, for the objectives of the research to include only those companies involved in the provision of international construction services. as participants in the final selected subgroups were chosen by the researcher, the survey sample is classified as a judgmental cluster sample ( hussey and hussey, 1997). it is important to note that cluster sampling is known to provide unbiased estimates of the population parameters (emroy and cooper, 1991). the total response rate was 34.3%, comprising 105 companies representing design, engineering, construction and contracting services. the number of employees in these companies ranges from 3 to 3000 worldwide. for reasons of convenience four of the south east queensland respondents were approached for interviews. analysis company profile more than three quarters of the respondents’ companies are 100% australian owned, with 8.7% being "international" companies with no australian ownership and the remaining 13% being companies with combined ownership. of the companies, 60.9 % are small and medium enterprises (sme). the largest percentage of entry mode is export (46.4%), with joint ventures next (21.7 %). the respondents’ companies offer a range of international services, with 30.4% offering all services and 26.1% offering preconstruction services including engineering and architectural design. developing and newly industrialised economies are the largest target market groups at 34.8%. company-specific factors influencing market selection table 1 summarises the results for the company-specific factors influencing market selection. variables were ranked according to their mean scores and grouped by the method of least significant difference (lsd). this produced three sub-groups each for smes and multinational enterprises (mnes). for example, the small and medium enterprise group comprised subgroup a, consisting of desire to expand strategically, project nature and future potential, company strength in know-how and project funding. these variables are primarily project related variables and company strategic motivation factors. subgroup b, on the other hand, contained strategic motivation and foreign market selection factors in the australian construction services sector the australian journal of construction economics and building vol.2 no.1 111 market variables and subgroup c contains project, market and strategic motivation variables. for the mne group, subgroup a contained strategic motivation, market and project variables, with subgroup b containing project, market and strategic motivation variables and subgroup c containing export credit insurance. for the mnes and smes, the three most important variables explaining their reasons for entering foreign markets were desire to expand geographically, project nature and future potential, and company strength in know-how. these are company motivation and project related factors. however, the mean score for mnes is much higher for these variables than for the smes. in addition, the mean scores for all factor groups in both samples indicate company motivation and project nature plus company strength to be the most important variables for choosing country of entry. the interviews revealed that nominal presence to mnes is important when the market potential is great, but branch offices had to be "financially viable". market similarity was "not a primary consideration" because major international projects are infrastructure projects that are part of international consortia. the only consideration then is "if there is some local expertise that you can use". technology transfer had two aspects for consideration: the host government point of view on "the way they want to build their facility" and "duration of the project, and what you see your role in the country". a suitable joint venture partner was seen as "... someone who knows their way around the city, who have the right contacts in the government and the industry. someone with competency skills." table 1: company-specific factors, descending means and sub-groups variable sme mne mean group mean group desire to expand strategically 4.29 a 4.56 a project nature and future potential 4.21 a 4.33 a company strength in know-how 4.21 a 4.33 a project funding 3.86 a 3.56 b desire to expand geographically 3.79 b 4.33 a profitability 3.64 b 4.33 a cost of market entry 3.43 b 4 a quick entry into market 3.21 b 3.33 b suitable host country partner 3.14 b 3.11 b technology transfer 2.86 c 2.89 b market similarity 2.79 c 3.33 b nominal presence 2.71 c 3.33 b follow a domestic client overseas 2.63 c 3 b export credit insurance 2.57 c 2.33 c intensity of global competition in host country 2.50 c 2.89 b suitable home country partner 2.29 c 3.11 b faiza a. el-higzi 112 the australian journal of construction economics and building vol.2 no.1 mnes had six variables in the first subgroup and four in the last subgroup while smes had four in the first subgroup and eight in the last subgroup. this suggests that there is a greater interplay of issues for mnes than smes. it was also noted that the variables in each sub-group are project related, market related and company motivation related issues, suggesting the interplay of many variables. it is also clear that project related factors and company motivations were significantly more important than variables in the host country and home country factor groups. host country factors influencing market selection variables with high mean values in the host country factors for smes were mostly policy (profit repatriation, trade barriers) and structural variables (foreign exchange control, tax discrimination and ease of foreign investment procedures) (table 2). political stability of the host country also scored a high mean value (3.79) as did market size and problems with collectibles. the table shows that mnes share the first three variables with smes. they also rank problems with collectibles, ease of foreign investment procedures and degree of urbanisation as more important than do smes. problems with collectibles had an a ranking for mnes, attracting the comment from an export manager interviewed "... you have to look at the cost of opportunity, if you don't get paid or are unable to repatriate your profits, or you are double taxed, then the pot of gold you have made is not worth the struggle". table 2: host country factors analysis by descending means and sub-groups variable sme mne mean group mean group profit repatriation 3.86 a 4.22 a political stability 3.79 a 4.22 a foreign exchange control 3.50 a 3.89 a trade barriers 3.50 a 3.22 d tax discrimination 3.43 a 3.67 b host country market size 3.43 a 3.44 d high economic performance 3.29 a 3.56 d competition intensity in host country 3.29 a 3.22 d ease of foreign investment procedures 3.21 b 3.67 b external debt servicing ability 3.21 b 3.00 d problems with collectibles 3.07 b 3.89 a degree of urbanisation 3.07 b 3.67 c skill of workforce and quality of output 3.00 b 3.22 d gdp per capita 3.00 b 2.67 f geographical proximity 2.93 b 3.56 e less-developed infra-structural system 2.93 b 3.00 e services liability 2.86 b 3.22 d less-developed legal system 2.86 b 2.67 f cultural similarity 2.79 b 2.89 e restriction on foreign ownership 2.71 b 3.33 d employee self-interested behaviour 2.71 b 3.00 e natural disasters 2.29 c 2.22 f foreign market selection factors in the australian construction services sector the australian journal of construction economics and building vol.2 no.1 113 some of the variables that were expected to be of significant importance to the construction industry in australia were cultural similarity, geographical proximity, skill of the workforce and quality of the output, and the legal system of the host country. however, none of these were in the a, b or even c groups. one possible explanation is that most of the respondents were smes, with export as their dominant entry mode. this reinforces the view that respondents see overseas operations as secondary to their domestic operations. this suggests that these companies are still in the first stages of their internationalisation process and lack market knowledge and experience. while smes had only two dominant subgroups and a third that consisted of only one variable, mnes had six equal mean subgroups, indicating that the mne respondents are more sensitive to the degree of importance and significance of variables than sme respondents. it was noted that none of the sub-groups comprised a single factor group (structural, economic or policy) but were of different themes, highlighting the inter-play among the different variables. home country factors influencing market selection variables in home country factors were structural factors, market factors and production factors. table 3 summarises the results for the smes and mnes. this shows the first two variables — home country demand fluctuation and intensity of competition at home — are the same for the two company size groups. it was also noted that for the smes, reliable and timely information, and availability of finance are more important than for mnes, which agrees with the view of the australian trade commission (1994), that smes rely on home government market intelligence and funding support. "we haven't been picking and choosing, we deal with austrade and other government agencies, and for our last job austrade contacted us," said the manager of one sme. on finance, another manager of another sme said, "we are now applying for the emdg program and are on austrade's list. they sure help." table 3: sme home country factors descending means and equal mean sub-groups variable sme mne mean group mean group home country market demand fluctuation 3.36 a 3.89 a intensity of competition in home country 3.36 b 3.89 a reliable and timely information 3.36 b 2.86 b availability of finance 3.36 b 2.44 b tax incentives with host country 3.21 b 2.33 b home government policy towards foreign investment 3.00 b 3.11 a home country economic treaty with host 2.93 b 2.67 b part of an aid program 2.86 b 2.78 b high costs of operation in home country 2.77 b 2.56 b faiza a. el-higzi 114 the australian journal of construction economics and building vol.2 no.1 it was also noted that home government policy issues were less significant than host government policies. for sme respondents, tax incentives, home government policy towards foreign investment, economic treaties and aid programs were rated 5th, 6th, and 7th and 8th. apart from tax incentives (3.21 for smes and 2.33 for mnes), other variables scored relatively close mean scores. tax incentives with host countries include double taxation treaties, and profit repatriation schemes as well as basic tax rates. apart from the view reported above regarding difficulties with taxation and repatriation of profits perhaps resulting in the struggle “not being worth it”, others managed to write the risks associated off: "... if we pay the tax, we build it in our contract." taxation is therefore treated as a business risk that is evaluated and compensated for before commencing construction works. again, the differences in orientation of smes and mnes towards overseas involvement explain the complexity and degree of importance of the issues that interplay. as mnes are oriented towards long-term involvement in overseas operations, they consider home government policy towards foreign investment a more important variable than do smes global factors influencing market selection global factors for consideration were global competition, following competitors overseas, and international finance. table 4 summarises the results. it is interesting to note that the international finance mean value was the least for the mne respondents and most of for the sme respondents. common variables common variables for the mne and sme respondents are shown in table 5. the company motivation factors of desire to expand strategically and profit repatriation were in the a group, together with projectspecific variables of project nature and future potential, and company strength of expertise. table 5 shows that group b has 10 variables. these include the company motivations of desire to expand strategically and profitability, as well as project factors, home market factors and structural factors of the host country. it is interesting to note that market factors scored higher means than some foreign investment policy issues at the host country level. group c primarily comprises host country structural and policy issues, but it also includes variables at the home country policy level. the availability of a suitable host country partner did not seem to have a significant effect contrary to what erramilli (1990) found at the services sector level. this may be due to the profile of the respondents and their predominant entry mode. of the three remaining groups, d included all remaining variables but two, which belonged to e and f groups. all global variables were part of the d sub-group, indicating their relative lack of importance. table 4: global factors descending means and sub-groups for smes and mnes variable sme mne mean group mean group global competition 2.71 a 3.11 a follow competitors overseas 2.50 a 2.67 a availability of international finance 3.07 a 2.63 a foreign market selection factors in the australian construction services sector the australian journal of construction economics and building vol.2 no.1 115 table 5: common variables by sub-groups variable descending group mean desire to expand strategically 4.39 a project nature and future potential 4.26 a company strength in know-how 4.26 a profit repatriation 4.00 a desire to expand geographically 4.00 b political stability 3.96 b profitability 3.91 b home country demand fluctuation 3.74 b project funding 3.74 b foreign exchange control 3.65 b cost of market entry 3.65 b intensity of competition in home country 3.57 b tax discrimination 3.52 b high economic performance 3.39 c ease of foreign investment procedures 3.39 c host country market size 3.39 c trade barriers 3.39 c problems with collectibles 3.39 c competition intensity in host country 3.26 c quick entry into market 3.26 c geographical proximity 3.17 c external debt servicing ability 3.13 c skill of workforce and quality of output 3.09 c home government policy towards foreign investment 3.04 c reliable and timely information 3.04 c suitable host country partner 3.04 c services liability 3.00 c availability of finance 3.00 c market similarity 3.00 c less-developed infra-structural system 2.96 d restriction on foreign ownership 2.96 d nominal presence 2.96 d less-developed legal system 3.17 c restriction on foreign ownership 2.96 d nominal presence 2.96 d degree of urbanisation 2.91 d global competition 2.91 d tax incentives with host country 2.87 d faiza a. el-higzi 116 the australian journal of construction economics and building vol.2 no.1 table 5 (continued) variable descending group mean technology transfer 2.87 d gdp per capita 2.86 d cultural similarity 2.83 d employee self-interested behaviour 2.83 d home country economic treaty with host nation 2.83 d part of an aid program 2.83 d less-developed legal system 2.78 d follow a domestic client overseas 2.77 d high costs of operation in home country 2.68 d intensity of global competition in host country 2.65 follow competitors overseas 2.58 d export credit insurance 2.48 d availability of international finance 2.35 e suitable home country partner 2.30 e natural disasters 2.26 f conclusion the survey of australian construction companies found the choice of overseas country of entry is not only the outcome of the host country’s economic, political and structural factors, but also a result of the interplay of the company's motivations for expansion, and the availability of a relevant construction project. other factors at the host country level and home country level, and the global and company level influence the company's approach to the overseas operation but do not significantly influence the decision of choice of country of entry. of major significance is the finding that trade in construction services is primarily with developing and newly industrialised economies. according to the factor proportions theory, this suggests that trade is a result of the technological superiority of the australian companies involved, a conclusion reinforced by the generally high scores for company strength in expertise, and project nature and future potential. from a stage models perspective, the use of low-resource commitment methods of market entry suggests that the australian companies’ level of market knowledge and experience is insufficient to inspire confidence in investment in overseas operations. it also implies that australian companies are just beginning to develop an export culture and therefore consider international operations to be secondary to their domestic activities. the transaction cost model, on the other hand, suggests that the companies involved are opting for the low-risk/low return modes of entry and consequently short-term involvement in overseas ventures. competitive intensity and organisational goals were also significant factors, as predicted by the conceptual model of contingencies. also, as the study used entry mode variables and tested them at the country of entry choice level, it can be concluded that international entry mode models and frameworks can be used to determine foreign market selection variables. equally important is the finding that export is the dominant entry mode of the respondents, suggesting that companies are driven by the intensity of domestic competition and fluctuating domestic demand to seek overseas ventures and so increase their profit margins. the company's expertise is another significant factor; other factors are investment policy variables that influence the flow of trade and investment between countries such as profit repatriation, trade foreign market selection factors in the australian construction services sector the australian journal of construction economics and building vol.2 no.1 117 barriers and tax discrimination. the major international business risks are political 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(1992) a market expansion ability approach to identifying potential exporters. journal of marketing, 56 (1), 84–96. viewpoint international comparisons of cost and productivity in construction: a bad example rick best, (bond university, australia) abstract in a report published in june 2012 the business council of australia (bca) reported that it costs considerably more to build a variety of types of infrastructure in australia than it does in the us. airports (90 per cent more costly) and hospitals (62 per cent) were quoted as the worst cases with other projects ranging from 26 to 43 per cent more. they used these figures to conclude that australia is a high cost, low productivity environment for building infrastructure projects. these claims were based on cost/m 2 figures published by a major international construction consultancy. the method used by the bca is flawed in two ways: one is the in the use of costs that are recognised as giving only the broadest of indications of probable costs and the second is the use of exchange rates to convert australian construction costs to us dollars. careful analysis of the methodology used, supported by a series of other comparisons based on other data sources and other conversion factors (purchasing power parities or ppps), suggests that in real terms it probably costs no more to build in australia than it does in the us and that it may well be cheaper to build in australia than it is in the us. keywords: international comparisons, construction costs, purchasing power parities, productivity introduction the following appeared in in a leading national newspaper in june 2012 (hepworth 2012) landmark research to be released today finds that, compared with the us, airports are 90 per cent more expensive to deliver, hospitals 62 per cent, shopping centres 43 per cent and schools 26 per cent. the ‘landmark research’ was a report published by the business council of australia (bca 2012) that suggests that australia is now a high cost, low productivity environment for construction work. the report was released just prior to an economic forum hosted by the prime minister. while much of the focus of the report was on large scale infrastructure projects it was not surprising that the figures that grabbed attention were the comparative costs for the construction of several types of building which were classified as infrastructure: schools, hospitals and large shopping centres. the purpose of this paper is to examine the methods used to establish these comparative costs and to compare the result published by the bca with the results of similar exercises based on different building costs and different cost conversion methods. large scale projects such as the resources projects that are so much in the news are not examined here. the bca method the basic building cost data for schools, hospitals and shopping centres were taken from turner&townsend’s international construction cost survey 2012 (turner&townsend, 2012). according to the bca report (bca 2102, p. 81) these estimated costs (expressed as $/m2 of floor area) were for ‘producing each project according to local standards in each country.’ the australian costs for the various types of building project for 2011 were converted to usd australasian journal of construction economics and building best, r (2012) ‘international comparisons of cost and productivity in construction: a bad example’, australasian journal of construction economics and building, 12 (3) 82-88 83 using an average exchange rate for that year to allow direct comparisons of costs in the two countries. there are two potential flaws in this approach. the first relates to comparing what are treated as identical buildings (‘standard projects’) in the two countries when in fact the buildings may vary considerably not only between the two countries but within each country. these differences can be due to a range of factors including differences in building standards and client expectations. the second relates to the use of money market exchange rates to convert construction costs to a common currency. before examining the results of similar comparisons using both different cost data and different cost conversion methods the flaws in the bca method need to be explored in some detail. with regard to the cost data used in the bca report turner & townsend (2012, p. 1) note that: costs are dependent on building design, inclusions, exclusions and site conditions. cost comparisons between countries are subject to different interpretations, building methods, and standards for costing, measurement and construction. in effect what they compare is functionally similar buildings rather than identical projects and thus the costs provided give an indication of the cost a building of a particular type or function in each location. this is fundamentally different to comparing the cost to build the same building in different locations and while it is a valid comparison in some circumstances it is not valid when attempting the sort of comparison undertaken by the bca. taken at face value, as was done in two major newspapers (hepworth 2012; forrestal and dodson 2012), it appears that building the same building of a given type in the usa and australia is considerably more expensive in australia. the second concern is the way in which costs in aud have been converted to usd. obviously costs have to be expressed in the same currency before they can be compared but it is generally accepted that money market exchange rates do not provide a valid method for such conversions (see, for example, vermande and van mulligen 1999; nsi 2004; walsh and sawhney 2002; best and langston 2006, best 2008). in the bca exercise costs expressed in aud are converted to usd using an annual average exchange rate. while the use of an annual average is probably better than using a single daily rate there have been considerable variations in the aud/usd exchange rate over the years since the aud was floated with monthly average rates as low as aud1=0.50usd in 2001 and as high as aud1=1.08usd in 2012 (x-rates.com 2012). as is demonstrated later apparent cost differences change markedly depending on the year and thus on the exchange rate used. using purchasing power parities to convert to a common currency purchasing power parities (ppps) are used by various agencies (notably the world bank: see icp 2011) to convert amounts of money initially expressed in various national currencies to a single common currency, typically usd. ppps are, in effect, conversion rates that bring amounts in different currencies to a common base as well as adjusting for differing price levels between countries and thus for differences in purchasing power. construction is a significant component of the overall (gdp level) ppps produced by the world bank as part of the international comparison program and industry-specific ppps for construction (cppps) are also published (see, for example, oecd 2012). if cppps are used to convert construction costs to a common base then cost is really being measured in ‘construction dollars’ where one such dollar buys a similar amount of construction in each location. when national costs are expressed in such international construction dollars a different picture of relative costs emerges. in the following examples construction data for australia and the usa obtained from several sources are used and the australian costs converted to usd using both average exchange rates and ppps. australasian journal of construction economics and building best, r (2012) ‘international comparisons of cost and productivity in construction: a bad example’, australasian journal of construction economics and building, 12 (3) 82-88 84 some examples using turner & townsend cost data table 1 shows the data used and the results quoted in the bca report. us cost/m 2 (usd) aus cost/m 2 (aud) aus cost/m 2 (usd) difference airport terminal 3550 6565 6757 +90% shopping centre 1560 2172 2235 +43% hospital 3300 5185 5337 +62% school 1570 1919 1975 +26% table 1 2011: turner & townsend data, annual average exchange rate (0.97aud=1usd) when the same basic data is used but the australian costs are converted to usd using ppp the results are quite different as shown in table 2. the ppp used is a gdp ppp rather than a cppp. this has been done as cppps are not usually published with the same frequency as gdp level ppps. in 2005 and 2008, the last years that cppps are available for, there was negligible difference between the general ppps and cppps for the two countries. (oecd 2012: see tables for 2005 and 2008 ppp benchmark results). us cost/m 2 (usd) aus cost/m 2 (aud) aus cost/m 2 (usd) difference airport terminal 3550 6565 4208 +19% shopping centre 1560 2172 1392 -11% hospital 3300 5185 3323 negligible school 1570 1919 1230 -22% table 2 2011: turner & townsend data, gdp ppp (1.56aud=1usd) (oecd 2012) use of a more appropriate conversion rate produced very different results with only the airport terminal appearing to be more costly in australia. given the great variability in airport terminal size and design it is arguable that the airport example is not appropriate in any case; even it were the difference now is quite small and a far cry from the 90% quoted by the bca. it is also worth noting the bca report talks of ‘airports’ while the turner & townsend data is for ‘airport terminals’. to further illustrate the inappropriateness of exchange rates for these cost conversions cost data for 2008 from turner & townsend was used again with both annual exchange rate conversions and ppp conversions. tables 3 and 4 show the results. in view of the potential variability of airport terminal size and design they have been omitted in these comparisons. us cost/m 2 (usd) aus cost/m 2 (aud) aus cost/m 2 (usd) difference shopping centre 1580 2200 1876 +19% hospital 3000 5500 4691 +56% school 1450 1985 1693 +17% table 3 2008: turner & townsend data, annual average exchange rate (1.17aud=1usd) us cost/m 2 (usd) aus cost/m 2 (aud) aus cost/m 2 (usd) difference shopping centre 1580 2200 1477 -7% hospital 3000 5500 3691 +23% school 1450 1985 1332 -8% table 4 2008: turner & townsend data, gdp ppp (1.49aud=1usd) (oecd 2012) the difference in the exchange rate (table 3) sees substantial changes in the apparent cost differences for shopping centres and schools while the ppp based results (table 4) again australasian journal of construction economics and building best, r (2012) ‘international comparisons of cost and productivity in construction: a bad example’, australasian journal of construction economics and building, 12 (3) 82-88 85 show shopping centres and schools being less costly in australia than in the us. in most cases, however, there are still substantial differences between results in spite of the short time between observations (only three years). this illustrates the coarse nature of this sort of comparison where the basic cost data provides nothing more than an indication of the relative costs between locations. what is clear, however, is that the example quoted by the bca is the one that shows the australian industry in the least favourable light. examples using cost data from other sources other construction cost consultants apart from turner & townsend regularly publish similar international construction cost comparisons. these include davis langdon, rider levett bucknall, rawlinsons, ec harris and gardiner & theobald. typically these costs are published as a promotional exercise rather than as serious rigorous comparisons and they usually carry disclaimers, e.g. rawlinsons (2012, p. 868) say: “costs given are average prices for typical buildings, they provide no more than a rough guide to the probable cost” [emphasis added]. rawlinsons publish international cost/m 2 rates for a small number of building types not including schools or hospitals. shopping centres are represented only as ‘retail (shell construction for letting)’. while the bca report is about infrastructure costs it does include building types that might be described as social infrastructure (schools, hospitals) but which are constructed using normal building methods rather than heavy engineering construction methods. unlike much of the large infrastructure projects in australia these buildings are not generally affected by the cost and logistical problems associated with construction in remote locations. it is therefore reasonable to make some comparisons based on rawlinsons data for several building types which may actually be more comparable than buildings such as airport terminals and hospitals and which are certainly more easily compared than ports and oil platforms. the following tables show results based on rawlinsons data for typical retail, hotel and industrial (factory/warehouse) buildings. once again the australian costs are converted to usd using both annual average exchange rates and ppps. us cost/m 2 (usd) aus cost/m 2 (aud) aus cost/m 2 (usd) difference retail (shell construction for letting) 888 1115 1152 +30% hotel (medium rise, three star) 1995 3648 3768 +89% factory/warehouse (owner occupied) 720 530 548 -24% table 5 2011: rawlinsons data, annual average exchange rate (0.97aud=1usd) us cost/m 2 (usd) aus cost/m 2 (aud) aus cost/m 2 (usd) difference retail (shell construction for letting) 888 1115 715 -19% hotel (medium rise, three star) 1995 3648 2338 +17% factory/warehouse (owner occupied) 720 530 340 -53% table 6 2011: rawlinsons data, gdp ppp (1.56aud=1usd) (oecd 2012) again use of ppps suggests that the bca conclusions are not well founded with two building types apparently costing less in real terms in australia than in the us. the apparent difference in hotel costs is much reduced by the ppp conversion and given the approximate nature of the base data there may actually be little difference in practice. australasian journal of construction economics and building best, r (2012) ‘international comparisons of cost and productivity in construction: a bad example’, australasian journal of construction economics and building, 12 (3) 82-88 86 davis langdon publishes an annual report called the blue book (davis langdon 2012). the following tables (tables 7 and 8) use their 2011 data (published in 2012) and again the same two conversion methods are used. the differences are quite unlike anything seen in the earlier exercises. expressed differently table 7 suggests it costs close to double to build a school or factory in the us and more than 80% more to build a hospital. table 8 suggests around three times as much to build a school, factory or hospital and twice as much to build a shopping centre; even the hotel now appears slightly more expensive in the us. based on these results one would conclude that the australian construction industry builds more cheaply than the us industry and thus may be more productive. it is important to note that higher or lower construction costs do not automatically imply higher or lower productivity although the bca report and certainly those writing newspaper articles based on the bca report seem to make a very clear connection between costs and productivity. us cost/m 2 (usd) aus cost/m 2 (aud) aus cost/m 2 (usd) difference shopping centre 3033 2353 2424 -20% hotel (three star) 2183 3036 3127 +43% school 3267 1600 1648 -50% hospital 7033 3771 3864 -45% light duty factory 1267 637 657 -48% table 7 2011: davis langdon data, annual average exchange rate (0.97aud=1usd) us cost/m 2 (usd) aus cost/m 2 (aud) aus cost/m 2 (usd) difference shopping centre 3033 2353 1508 -50% hotel (three star) 2183 3036 1946 -11% school 3267 1600 1026 -69% hospital 7033 3771 2417 -66% light duty factory 1267 637 408 -68% table 8 2011: davis langdon data, gdp ppp (1.56aud=1usd) (oecd 2012) discussion the foregoing analysis leads to a number of observations. the first is that the method used to convert costs to a common currency is a key factor in determining the outcomes of these comparisons. it is worth noting at this point that how costs are converted and what is the most appropriate way to do it depends on the purpose of the conversion. travellers are naturally interested in exchange rates as the rate determines how much of their national currency they will need to spend in order to make purchases in another. a firm planning to fund construction in another country using money in their home currency will make conversions similar to those made by an intending traveller as again the question will be how much of their home currency they need to convert in order to purchase construction elsewhere. if the same firm were planning to build overseas and to fund that construction from borrowings and/or income generated in that same location then they will be interested in local construction costs and probably no conversion is necessary. what the bca has done is to make the sort of conversion that travellers make and then to draw conclusions about price levels and productivity comparisons. this is not a valid approach as what is needed is a method that allows volumes of construction to be compared and this is where purchasing power parities (ppps) comes into play. the ‘volume’ of australasian journal of construction economics and building best, r (2012) ‘international comparisons of cost and productivity in construction: a bad example’, australasian journal of construction economics and building, 12 (3) 82-88 87 construction can really only be measured in terms of the value of what is built and value can really only be expressed in money. these amounts cannot be compared unless they are in the same currency or some other form of common metric. ppps allow volumes of output to be compared without the distortions caused either by money market (exchange rate) fluctuations or differences in price levels. what ppps do is what their name suggests: they allow us to compare volumes of output in terms of what can be purchased with amounts of money in different currencies. the big mac index (the economist 2012) uses the cost of a standard hamburger in many countries to compare purchasing power and thus to identify underand over-valued currencies. the basic theory is that if you can buy a big mac hamburger in australia for aud4.80 and in the us for usd4.20 then this implies an exchange rate of 1aud=0.875usd as around 88 us cents buys as much hamburger (i.e. the same volume of output/hamburger) as one australian dollar. if the two hamburgers are identical then it is assumed that have the same value (however it is measured, e.g. kilojoules, satisfaction, happiness). thus, when construction costs are compared using ppps as the conversion factor, the value and volume of construction is being compared. this is a more robust method for comparing cost and (perhaps) productivity than the traveller’s method. the second point is that the cost data must be treated with caution. this is well illustrated by, for example, the very large variance in published $/m 2 costs for hospital construction: for 2011 turner & townsend suggest us costs of usd3300/m 2 while davis langdon suggests usd7033/m 2 – more than double the turner & townsend figure. in contrast the corresponding costs for australian hospitals are aud5185/m 2 (turner & townsend) and aud3771/m 2 (davis langdon) – the davis langdon figure is now less than 75% of the turner & townsend figure. while it may be that the two sets of costs cover different scopes of work it must be assumed that each source is presenting costs for very similar projects, i.e. the costs for hospitals in turner & townsend’s data are for comparable projects and the same must apply to davis langdon even though it may not be appropriate to compare a turner & townsend cost directly with one from davis langdon or some other source. the question must be asked: why do us costs vary so much in one direction and australian costs vary considerably in the opposite direction? are the hospitals being compared within each of the studies actually comparable? it is easy to assume the first difference (usd3300 compared to usd7033 for us hospitals) is explained by differences in the scope or nature of the projects being compared given that the costs come from different sources – but how then can the opposite relativity (aud5185 and aud3771) for australian hospitals be explained? if the higher figure in the first case can be attributed to, say, the inclusion of fittings and equipment in one but not the other then surely the same would apply for the australian costs and they would be higher in the davis langdon data rather than lower. what this illustrates quite clearly is that these costs are nothing more than rough guides, as rawlinsons clearly say, and they should not be relied on for serious comparative studies. concluding remarks the foregoing analysis demonstrates how easy it is to take some figures at face value and make broad statements about what they show. this makes good newspaper fodder but as shakespeare said “comparisons are odorous” and this is surely the case with the bca report as the generalisations made about relative cost and productivity in regard to the australian construction industry are easily shown to be very dubious when the methodology is examined. it is counter-intuitive in the extreme to imagine that in an area of highly mechanised, computer-assisted construction technology and management practices that productivity in the industry is falling or, at best, stagnant. buildings are certainly more complex than they were even 20 or 30 years ago and while factors such as improved safety standards may slow work down this is surely more than offset by other advances such as the australasian journal of construction economics and building best, r (2012) ‘international comparisons of cost and productivity in construction: a bad example’, australasian journal of construction economics and building, 12 (3) 82-88 88 use of offsite fabrication and the ubiquitous concrete pumps that have all but replaced the much slower crane-based concrete placement methods of the past. what the bca report represents is fundamentally bad ‘research’ where someone found some figures that made a good story but then either lacked the knowledge or did not bother to examine those figures to see what they were intended for and what they were actually based on. references bca (2012) pipeline or pipe dream? securing australia’s investment future, business council of australia http://www.bca.com.au/content/101987.aspx best, r. (2008) the development and testing of a purchasing power parity method for comparing construction costs internationally, unpublished phd thesis, university of technology, sydney. best, r. and langston, c. (2006) ‘converting construction costs to a common currency base: an unresolved problem’, in: proceedings of construction in the xxist century: local and global challenges. rome, october 18-20 davis langdon (2012) the blue book, 14th edition, davis langdon, www.davislangdon.com/upload/staticfiles/ausnz%20publications/the%20blue%20book/b lue-book-2012-final.pdf forrestal, l. and dodson, l. (2102) ‘high costs could kill big projects’ the australian financial review, 7 june www.afr.com/p/national/high_costs_could_kill_big_projects_aujm8hwwpyswpkwkh1t1dp hepworth, a. (2012) ‘local project costs 40pc above the us, says business council of australia’ the australian, 7 june http://www.theaustralian.com.au/national-affairs/localproject-costs-40pc-above-the-us/story-fn59niix-1226386836012 icp (2011) ppps and exchange rates http://go.worldbank.org/c0e00hqfm0 nsi (2004) european comparison program, methodological notes, national statistical institute of bulgaria, http://www.nsi.bg/gdp_e/ecp-method.htm oecd (2012) oecd.stat extracts: prices and purchasing power parities, accessed 19 june 2012 http://stats.oecd.org/index.aspx?r=287888 rawlinsons (2012) australian construction handbook, 30 th edition, rawlhouse publishers, perth the economist (2012) big mac index, accessed 21 june 2012 http://www.economist.com/node/21542808 turner & townsend (2012) international construction cost survey 2012 http://www.turnerandtownsend.com/construction-cost-2012/_16803.html vermande, h. and van mulligen, p-h. (1999) ‘construction costs in the netherlands in an international context’, construction management and economics, 17, 269-283 walsh, k. and sawhney, a. (2002) international comparison of cost for the construction sector: towards a conceptual model for purchasing power parity. report submitted to the world bank group, june 2002. x-rates.com (2012) monthly exchange rate average (american dollar, australian dollar) www.x-rates/com http://www.bca.com.au/content/101987.aspx http://www.davislangdon.com/upload/staticfiles/ausnz%20publications/the%20blue%20book/blue-book-2012-final.pdf http://www.davislangdon.com/upload/staticfiles/ausnz%20publications/the%20blue%20book/blue-book-2012-final.pdf http://www.afr.com/p/national/high_costs_could_kill_big_projects_aujm8hwwpyswpkwkh1t1dp http://www.theaustralian.com.au/national-affairs/local-project-costs-40pc-above-the-us/story-fn59niix-1226386836012 http://www.theaustralian.com.au/national-affairs/local-project-costs-40pc-above-the-us/story-fn59niix-1226386836012 http://go.worldbank.org/c0e00hqfm0 http://www.nsi.bg/gdp_e/ecp-method.htm http://stats.oecd.org/index.aspx?r=287888 http://www.economist.com/node/21542808 http://www.turnerandtownsend.com/construction-cost-2012/_16803.html http://www.x-rates/com australia’s crisis of uncertainty viewpoint australia’s crisis of uncertainty dr robert kay, (co-founder incept labs & adjunct professor, faculty of design architecture & building, uts) many commentators acknowledge that the world is becoming a more uncertain place to live. climate change, terrorism, food security, aging populations, systemic failures in financial systems, the list of significant realised and potential disruptions goes on. increasingly we look to our governments to regulate, bail out, step-in or just generally save us. but what as a society are we doing to address the growing uncertainty that surrounds us? 2010 represents the year peak labour occurs (more people will leave the workforce than join it). this means that for many of us, a focus on superannuation becomes quite acute. approximately 59% of these retirement savings will be invested in equities, equities that must perform with a minimum of downward volatility to ensure a prosperous retirement. as a consequence now, more than ever before, society worries about the management approach of executives trusted with the responsibility of steering the large corporates that form the platform of our retirement prosperity. a perfectly justified but unintended consequence of this attention is the pursuit of short-term certainty. retirees naturally want short-term certainty of returns from their superannuation funds or superfunds – they depend upon it. fund managers, remunerated to provide these short-term returns, place pressure on executives to deliver them after all, superfunds are probably their major shareholder and consequently do have a legitimate influence. the modern australian executive therefore works hard to remove any volatility from their future shortterm performance. whilst they need to remain competitive in their respective markets, and provide ongoing growth trajectories for their organisations, the actual nature of the competition is tempered to some extent in australia, simply through size. a large proportion of australian industries are oligopolies (four big banks, two main miners, two major supermarket chains, etc.). whilst there are also large construction players, construction in australia is one of the few industries where real competition still occurs. having said this, oligopolistic characteristics still exist within different construction markets. certainly at the big end of town, the pressures described above are still in effect for the asx listed construction companies. an unintended outcome of an oligopolistic marketplace is that the focus of competition is on efficiency and effectiveness, not innovation. it is simply not worth the risk. how often do we see an organisation out-perform analyst expectations when reporting its results, with no impact on the share price? the market response is that the higher performance had already been factored into the share price, and whilst the performance is good, we already expected it to be good. yet when an organisation underperforms to expectations, for example 5 per cent below projected growth, the market response is swift, and the stock may well have more than 15 per cent of its value wiped away, an arguably illogical response. let us consider the effect of this type of dynamic for a minute. if you’re a ceo, concerned with the future growth of your organisation, what is the reward for taking risk on more uncertain but potentially higher returning activities? if taking the risk pays off in terms of out-performance, the reward for doing so, under the short-term focus described above, is nothing. the punishment, should this risk produce a small negative volatility to performance (in the shortterm) is out of all proportion. let’s also not forget that a high percentage of the ceo’s remuneration package will be geared to short-term performance. so the probability is that you just don’t take any risks where there is some uncertainty involved. you focus on australasian journal of construction economics and building kay, r (2010) ‘australia’s crisis of uncertainty’, australasian journal of construction economics and building, 10 (3) 76-79 77 activities around which you have the most certainty – those focused on efficiency and effectiveness. let me follow this logic a bit further. many organisations pursue a policy of hiring for and promoting the best and brightest staff they can get their hands on. this is only logical. but what does ‘best and brightest’ mean in this scenario. it means those that are the best and brightest in providing efficiency and effectiveness in the organisation’s operations, i.e. providing certainty on performance. so by default, the talent pool at the top of our major corporates begins to take on a particular worldview and approach to management. furthermore organisations demand more of this style of employee, or at the very least the ability to develop them. enter the master of business administration (mba), the key efficiency and effectiveness qualification for the modern executive. whilst many mbas are designed to high standards and the quality of the people who deliver them is also very high, the mba is a response to a market need. often built around the use of best practice studies all designed to provide knowledge on how to achieve increased certainty of outcome. the result of all this is that we have a market environment unconsciously obsessed with short-term certainty, giving rise to an unintended preponderance of short-term focused executives, selected for their highly developed ability to deliver certainty around performance, taught by and demanding more educational qualifications that help them be better deliverers of certainty to all their stakeholders, including retirees whose superfunds are invested in the companies they manage. so what’s wrong with a highly developed ability to deliver certainty? put simply, nothing – so long as you are in a stable environment. thinking about uncertainty professor james march (1991) conceptualised the way in which organisations adapt and learn as a tension between processes of exploitation and exploration. exploitation processes develop to ensure efficiency and effectiveness in an organisation’s operations. they are focused on the delivery of quality, cost management and control, through hierarchical silobased structures that remove volatility. change initiatives are large and deliberate. the focus is short-term and on the reduction of risk by breaking problems down into small manageable pieces. put another way ‘exploit’ processes are designed for the management of certainties. conversely processes of exploration involve potentially ad hoc changes in direction. the focus is more opportunistic, and long-term, structures are smaller and collaborative. the risk appetite is higher and as a consequence it is usually through these exploration processes that innovation occurs. ‘explore’ processes assume an uncertain environment and as a consequence are designed for the holistic management of uncertainties. young or start-up organisations are characterised by a greater degree of ‘explore’, due to the uncertainty involved in bringing a new product/service to market. over the lifetime of an organisation, the balance gradually shifts from ‘explore’ to ‘exploit’ in response to the growing size of the organisation, the need to manage increased complexity, and the desire to remove uncertainty across the different aspects of its operations1. viewed through the lens of ‘explore’ and ‘exploit’, today’s modern australian corporate is geared to be almost totally ‘exploit’ – it has to be. this is the best way to respond to the needs of the organisation’s various stakeholders as described above. this imbalance creates a worldview in the organisation, that i would argue kills off the organisation’s ability to innovate and deal with uncertainty. this occurs in a number of ways, but most obviously where it relates to the introduction of what might be termed strategic innovations, i.e. innovations that are potentially disruptive to incumbent business models and require a few years of incubation. 1 an exception to this can often be found in ostensibly family owned businesses, or businesses where the founder is still in control rather than employed professional managers. australasian journal of construction economics and building kay, r (2010) ‘australia’s crisis of uncertainty’, australasian journal of construction economics and building, 10 (3) 76-79 78 this type of innovation usually falls outside the short-term business planning cycle, and therefore the objectives of professional managers. it is inherently uncertain, and so from the executive’s point of view a threat to the delivery of short-term certainty – not an opportunity. furthermore because the organisation is overwhelmingly exploit all investments in new opportunities need to be assessed through the ‘exploit’ business planning and budget cycle. the result of this is that speculative ‘explore’ ideas are directly evaluated against ‘exploit’ ideas, i.e. cost cutting projects, it refresh etc. in other words the uncertain ‘explore’ project is measured and assessed against the high certainty ‘exploit’ project in direct competition for typically finite funds. it is not surprising that the ‘exploit’ project always wins. the risk/reward equation in the modern corporate cannot lead to any other result. historically a circuit breaker for this problem was the discretionary budgets often allocated to senior executives, within which more speculative activities could be undertaken, without coming under the spotlight of the ‘exploit’ budget process. indeed many senior executives used these funds for ‘explore’ purposes (often in the form of skunk-works projects). over the past 15 years or so, (a period roughly equivalent to the introduction of compulsory superannuation and the socio-economic dynamic associated with it), these funds have been gradually whittled away through successive rounds of cost-cutting and downsizing to the point where only extremely incremental innovation can really be considered out of these pools. in other words, in many australian corporates, for an innovation to be successfully introduced it needs to be able to display an adequate level of certainty compared to other budget items, so that when it is considered for approval, the risk of not doing it is greater than the risk of doing it. note that the opportunity associated with the innovation is usually removed from the deliberation, as this is uncertain. it also means that organisations by default develop and apply tools that assume certainty in relation to new opportunities, rather than systematically reduce uncertainty. the use of best practice studies is an example of this approach. an idea that is new to an organisation can be presented as having higher levels of certainty because someone else has already done it. from an ‘exploit’ point of view this is great and assists the idea move through the budgetary process. from an ‘explore’ point of view however, this is fairly problematic. firstly, for something to be the subject of a best practice study it would need to be at least five years old, so nothing particularly innovative there. secondly, in introducing the idea, the actual uncertainty in relation to how this idea might behave in the new australian context hasn’t been ‘explored’, ironically increasing the risk. as a consequence, we still have a significant proportion of projects that are described as being innovative, (even after the best practice study) that fail to deliver because the expected certainty of the result observed in the idea’s original context couldn’t be replicated. this provides a further reason for executives to avoid innovation if they can. the other option for the organisation to gain new capability or market penetration is to merge or acquire another business. again on one level this provides a feeling of certainty as many of the characteristics of the acquired entity can be measured. unfortunately, like the best practice study, the complexity of implementing the merger often brings the organisation undone. a variety of studies conducted by both academics and through the large chartered firms show that between 50 and 80per cent of mergers fail to deliver on their projected benefits. the reason for this failure is usually attributed to soft issues such as culture, where the ‘exploit’ measures tend not to be effective. the development of highly sophisticated ‘explore’ capacities (or capacities that are at least as competent as their ‘exploit’ counterparts) is something that is sadly lacking in australian corporates. furthermore it is a situation that is likely to get worse rather than better due to australasian journal of construction economics and building kay, r (2010) ‘australia’s crisis of uncertainty’, australasian journal of construction economics and building, 10 (3) 76-79 79 the socio-economic dynamics described in the first section of this discussion. this is something we should all be concerned about given the growing levels of uncertainty in our environment. our ability to ‘exploit’ has served us well and will continue to do so under the right circumstances. without an ‘explore’ capacity though one has to wonder how well we are prepared to deal with a changing future, or respond to an unforeseen one. reference march, j. (1991) ‘exploration and exploitation in organizational learning’, organization science, 2(1), 71-87 level of satisfaction and issues with procurement systems used in the malaysian public sector mastura jaafar and nurhidayah mohd radzi (universiti sains malaysia, malaysia) abstract since the declaration of malaysian independence, the public sector has significantly contributed to the country’s development. in the 1990s, a new procurement system was developed due to cibd various changes in the construction industry. since that period, the poor quality of public sector projects has started to attract public attention. this paper describes a study that was conducted to identify the dominant public procurement systems in place, the problems associated with these systems, and the satisfaction level of the industry players in the malaysian construction industry. the results were drawn from 84 survey responses and interviews with industry players. the public sector is using a traditional system inherited from the british, with an intention to adopt new procurement systems. aside from the disputes that are present in most systems, the public sector seems to encounter particular problems in relation to capabilities, time, and cost of the major procurement systems used. traditional work culture and the industry environment influence public sector practice, which accounts for the modifications of each procurement system used. thus, the full advantages of using an alternative procurement system may not be realised in public sector organizations. this produces an average level of satisfaction gained from the procurement system adopted. as a developing country, malaysia needs to exert significant efforts to improve the public procurement system. keywords: procurement system, problem, satisfaction level, public sector, construction industry introduction public sector organisations exist for the ultimate benefit of the public citizenry (gould, 1997). masteman (2002, p.9) defines the client as “the organization, or individual, who commissions the activities necessary to execute and complete a project in order to satisfy its/his needs and then to enter into a contract with the bespoke parties”. the government, as a public sector client, is expected to initiate major developments on social amenity projects in the malaysian construction industry. for instance, in 2008, from the total annual malaysian construction project value, educational projects and hospitals contributed approximately 35% (rm 15 billion 1 ), followed by infrastructure development projects with a contribution of 20% (rm 9 billion) (e.g. cidb, 2009; ibrahim et al., 2010). the government is an important contributor to the demand for specific industries, especially during an economic slowdown. an example is the ninth malaysia plan from 2006 to 2010, in which the government allocated rm 2.4bn worth of projects to maintain industrial growth. ashworth (1991) defined a procurement system as a type of contract that states the obligations, rights, and liabilities of the parties involved, which include clients, consultants, and contractors. on the other hand, turner (1999) defined procurement as the participation of three important 1 1rm approximately aud 0.31 australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 51 parties (clients, consultants, and contractors) who work together to provide practical guidance on decisions regarding the actual procurement direction. procurement systems are of two types: traditional and alternative. traditional procurement systems are categorized as lump sum-firm bill of quantities (lsfbq), lump sumapproximate bill of quantities (lsabq), and lump sum-drawing and specification (lsds), whereas alternative procurement systems include the d&c and turnkey. according to ramus et al. (2006), lsbq is a contract where surveyors prepare a bill of quantities based on the architect’s drawing and specification. the quantities and unit rates in the bill of quantities form part of a contract. for lsabq, whatever quantity mentioned in the lsabq is is subject to a later adjustment, but the unit rates remain part of the contract document. contractors are invited to price the bill of quantities and to submit tenders in competition. lsds procurement only provides drawings to contractors, who then have to prepare their own bill of quantities. each of these categories has its own advantages and disadvantages. this paper describes a study carried out in order to: 1. identify the dominant public sector procurement systems in use; 2. identify the problems with these dominant public sector procurement systems; and 3. determine the satisfaction levels of stakeholders in the dominant procurement systems. the following sections describe the results of this study. current dominant public procurement systems public clients have an obligation to spend public money properly by following a set of procedures (tabish & jha, 2011). the awarding of a project is usually based on the lowest responsible and responsive bidder (jaafar & radzi, 2012). mahmood and mansor (1996) define public sector clients as government bodies that are directly related to the construction industry, such as the public works department (pwd) and other local and semi-government authorities including the urban development authority and state economic development corporation. the existing procurement system used by the public sector in numerous developing countries has been inherited from their former colonial administrators (e.g. ofori, 2007; cidb, 2009). in this respect, malaysia has inherited its procurement system from the british (jaafar and aziz, 2006; cidb, 2009). in the earlier days of independence, the public sector used a traditional procurement system in project development. a traditional system is one where design and construction are separated, whereas these aspects are performed in parallel in modern systems (masterman, 2002). given the large number of projects needed to support the nation’s growth in the mid-1990s, significant changes to the dominant procurement system were applied in the malaysian construction industry. since then, malaysia has adopted a new public sector procurement system (rashid et al., 2006) to cope with high demand and to achieve faster project completion rates. various new procurement systems were introduced as alternatives to the traditional procurement system. this move was justified by similar movements in other countries such as the united kingdom (davis, 1995) and the united states (el wardani, 2006 and hale et al., 2009) to achieve improved project outcomes. since the government’s initial adoption of new procurement systems such as project management consultancy (pmc); build, operate, and transfer (bot); and design and construct (d&c), public project failures have gained widespread media attention. project performance is generally measured in terms of cost, time, and quality; factors that are influenced by the type of australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 52 procurement system employed (ciob, 2010). as fast-track procurement systems have become popular in malaysia, problems related to the performance of the construction industry have emerged, including issues related to quality, productivity, and safety (rahman et al., 2010). according to nitithamyong and tan (2007), the ministry of works revealed in 2003 that a number of public projects handled by a few consultancies were not completed within schedule and exhibited poor workmanship. meanwhile, d&c and turnkey system projects, such as the construction of 13 hospitals in the 1990s, were completed, but with numerous defects (hashim et al., 2006; jaafar & aziz, 2009, jaafar & radzi 2012). ibrahim et al. (2010) observed that by the end of 2004, major development projects faced problems such as delays in the construction schedule, cost escalation, and even structural defects in schools and community college buildings. the problems were attributed to the pmc system and the pmc system is therefore currently being replaced by the d&c system. in an attempt to improve the industry, the construction industry development board (cidb) launched the malaysian construction industry master plan in 2006. under strategic thrust 1, industry services and commercial business entities were encouraged to enhance knowledge, efficiency, and effectiveness. these goals were achieved through the development and improvement of various strategic instruments and the identification of the best procurement practices by managerial tendering and contracting. the problems with current procurement systems according to toor and ogunlana (2008), the major problems faced by numerous construction projects are usually caused by an inadequate understanding of the procurement system, lack of resources, discrepancies between design and construction, inadequate project management practices, numerous variation orders, communication lapses, cultural issues, differing interests of participants, poor labour productivity, and lack of skilled contractors. they added that the problem of delays in construction not only results in cost overruns and poor quality, but also in more conflicts. stakeholder satisfaction with different procurement systems liu and walker (1998) considered satisfaction as an attribute of success. satisfaction can be described as the level of happiness among the people affected by a project. these people include key project participants, such as the client, architect, contractor, subcontractors, surveyors and engineers, end-users, and third parties (chan et al., 2002). torbica and stroh (2001) believed that if end-users are satisfied, the project can be considered as successfully completed. roodhooft and abbeele (2006) investigated the satisfaction of organisations with the consulting services they buy. the findings supported the results of the multi-attribute selection technique of skitmore and marsden (masterman, 2002), which describes the complete satisfaction of private clients within a conventional system. masterman (2002) elaborated on the technique implemented by skitmore and marsden (1988) by assessing the satisfaction of private clients with the d&c system. hashim et al. (1996) found no significant difference in the level of client satisfaction from different procurement routes selected. industry survey following on from the results of the literature review detailed in the previous sections, a survey was carried out among various stakeholders in the malaysian construction industry. australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 53 questionnaire development this paper is part of a larger study on the procurement system applied in the malaysian construction industry. aside from having questions on the respondent’s background, the other parts of this section focus on the problems associated with the usage of the selected procurement types and their satisfaction level. questions on problems, which were included in the questionnaire, were adopted from various sources and then categorized under different measures, such as legal, management, capability, dispute, time, risk, operation, cost, and quality. the items are listed in table 2. in relation to the study on the problem in using procurement, a five-point likert-scale with options ranging from “strongly disagree” to “strongly agree” has been adopted by kong et al. (2006), adnan et al. (2008), and ling and poh (2008). for satisfaction, a three-point likert-scale has been used. data collection the questionnaire forms were distributed to 800 respondents (i.e., 300 clients from public and private sectors, 200 contractors, 100 architects, 100 engineers, and 100 quantity surveyors). the respondents were selected randomly. professional consultants were chosen from the web sites of the malaysian association of architects (pam), institution of engineers malaysia (iem), and the board of quantity surveyors malaysia (bqsm). for contractors, company names were chosen from the malaysian cidb directory 2008–2009. for private client organizations, the list was obtained from the real estate housing developers association (rehda), whereas federal and state departments have been included to represent public clients. these organizations were selected because they are the actual players in the construction industry, and they have important roles in managing project procurement systems. as explained by rashid et al. (2006), the process of acquiring a building by a client involves a group of people who are gathered and systematically organized in terms of their responsibilities, roles, duties, and interrelationships. the selection of the sample and the population for this study was based on a specific research design employed in previous studies on procurement (rashid and morledge, 1998; love, 2002, davis et al., 2009). during the process, only 151 replies were received (refer to table 1). this number represents a 19% response rate. among the respondents, 84 or 55.6% indicated their involvement in public sector projects. this research utilizes the two stages of data collection applied by mbachu and nkado (2006), tabish and jha, (2011), and adnan et al. (2008). aside from using a quantitative approach, a semi-structured interview was conducted with 10 industry players. the objective of this interview is to obtain in-depth information to support the first quantitative result. face-to-face interviews for the first phase of the quantitative data collection method were conducted with those who signified their willingness as expressed in the returned questionnaires. each interview session was recorded and consequently transcribed. the names of the interviewees and the firms who participated in these interviews are not disclosed in this thesis to maintain confidentiality. the interview involves three public sector clients, five consultants, and two private clients. analysis background of the respondents the majority (51%) of the respondents have college degrees. respondents with qualifications below degree level (i.e., diploma and high school) accounted for 42.5%, whereas 7% stated that they have a higher degree level. in terms of specialization or work expertise, 27.4% of the respondents specialized in quantity survey and construction, and 24.7% were experts in civil engineering. a number of respondents hold current positions as project managers (27.4%) and quantity surveyors (23.3%). the rest are civil engineers, site managers, and architects. only a australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 54 profession contractor architect engineer quantity surveyor private client public client project/ contract manager source of info cidb malaysia, contractor grade 7 pam web site iem web site bqsm rehda directory 2004/2005 web site ministry of housing and local government web site ministry of finance no. in the directory 4285 4972 9674 2081 1183 150 9 no. of questionnair es sent 200 100 100 100 150 150 9 no. response sample 57 15 20 13 21 16 9 % response 28% 15% 20% 13% 14% 11% 100% table 1 response rate by profession small number (6.8%) of respondents have worked in the malaysian construction industry for 20 years and above, whereas the rest have less than 20 years of work experience in the industry. most of those interviewed have the same length of experience in the construction industry, which is between six and 20 years. the respondents of this study were divided into three categories: contractor firms (44%); consultant firms (48%), which include architects, quality surveyors, civil engineers, and project managers; and public client firms (11%). overall, the number of respondents who replied comprises the following: 10.7% (public clients), 13% (quantity surveyor), private client (14%), architect (15%), engineer (20%), contractors (28%), and public clients (100%). public clients include government departments involved in projects such as the public work department, local authorities, and state development companies. a test of differences that was conducted did not show a different result among the different characteristics of the respondents. analysis of the dominant procurement system used the respondents were asked to tick the type of procurement method that they normally use. the five procurement systems included were the lsds, lsbq, and lsabq systems, whereas the alternative procurement systems were the d&c and turnkey systems. results of the survey concluded that the lsds system was the most used procurement system with a total usage of 50.7%. the lsbq system garnered the second highest score of 34.2%, followed by the turnkey system with a total usage of 23.3% and the lsabq system with a total usage of 20.5%. the d&c system ranked fifth with a total usage of 16.4%. the procurement system used in the industry is mainly based on the traditional system. however, the client can choose the implementation medium based on their requirements and type of project. for example, the lsds system can be chosen because it can be subject to “no more measurement,” where the client claims that a quantity surveyor can make a mistake in his calculations. on the other hand, another client prefers to use the lsbq system. he said, “[proposing a] lump sum [following] the drawing is difficult because in most projects, the drawing is incomplete.” the same experience is shared by another public client, who claimed that “[being] involved in different types of projects require different practice[s]; for example, infrastructure work use bill of quantity, [while] building work will use semi bill of quantity.” australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 55 in relation to the choices, a public client prefers to use the traditional systems, that is, either lsbq or lsds, for a number of reasons. first, they have a limited staff, and they can appoint consultants, call for tender, and award the project to a contractor. second, the client can be assured of the design, quality, and time because a separate stage will enable consultants to understand fully the client’s requirement in terms of planning and design as well as other factors such as profit and other services that need to be established. finally, the client can choose the project team based on their track record. one consultant stated his opinion: “in malaysia, there [is] a [variety] of hybrid systems where [modifications] of [the] conventional system, variation of design and build, and management contracting [were observed]. these [occurred] under the previous leadership when we are geared toward [malaysia’s] incorporation and privatization.” aside from the prevalence of the traditional system, the current procurement practice in malaysia remains undefined, as confirmed by an architect consultant, who claimed that in his project, the procurement system that was initially used was d&c although a pmc was also appointed. this case happened when the main company has its own subsidiary company involved in the construction. he said: “in my case, the main company will join [sic] venture with another company, which is [a] renowned giant political company, for a proposal to construct a new school building. this company will appoint [the] pmc to handle all the consultants and [to] appoint contractors. there is a need to hire the expert pmc because we are using [the] industrialized building system (ibs) system where the supplier of the ibs system comes from their subsidiary company. there is an advantage because they know the system and can give advice on the technical system.” a more modern system is chosen for a client who has particular requirements. for example, when the manufacturer has a specific building plan that is subject to a disclosure of information or when the budget needs to be completed in a stipulated time, then the fast-track system will be appropriate. in assessing the applicability of the modern procurement system, the d&c system is currently popular in malaysia because of its sole responsibility. “in [reality], for d&c [projects], [a] client will appoint the contractor. [the] contractor will appoint the consultant [based on the client’s requirements]. all the consultants will cooperate with [the] contractor in preparing the drawing. the major role will be played by an architect who will design all the [buildings] and [facilities]. during the construction stage, the architect has to play the role of [supervisor] to ensure the quality of the project,” said one contractor. another respondent who has considerable experience in building projects further explained, “definitely, it would save time, cost, and quality subject to the expertise and capability of the main contractor. for example, [the] modern procurement system will be applied for a complex project that not everyone has the expertise [for]. like [a] hospital buildingthere are many specific room[s] and equipment such as [the] operation theatre and so on. [the] traditional system [is] always [faced with] problems [in coordinating with the] mechanical and electrical (m&e) contractor, but under [the] d&c system, the m&e contractor is under the main contractor. [thus], the main contractor can fully monitor their performance”. analysis of the problems with the dominant procurement system based on the literature discussed in section 2, nine measures on procurement problems have been identified. a reliability test was conducted on the items of each variable to obtain the cronbach alpha (table 2). the cut-off point of the cronbach alpha value was sufficiently reliable at 0.7 for the five-point scale measurement. table 3 suggests that disputes and capabilities are among the major problems encountered in all types of procurement systems. meanwhile, operation and quality were rated as minor problems by the public sector. for the lsds system, the major problems ranked by australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 56 respondents were as follows: dispute, with a mean value of 3.54; cost, with a mean value of 3.39; and risk, with a mean value of 3.36. for the lsbq system, dispute was chosen as the major problem with a mean value of 3.62, followed by time (mean = 3.42) and capabilities (mean = 3.29). respondents agreed that dispute was a major problem in the lsabq system, as well as dispute (mean = 3.53), followed by capabilities (mean = 3.30) and cost (mean = 3.25). for the turnkey system, time was rated as a major problem (mean = 3.59), followed by dispute (mean=3.56) and capabilities (mean = 3.50). finally, for the d&c system, the major problem indicated was dispute (mean = 3.96), followed by management (mean = 3.65) and capabilities (mean = 3.56). problem variable measures legal conflict with contract terms bias toward one party misrepresentation of contract conditions uncertain scope of work in the contract inconsistency of the amendments in the contract alpha value=0.815 management lack of management resources to organize and manage changes lack of management agreement toward a common team vision difficulty in design management lack of comprehensive briefing alpha value=0.768 capability inadequate experience of contractors in the design process client’s lack of knowledge procurement requires skillful consultants lack of resources and expertise in consultancy alpha value=0.700 dispute problems with conflicts of interest in terms of cost reduction and securing design insufficient communication between parties alpha value=0.700 time insufficient time to prepare tender document insufficient time allocated for briefing alpha value=0.706 risk enhancing risk unmanageable risk high risk of disparity between design and operational needs alpha value=0.827 operation difficulties in managing the development process less control of the development process alpha value=0.830 cost high total project cost efficient in theory but expensive in practice high maintenance cost cost uncertainty in the contract high upfront capital alpha value=0.795 quality less design control lower quality satisfaction alpha value=0.700 table 2 cronbach alpha for problems of procurement in the entire system given above, dispute was ranked the highest. according to one consultant, the practice in the industry is confusing because the system tends to be a hybrid one. in australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 57 practice, the implementation of public procurement is influenced by factors such as the involvement of political influence in project awarding and implementation, as well as multilayered subcontracting. according to one client, “the [t]raditional contract has a gap, [as in] the involvement of political [parties] in project implementation. [the] [l]ack of supervision can [yield] many project dispute[s] and failures.” the client then further explained that “in public sector procurement, [the] traditional system [leads] people or firms who [are] not experts to go for tender and win the project, then subcontract the whole project to another contractor or subcontractor.” according to an experienced public client, a multi-layer subcontractor raises the issue of payment: “there are many cases where the main contractor uses the progress payment and does not [pay] the subcontractor. when the client is having problems with the progress, the project needs to be saved. it is more complicated if the project has been charged to the bank to [obtain] [a] bank loan. there is a case where the payment was paid [directly] to [the] bank and the balance [goes] to [the] subcontractor, with the agreement of the main contractor.” on the d&c system, respondents commented on the risk involved in awarding the contract to a subcontractor. another client comments that “the management [and] the implementation are [[performed] by [different groups of] people, and they appoint subcontractors based on the lowest price. with [the] lowest price, less supervision will result [in a] low-quality project. normally, 60% of the total [physical] project will be sublet to a subcontractor. we have a problem of the practice of contractors in the industry and lack of skilled workers.” the disadvantages will be the quality of the d&c project, which is normally lower than that of the traditional system, because according to the client, a d&c project contractor maximizes the profit by not paying the consultant on time. problems traditional alternative lsds lsbq lsabq turnkey d & b mean rank mean rank mean rank mean rank mean rank mean legal 3.16 8 3.04 6 2.99 7 2.94 9 3.22 6 mean management 3.21 7 3.27 4 3.22 5 3.28 5 3.65 2 mean capabilities 3.27 6 3.29 3 3.30 2 3.50 3 3.56 3 mean dispute 3.54 1 3.62 1 3.53 1 3.56 2 3.96 1 mean time 3.30 5 3.42 2 3.23 4 3.59 1 3.29 5 mean risk 3.36 3 3.01 7 3.13 6 3.10 6 3.19 7 mean operation 3.28 4 2.58 9 2.83 8 3.00 7 3.13 8 mean cost 3.39 2 3.11 5 3.25 3 3.38 4 3.38 4 mean quality 2.96 9 2.98 8 2.80 9 2.97 8 2.96 9 table 3 non-parametric test on problems of procurement note: less than 1.49 = strongly disagree; 1.5–2.49 = disagree; 2.5–3.49 = either agree or disagree; 3.5–4.49 = agree; and 4.5–5.0 = strongly agree table 4 shows the mean scores on the satisfaction level of the public sector. the level of satisfaction of the respondents was shown to be only in the medium level, with mean values from 1.5 to 2.5. the lsbq system garnered the highest satisfaction level with mean = 2.48, followed by the d&c (mean = 2.32) and abq (mean = 2.26) systems. australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 58 procurement types mean std. deviation lsds 2.13 0.489 lsbq 2.48 0.509 abq 2.26 0.449 d & b 2.32 0.671 turnkey 2.14 0.639 table 4 mean value of the respondent’s level of satisfaction mean ranging from 1.00 to 1.50 = low; mean ranging from 1.50 to 2.50 = medium; and mean ranging from 2.50 to 3.00 = high the satisfaction level is based on the final product produced. however, each client mentioned that the satisfaction level is based on the capability of the main contractor, that is, regardless of the type of development, the success of a project depends on the main contractor. according to an experienced client, “[the] success or failure of the project very much [depends] on the capability of [the] contractor.” all the parties interviewed mentioned the incompetence of contractors as the main issue affecting project delivery and overall satisfaction. discussion earlier literature has raised the importance of the choice of procurement system in ensuring project success (eriksson and laan, 2007). thus, numerous studies have been conducted in different countries to identify the issues with the various procurement systems. a two-stage method was conducted in this study to capture the dominant procurement system in the industry, the problems associated with such system, and the satisfaction level of the industry players. the results revealed that the traditional procurement system remains dominant, with lsds as the highest ranking system, followed by lsbq and lsabq. according to davis et al. (2009) and love et al. (2010), the traditional lump sum has been the primary procurement method in australia. even davis et al. (2009) argue that the system is beginning to change because of the evolution of new and hybrid procurement systems. malaysia has also begun using new and hybrid procurement methods, as highlighted by cho et al. (2010). the push for the adaptation of new procurement methods is justified by the need for higher client satisfaction (mbachu and nkado, 2006) and improved cycle-time performance (gibson et al., 2007). hale et al. (2009) and migliaccio et al. (2012), along with players from the industry, claim that the d&c system saves time and is suitable for complex projects. however, the fast-track approaches are not without problems (cho et al., 2010). the choice of procurement is more related to a client’s familiarity and knowledge regardless of any differences in the projects (eriksson and westerberg, 2010). for example, a respondent states that ”our practice of d&c here is very much different from the uk, and the industry tends to modify the system to suit their requirements, which are closely related to their past experiences and knowledge.” this statement justifies the term ”hybrid procurement,” which is widely practiced in the malaysian construction industry. ”we can have different terms for different procurement systems but the practice is rather similar,” explained one consultant respondent. based on the ranking of the five procurement systems, this study explored related problems from the perspective of the public sector. based on the mean value, industry players generally australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 59 agreed that the main problems with both traditional and alternative procurement systems are dispute, capability, time, and cost. in a comparison between traditional and alternative procurement methods, the major results indicate that: 1. d&c received the highest agreement on dispute, followed by other procurement methods; 2. capability problems received a higher agreement in d&c and turnkey projects compared with the traditional procurement methods lsbq and lsds; 3. the time problem in turnkey projects received the highest agreement, followed by lsbq and d&c systems; and 4. cost is the main concern for turnkey, d&c, and lsds projects. the above evidence strengthens the argument that the move to use alternative procurement systems is not a guarantee that the deficiencies of the traditional system will be overcome (cho et al., 2010). interestingly, dispute was proven to be a major problem in both systems. disputes are associated with a conflict of interest, such as the need to reduce costs and secure a design (smith et al., 2004) as well as insufficient communication between parties (yu et al., 2005; ling and poh, 2008; ciob report, 2010). consequently, ofori (2007) argues that any dispute is likely to be costly and disruptive to the project unless it is resolved early. as explained by one consultant, “in most cases, our contract relationship is [unclear], thus [leading] to many disputes and discrepancies [in the] contract.” these results support previous reports (yu et al., 2005; the ciob, 2010) that categorized dispute as a major problem in the implementation of procurement systems in different countries. disputes under d&c received the highest agreement (mean = 3.96) because f the uncertainty of drawing, which yields numerous problems in project management, as proposed by cho et al. (2010). however, in traditional systems, tien and jason (2006) found that variations also cause disputes among various parties, thus resulting in cost uncertainty with changes in design and scope. insufficient design could be a reason for disputes in lsds and lsbq projects. for example, neighbour (2000) stressed the importance of sufficient time for the consultants’ preparation of the full document prior to calling for tenders. tabish and jha (2011) identified that pre-project planning and a clear scope to be among the factors that contribute to the success of a public construction project. however, a study by jaafar and chong (2010) acknowledged the lack of attention given to public projects during the briefing stages. similarly, rwelamila and mayor (1999) agree that a lack of preparation for the design and bills of quantities before the selection of contractors is evident. changes in drawing would affect the measurement of the triangle project performance because the industry involves numerous parties in temporary project organizations. inadequate and inefficient communication between parties could lead to a lack in information flow. a survey conducted in the united kingdom mentioned lack of communication as the most significant problem in the procurement process, with dispute as the major problem in traditional and alternative procuring methods (the ciob, 2010). similarly, smith et al. (2004) concluded that poor communication and misunderstanding between contracting parties could result in contractual disputes. in this study, all the interviewed respondents highlighted multi-layered subcontracting as a major issue resulting in inefficient communication, lack of integrity, and problems in payment. meanwhile, the problem of capabilities was highlighted as a major issue in managing alternative procurement systems, especially in the d&c system. in conducting a d&c project, puerto et al. (2008) expressed the need to appoint a highly capable and qualified team to ensure the success of the project. however, traditional procurement systems also suffer from the lack of capabilities of the people in charge. a lack of experience among the construction team can cause delays and can result in longer construction time. ofori (2007) and harland (2005) argued australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 60 against the lack of capability of the public procurement officer when handling a public project. according to ofori (2007), the lack of skills among procurement officers during public procurement is an obstacle to any effort to promote innovation. furthermore, harland (2005) raised the issue of a shortage of highly qualified and motivated professionals during public procurement. as mentioned by one respondent, “our clients and consultants are not capable enough to handle the project, and [the] public sector needs to enhance their effectiveness in project supervision.” on the other hand, the capability of the contractor and consultant is a major concern among industry players. as highlighted by the ciob (2010), the industry players have a poor understanding of procurement systems. in malaysia, the procurement system has not been widely understood by the industry, except for quantity surveyors and experienced architects. in developing countries, construction projects are closely related to the political agenda (ofori, 2007). for example, in western australia, love et al. (2008) find that lsds methods are always effective and cost-efficient, but clients prefer different procurement systems for complex projects. in reality, the local market has limited experience dealing with construction management procurement. client’s experience and current market conditions influence the choice of procurement strategy. for example, the interviewed respondents raised the issue of procurement implementation in malaysia. regardless of the procurement system adopted, political influence in awarding public projects contributes to the increase in the number of contracting firms that are only interested in obtaining contracts. these firms sublet the total project to other contractors or subcontractors. other issues have been mentioned by the respondents, such as incapability of contractors, which results in project mismanagement; manipulation of payments; difficulties in obtaining supplies on time; as well as lack of integrity and commitment. these issues are proven by the project’s quality where it has been given minor attention, indicating the unimportance of procurement issues in solving industry problems. the important role of contractors has been highlighted by rwelamila and meyer (1999). these issues also arise in both traditional and modern systems. regarding the problem of time, respondents agree that this problem exists in all types of procurement methods, with the highest agreement cited for the turnkey system. time is closely associated with cost. the first part of the introduction noted that numerous projects suffer from additional time and costs in malaysia. a fast-track system, as highlighted by cho et al. (2010), needs to be managed by a capable team. while traditional methods have been tied-up with a sequential process, a fast-track system is closely associated with a lengthened process of project delivery. lsbq has been agreed to be late compared with lsds because additional time is required for the preparation of the bills of quantities (turner, 1983). furthermore, project delivery in this system provides little opportunity for interaction and teambuilding among the members of the construction team. according to soon (2010), various parties such as pwd, iem, pam, cidb, and even the federal government have exerted efforts to establish of the rules and standards on work implementation to resolve delay issues. with a mean of 3.29, the majority of respondents acknowledged the effectiveness of the d&c system in ensuring timely project delivery, supporting the propositions of gibson et al. (2007) and migliaccio et al. (2010). given that d&c is the most popular alternative procurement system in malaysia, industry players are starting to become familiar with its implementation. cost problems, on the other hand, moderately exist in all types of procurement, with high agreement on the lsds, turnkey, and d&c. problems of conflict of interest in terms of reducing cost, securing design, and insufficient communication between parties could yield more problems that can delay the project. australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 61 the problem of quality is one of the minor problems encountered in all types of procurement. although the issue of the public sector’s building quality was highlighted, the study findings indicate that the industry practitioners are not significantly concerned about quality compared with the other two performance measurements, which are time and cost. these findings contradict the previous literature, which indicates that time, cost, and quality are among the major problems of procurement systems. this result is also in contrast to previous literature on various procurement systems, which incorporate the quality issue with other dominant problems such as time and cost (chang, 2003; turk, 2006; toor and ogunlana, 2008; the ciob report, 2010; rahman et al., 2010). turk (2006) mentioned that quality is a serious problem in turkey, given that the industry has to sacrifice by cutting costs or shortening project time. the quality problem is also critical in construction projects in china (chang, 2003). based on the satisfaction level of the procurement system used by the public, all the procurement systems were given a medium level of satisfaction. this study supports previous findings by mbachu and nkado (2006). hashim (1997) found that 54% of the clients in malaysia are satisfied with the completion rate of projects that employ traditional procurement methods. respondents expressed the highest satisfaction with the lsbq and d&c systems. the lsbq can reduce the cost of tendering (australian institute of quantity surveyors, 2001) because the boq encourages a greater number of subcontractors to submit tenders for work packages. davis et al. (2009) include among the list of the benefits of the lsbq method the certainty of progress payment, providing common basis for change order management, and minor errors. furthermore, the industry in malaysia has used the lsbq method for many years. however, the public sector has adopted the d&c system since the 1990s. thus, familiarity with the system justified the high satisfaction rating, especially for a complex project, as highlighted by a respondent: “the procurement selection is done by clients and they tend to use the normal procurement or modify the new procurement according to their norms.” in relation to procurement selection for the public sector, ofori (2007) stated that in developing countries, bureaucracy leads to more levels of administrative procedures and approval checks, causing inefficiencies, high costs, and project delays. toor and ogunlana (2008) added that this bureaucracy could result in the fragmentation of procurement laws, higher levels of corruption, and a lack of coherence among the procurement systems, the local culture, administrative systems, and the authority structure. the respondent also mentioned the uncontrolled political interruptions in public organizations, which impede the effectiveness of project implementation. even clients tend to choose a procurement system that they are highly familiar with, but dubois and gadde (2002) argue that changes in attitudes, behavior, and procedures can help increase the chances of project success. conclusion this study identified the dominant procurement system, the problems associated with it, and the satisfaction levels of the public procurement systems in the malaysian construction industry. public sector clients select the lsds system as their main choice among the traditional procurement systems used in accomplishing projects in malaysia. the move to use both alternative and traditional procurement systems by the private sector in other countries has convinced them of the need to adopt alternative procurement systems to accelerate the development of the country. throughout the industry’s development, however, the suitability and efficiency of alternative procurement systems are being questioned, considering the various defects observed in public projects. this study found that no specific procurement system is the best because each system has its own flaws. the problems could also lie with the industry players, who might have limited knowledge on the procurement process. another observation from this study is that the public australasian journal of construction economics and building jaafar, m and radzi n m (2013) ‘level of satisfaction and issues with procurement systems used in the malaysian public sector’, australasian journal of construction economics and building, 13 (1) 50-65 62 sector has been practicing the same working culture from generation to generation. their familiarity and knowledge of the traditional procurement system has been embedded in their working culture, which explains the barriers to change. this factor highlights the importance of the traditional lsbq and lsds systems in the industry. even though there has been a massive development of procurement systems worldwide, this study found that the procurement system applied in the malaysian construction industry has not changed greatly since the time of british rule. the same situation has also been observed in other developing economies. generally, in developing countries, the public sector is the biggest client to the construction industry, but unfortunately a high tendency exists for political involvement and cronyism. with the large number of stakeholders, certain groups of people tend to manipulate the procurement system for their own advantage. this situation may lead to bias in the awarding of contracts and project implementation. the actual procedure may not be followed, which results in the shift to a hybrid system. such a shift can yield problems related to disputes, reduced capabilities in project management, and negative impacts on time and cost. there is a move towards advanced procurement delivery processes practiced in the industry to suit industry requirements such as industrialised building systems and e-procurement however the industry’s working culture still remains the same. therefore, the development of procurement system in malaysia has been very slow besides numerous achievements on the procurement research in western countries. in different perspective, this article highlights the importance of human factor in managing the procurement process. procurement transformation would enquire the transformation of the mindset and working culture of the entire industry participant. cidb needs to increase the industry awareness on the importance of getting the right procurement in order to enhance the stakeholder’s satisfaction in relation to industry changes and requirement. this study is only based on a small group of respondents where the actual knowledge on procurement systems is unknown. a thorough study of the procurement issue, which can be performed by interviewing experts in the industry, is needed to identify actual barriers to come up with a better procurement solution. a study on the private sector’s procurement methods could be another option because this sector has contributed much in terms of modifying the procurement system to ensure successful project completion. therefore, a continuous study on procurement systems as a green issue should be conducted, alongside the necessary changes in the industry. references adnan, h., jusoff, k. & salim, m. k, (2008) ‘the malaysian construction industry’s risk management in design and build’, modern applied science, 2 (5), 27-33 ashworth, a. 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(2005) ‘application of value management in project briefing’, facilities, 23 (7/8), 330-34 microsoft word july paper 1.doc information technology and the qs practice by peter smith the australian journal of construction economics & building page 1 information technology and the qs practice peter smith, construction economics unit, university of technology, sydney, australia 1. introduction professional expertise in project financial management is the fundamental basis for success for a quantity surveying firm. this can only be achieved through proper education, "on-the-job" training and experience over a wide range of projects. utilising information technology (it) for competitive advantage is the next key ingredient for a firm's success but, quite clearly, success cannot be achieved by the latter unless the former is established. this paper examines how the australian quantity surveying profession can combine these two ingredients to gain competitive advantage and create increased business opportunities both in the short term and the long term and within and outside the construction industry. the research for this paper is largely based on the results of a major it research study conducted on behalf of the department of industry, science and resources (disr) and three nationwide surveys of the australian quantity surveying profession. the paper commences with an analysis of the general rate of it adoption in the industry, explores future industry directions using the nsw department of public works and services (the largest client in australia) as a case example, presents and analyses the key findings of the research studies outlined above and concludes with a series of it-related strategies for quantity surveying firms to consider adopting to improve their business performance. 2. information technology adoption rate the rate of adoption of information technology (it) in the construction industry has been slow compared to most other industries despite its information intensive nature. the reasons for this slow adoption rate are many and varied. probably the greatest problem lies in the extremely fragmented nature of the industry not only in australia but globally. the industry is characterised by a large number of small organisations each with their own vested interests in the process. in australia, there are over 100,000 small businesses operating in the construction industry with 98% of firms employing less than 20 people and 85% employing less than 4 people (hutt 2000). 85-90% of construction work is subcontracted and project team consultants and contractors are typically assembled for individual projects in an ad-hoc "one-off" pattern with decisions on project team composition largely made on the basis of lowest price. hence, project teams are assembled and disassembled on a project by project basis with little continuity of project team members over the long term. during the course of large projects, there are typically hundreds of firms (consultants, contractors, suppliers) involved during the various stages with a high level of "change-over" between the various trade contractors. additionally, every project is a "one-off" prototype. current initiatives to address these problems include alliance contracting, joint venturing and "singlesource" delivery of services extending into the operational stages of projects. due to a lack of industry standards, each of these firms have their own organisational/management systems in place encompassing a wide range of technological capabilities and software usage. the wide range of software systems used and the incompatibility between many of these systems severely limit the scope for the industry to take advantage of the rapid technological advances surrounding it. exacerbating this situation is the generally low profit margins in the industry which inhibit the ability of firms and the industry generally to make the necessary investment in it systems, research and development. other key problems include the complexities surrounding information information technology and the qs practice by peter smith page 2 he australian journal of construction economics & building flow on construction projects, the lack of information and process standards, the traditional "paper-based" mindset of the industry and yet to be resolved legal and contractual issues relating to electronic documentation and records. nevertheless, the past 5 years has seen significant advances in addressing these problems. organisations such as the international alliance for interoperability (iai), backed by major international firms and professional associations, are making major inroads in developing standards to offset the problems associated with incompatibility of computing systems and information flow. there are now many examples of major projects where entire project teams have been linked electronically and all information flow carried out electronically; the construction of the new airports in hong kong and kuala lumpur being two good examples. major industry clients are exerting increased pressure on industry participants to more effectively utilise it capabilities. in australia, the nsw department of public works and services (dpws) is the nation's biggest construction industry client and is currently implementing strategies to push the industry into the electronic era. these strategies are summarised in section 5. the pace of change in our society is having a concomitant effect on the industry. gleick (1999 cited in spigelman 2000) provides historical comparisons with our current rate of change and adaptation to new technology. gleick examined how long it took for one-quarter of the population in the united states to adopt new technology; 46 years for electricity, 35 years for the telephone, 16 years for personal computers and 7 years to be connected to the internet. the digital revolution is occurring with unprecedented speed. this has been coupled with the phenomenon of a decreasing tolerance to delay. delays in certain processing functions (particularly those computerbased) quickly become unsatisfactory even though this type of delay may have been acceptable as little as a year earlier. instead of words per minute it is now characters per second. time has consequently become more important as people increasingly try to cram as much into their days as possible. in japan, some restaurants now charge customers by the minute and not on what they actually eat; customers clock in, clock out and the bill is calculated on the actual time spent in the restaurant. many examples exist of the need to create the illusion that we are saving time. the "door close" button on building lifts provides a good example; on many lifts these buttons do not actually work and are in place merely to "placate those who measure their time in seconds" spigelman (2000 p.5). current personal "off-the-shelf" computers with pentium processors are capable of performing 400 million instructions per second and, at the current pace of development, by 2012 personal computers will be able to handle 100,000 million instructions per second. in 1980 copper wire phone lines carried less than one page of information per second whilst, today, optical fibres as thin as a human hair can transmit the equivalent of over 90,000 volumes of an encyclopedia per second (de valence 1999). in the construction industry, the pace of change is gaining momentum. rapid changes in the design area alone have occurred; the drafting board is quickly becoming obsolete giving way to the computer monitor. weisburg (2000) argues that the next few years will see significant changes in how developers, designers, consultants and contractors manage the entire building process. these changes will result in not only substantial restructuring of how facilities are designed and supported but also a major reengineering of how these players do business. weisburg further contends that the process will become substantially more information-oriented with participants being required to not only have the technological capabilities to be a part of this information flow but also, and probably most importantly, be willing to share their information. the sharing of intellectual property amongst project participants will, in itself, require major information technology and the qs practice by peter smith the australian journal of construction economics & building page 3 cultural and business shifts as firms are increasingly asked to "hand over" their valuable data. 3. industry directions case example 3.1 dpws it strategies as mentioned previously, the nsw department of public works and services (dpws) is the largest construction client in australia and, accordingly, has a significant influence on the future directions of the industry. current dpws strategies therefore provide a good example of where the industry, at least in australia, is heading. in 1998, the dpws launched their strategies to more effectively use it to provide better value for money in capital works procurement. the aim is to achieve this by improving communication and teamwork through all phases of the design, construction and operation of facilities (dpws 1998). eden (2000) points out that these strategies are underpinned by the premise that the key to successful utilisation of current and emerging technology through the entire project life cycle and providing better value for money for clients lies in the sharing of data, information and knowledge at both industry and project levels. eden also describes the following as the main directions necessary for the successful implementation of it: focus on project specific applications integration of it through the entire procurement and project life cycle process and a feedback loop to the design and briefing stages integration of it through the entire supply chain including subcontractors and suppliers recognising the importance of and assisting in it education and training of practitioners use of object-oriented project databases sharing the learning experience between clients and industry, and sharing the learning experience between the construction and other industries. the dpws vision is that, by 2005, all firms wishing to undertake future capital works projects will need to be able to communicate electronically with all project participants at all necessary levels. for the quantity surveying practice, this means being able to transfer and receive all project information, including drawings, electronically. 3.2 key elements eden (2000) states that the strategies evolve around the following: object-based project databases these databases will contain all the project information and will be accessible by all project participants electronically at any time from any place and in a form best suited for the particular participant. project web technology (currently experiencing rapid development) will be used as the main communication media. the database will evolve around 3d object oriented computer-aided design (cad) whereby each component/element of a building is set up as an object with all the necessary design and operational attributes/properties/information intelligently imbedded in the object. this will extend into the facility management phase of a project's life cycle (a period where traditionally the original project information is not available in any useful form). whilst there is general consensus that the industry will eventually be driven by 3d object oriented cad, conventional 2d cad is currently used by well over 80% of cad users in the industry. the shift to 3d cad has been slow but there are now signs of this shift accelerating. communication networks communication networks will evolve around internet and web browser technology with all participants accessing a central project database. this will offset the need for multiple copies, and in some cases versions, of the data/information to be held separately by each project information technology and the qs practice by peter smith page 4 he australian journal of construction economics & building participant. the database will also enable access to client databases with generic information about their requirements and historic data as well as information about manufacturers, suppliers, contractors, consultants, service providers and their products. electronic commerce and electronic procurement electronic procurement will require all project participants to conduct their businesses via electronic commerce. this will necessitate cultural shifts in the way these firms do business and, for many, a major re-engineering of their processes and practices. to this end, the australian procurement and construction council (apcc) have developed a "national framework for cooperation for electronic commerce in government procurement" for the purpose of developing a consistent approach to the use of technology in electronic procurement. the dpws approach to electronic tendering is of particular relevance to the quantity surveying profession. they are progressively developing systems that go beyond simple advertising of tenders to allow the downloading of measurable documents and to enable the entire tender process to be completed electronically. some projects have already provided for tenderers (and their subcontractors/suppliers) to generate automatic linear and area measurements from documents available on the internet or, where downloading capabilities are limited, from computer disks. eden (2000) states that further developments with 3d object based documents will shortly enable tenderers to utilise these documents directly from the web to automatically generate length, area and volume measurements as well as detailed quantities for many items. 4. successfully implementing it 4.1 disr research the following section is based on the findings of a major research program carried out in 1998 for the australian department of industry, science and resources (disr) to examine the current status and future directions of information technology use in the construction industry (disr 1998). the research was carried out jointly by the fujitsu centre of the australian graduate school of management and the building research centre at the university of new south wales for the primary purpose of establishing how it can provide long term benefits for both firms and the industry generally. the research included interviews with managers of 30 firms (including quantity surveying firms) covering most sectors of the industry to identify the actual and potential benefits for these firms in adopting it and the problems in doing so. 4.2 it adoption phases the study identified 3 main phases in the adoption of it by firms in the construction industry: phase 1: automation this phase involves the use of it to automate technical and specialist tasks that were previously carried out manually. this has led to many generic benefits which include productivity gains, increased business turnover, shorter cycle times, the capacity to manage larger and more complex projects and improved accuracy and consistency of documentation. however, the researchers found that the leaders in automating their processes enjoyed competitive business advantage only over the short term because it is relatively easy with automation for competitors to adopt the technology used by these leading firms. in many cases, these leading firms act as "guinea pigs" for their competitors who prefer to adopt a "wait-and-see" approach before investing in technology. the result for the industry has been that automation has led to increased productivity gains and lower costs generally across the board for each profession with little long term competitive advantage being information technology and the qs practice by peter smith the australian journal of construction economics & building page 5 achieved by individual firms. in other words, automation really becomes a competitive necessity for firms to stay in business but, in itself, does not yield sustainable advantages over competitors. the majority of firms in the industry have remained in this phase. phase 2: adding value this phase goes beyond using it merely to reduce costs and to keep up with competitors and involves leveraging the information collected as a by-product of automation to improve management processes. this adds value to the automation process by typically enabling firms to provide a wider range of services for their clients which, in many cases, provide greater value for these clients. for example, a quantity surveying firm may invest in cad technology for the primary purpose of utilising the automated quantities capabilities of these systems. upon mastering this technology, this firm could further improve these capabilities by developing sophisticated cost planning cad models which would be invaluable for clients at the conceptual stages of projects. additionally, the spin-off effects of understanding cad would provide this firm with opportunities to link electronically with designers and entrench themselves in the information management side of the construction process creating an array of new business opportunities. few firms realise these opportunities. phase 3: business process reengineering the third phase is realised by even fewer firms but it is in this stage where the greatest benefits lie. this phase involves utilising it to transform (re-engineer) the firms core business operations to optimise the use of it. this usually requires continual investment in technological advancement and organisational change. the researchers found that the relatively few organisations that have re-engineered their business processes along with the adoption of it have experienced significant gains in productivity and gained sustained competitive advantage. this has enabled expansion into new markets, improved ability to manage projects from a distance and the ability to compete on an international scale. using design firms as an example, the researchers found that productivity gains (up to five times over seven years) were greatest amongst firms who moved to 3d object oriented cad and re-engineered their processes accordingly. on a general industry scale, the researchers found that the greatest potential for transforming it utilisation in the construction industry lies in reengineering the supply chain to deliver increased value for clients. due to the fragmented nature of the industry outlined earlier, this can only be achieved through inter-organisational processes which, at present, have been limited to the automation of communications (email, electronic funds transfer and the like). however, far more sophisticated advances are required particularly in terms of software standards to achieve the necessary interoperability. the researchers contend that even more important is the need for much closer cooperation and sharing of information amongst firms, a concept which is a real challenge in an industry traditionally characterised by its adversarial nature and firms’ possessiveness of their data and information. 4.3 potential benefits & challenges for quantity surveyors the study examined the main potential it applications and benefits for the quantity surveying profession. the main applications were found to be: increased productivity through streamlined data entry and data management increased productivity through automated quantities and cost calculations increased productivity through the use of digitisers for measurement elimination of measurement in many areas through direct extraction of quantities from cad files faster and more efficient transmission of quantity/cost data via email information technology and the qs practice by peter smith page 6 he australian journal of construction economics & building expanded services in relation to feasibility, time and cost planning using expert systems it was found that the current use of it by quantity surveying firms was largely restricted to: an emphasis on automating data entry and calculations use of email to send data to designers and contractors continued emphasis on manual measurement amongst most practitioners increasing non-traditional services in areas such as feasibility evaluation and time and cost planning including life cycle costing this area is further explored in section 5 when evaluating the nationwide surveys of the profession. however, the following conclusions drawn by the researchers in relation to the future direction of the profession are worth quoting and should serve as a pertinent reminder to the profession. perhaps even more pertinent because they are the conclusions of industry experts with "non-qs" backgrounds and no vested interest in promoting any particular professional discipline. "the direct calculation of quantities from cad files represents a serious threat to the traditional role of quantity surveyors. this could reduce the value-added base for their traditional services to two areas. the first is 'up to the minute' market knowledge of subcontractor rates. the second is job-specific knowledge of the impact of design, construction and detailing on costs. however, even in these two areas, the provision of market information is a service that could be readily supplied in the future by a single operator establishing an electronic market. the benefits of it may therefore only accrue to a small number of firms and only over the medium term. the future role of the quantity surveying profession will become limited to the area of cost adviser in an increasingly narrow area of expertise, significantly restricting business opportunities within the profession" (disr 1998, p.6). the saving light for the profession, in the view of the researchers, lies in the diversification of the services provided by quantity surveying firms. the surveys examined in section 5 suggest that there has been a marked push towards diversification by quantity surveying firms over the past five years. 4.4 key success and impediment factors for it implementation by firms the study identified the key factors which drive successful implementation of it and, conversely, the factors which impede it implementation. the success factors were summarised as follows: taking an incremental approach to the implementation of it ensuring new it systems have business benefits changing/re-engineering the business to optimise the advantages afforded by the technology using individual projects to fund incremental adoption using individual projects as an opportunity to learn to use new technology proper training and development of staff so they can use the new technology successfully commitment of senior management to it implementation. the main impediments for firms were found to be: the high cost of innovating/learning a new technology low margins resulting in little scope for investment in it innovation and learning fear of over-investing in it resistance to reengineering/organisational change lack of the necessary computing skills amongst staff information technology and the qs practice by peter smith the australian journal of construction economics & building page 7 lack of awareness by senior management of the opportunities it presents belief that it innovation is unnecessary client resistance senior partner/management resistance. the main industry-wide impediments were found to be the lack of people with vision in the industry, the fragmented structure of the industry, the adversarial nature of the industry, the lack of trust amongst firms and the lack of a shared/standard language and technology in current supply chain processes. 5. qs survey results & analysis this following section examines in detail the general practices of australian quantity surveying firms over the past 5 years with a focus on the attitudes towards and utilisation of information technology. it is based on nationwide surveys of the australian qs profession carried out from 1995 to 1999 by the construction economics research unit from the university of technology sydney in collaboration with the pacific association of quantity surveyors (paqs) and the australian institute of quantity surveyors (aiqs). these survey results enable evaluation of how the profession has reacted over the past five years to the challenges and opportunities that information technology advances and general industry changes have presented. 5.1 survey details the surveys comprise a series of 3 nationwide surveys of quantity surveying firms carried out in 1995, 1998 and 1999. the first two surveys were conducted in collaboration with the aiqs. 77 firms responded to the first survey (out of 160 firms) and 65 firms responded to the second survey (out of 126 firms) representing response rates of 48% and 52% respectively. the third survey in 1999 was carried out in collaboration with both paqs and the aiqs and was extended to cover quantity surveying practices in the paqs member countries. unfortunately, the response to this survey was not sufficient to enable detailed comparison between the various countries. consequently, this paper focuses on the responses by australian quantity surveying firms from whom 38 replies were received. the surveys comprised a number of questions concerning general practice details, information technology capability and use and future directions of the profession. the questions were largely the same for each survey but there were questions added to the 1998 and 1999 surveys. hence, it should be noted that where 1995/1998 results are not shown this indicates that the particular questions were not asked. these surveys will continue to be carried out on at least a biannual basis to gauge how the profession is evolving during these turbulent times. hopefully, better response rates from firms outside australia will enable international analyses in the future. 5.2 respondent profile the following figures indicate the size and age of the respondent firms. these questions were not asked in the 1995 survey. the respondents predominantly comprise small to medium sized organisations which is typical of the profession's (and industry’s) structure. more than half had less than 10 employees which is a significant factor when analysing the survey results. nevertheless, more than half have been in business for over 10 years which suggests that longevity of firms, at least until now, is a feature of the profession. information technology and the qs practice by peter smith page 8 he australian journal of construction economics & building 5.3 services provided the past two decades have seen quantity surveying firms expand and adapt their scope of services to meet changing industry demands. the use of the traditional "bread and butter" of the profession, bills of quantities, has declined markedly in the australian construction industry over this time to the point where they are rarely used. despite this, the volume of work carried out by firms has increased over the corresponding period. builders quantities, whereby tendering contractors themselves (rather than the client) engage and pay quantity surveyors to prepare quantities have now taken over from the traditional bill of quantities provided and guaranteed by the client. builders quantities are usually prepared in a concise form with firms using their own concise standards; no standard concise method of measurement has yet been developed. another major change has been that quantity surveyors are now used much more in the "front-end" stages of projects where their expertise is of most value. cost planning and budgeting is becoming fig. 1 total number of employees 0% 10% 20% 30% 40% 50% 1 1 > 5 5 > 10 10 > 20 20 > 50 50 + % of respondent firms 1999 1998 fig. 2 age of firm 0% 10% 20% 30% 40% 50% <2 yrs 2-5 yrs 5>10 yrs 10>20yrs 20yrs + % of respondent firms 1999 1998 information technology and the qs practice by peter smith the australian journal of construction economics & building page 9 the new "bread & butter" of the profession. one of the largest quantity surveying firms in australia1 provides a good example of these changes; in 1980 bills of quantities accounted for approximately 80% of their total workload whereas in 2000 this had declined to little over 5%. however, rather than leading to the firm's demise, the firm has adapted accordingly and now provides a greater volume and wider range of services. this section of the survey targeted the scope of services provided by firms. figure 3 shows the percentage of firms providing traditional services (question not asked in 1995). estimating/cost planning and contract administration are the main services provided by firms. even though the use of bills of quantities has declined most firms still provide this service albeit to a limited extent. more firms prepare builders quantities than bills of quantities. figures 4 and 5 show the extent of nontraditional and non-building services provided by firms (questions not asked in 1995). the range of services is now clearly very broad with taxation advice (comprising mainly building tax depreciation schedules) and valuations for insurance purposes the most common service. the role of quantity surveyors in resolving disputes as expert witnesses in arbitration/litigation actions has escalated markedly. australia is one of the most litigious countries in the world (measured in terms of legal cases per capita) and its construction industry is dominated by a high level of dispute. most disputes evolve around money so the cost expertise of the qs is commonly sought. many quantity surveying firms have now also ventured into non-building areas demonstrating that the cost management skills of the quantity surveyor can be applied in other industries just as is the case with project management. the 1 the identity of this firm is not disclosed for reasons of confidentiality results indicate that this trend is likely to continue. however, the provision of these services does not necessarily mean that these services account for a large proportion of firms' volume of work. figures 6 and 7 indicate the percentage of income that these non-traditional/non-building services provide for firms. the results indicate a significant increase in these percentages over the 5 year period. in 1995, nontraditional services accounted for less than 10% of total income for over 80% of firms and no firm had a percentage higher than 50%. non-building services were very limited; only 10% of firms carried out these services and, even then, they only accounted for less than 10% of total income. by 1998/99 this picture had changed significantly. for over approximately 70% of firms non-traditional services accounted for more than 10% of total income and over 20% of total income for more than half of firms. for approximately 25-30% of firms these services actually accounted for over 50% of total income. non-building services were also on the rise accounting for over 50% of total income for one firm and 10-50% of total income for approximately 20% of firms. marked increases were noted even between the 1998 and 1999 surveys. these results provide evidence that quantity surveying firms have really taken on the challenge of diversification to better meet and serve industry demands. this indicates, in part at least, a proactive approach to change by many firms. in order to ascertain current processing technology capacity, respondents were asked to indicate their hardware platforms with the results shown in figure 8. this provides the basis for the analysis of the survey results. information technology and the qs practice by peter smith page 10 he australian journal of construction economics & building f ig . 4 n o n t r a d it io n a l s e r v ic e s 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% feasibility stud life costs const planning tax advice arbitration/med expert w itness insurance val risk m'ment project m'ment value m'ment quality m'ment facility m'ment post occ evaluation premises audits due diligence reports cost benefit analysis other % of respondent firms 1999 1998 f ig . 5 n o n b u ild in g s e r v ic e s 0% 10% 20% 30% 40% 50% petrochemical m anufacturing m ining aeronautical ship building water services t ransport aeronautical m arine works infrastructure works civil works research/publishing other % of respondent firms 1999 1998 fig. 3 traditional services 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% estim/cost plan bills of quant bldrs quants spec prep contract admin % of respondent firms 1999 1998 information technology and the qs practice by peter smith the australian journal of construction economics & building page 11 f ig . 6 % i n c o m e n o n t r a d it io n a l s e r v ic e s 0 % 1 0 % 2 0 % 3 0 % 4 0 % 5 0 % 6 0 % 7 0 % 8 0 % 9 0 % 1 0 0 % < 5 % 5 -1 0 % 1 0 -2 0 % 2 0 -5 0 % 5 0 % + % o f re sp o nd e nt firm s 1999 1998 1995 f ig . 7 % i n c o m e n o n b u ild in g s e r v ic e s 0 % 1 0 % 2 0 % 3 0 % 4 0 % 5 0 % 6 0 % 7 0 % 8 0 % 9 0 % 1 0 0 % 0 % < 5 % 5 -1 0 % 1 0 -2 0 % 2 0 -5 0 % 5 0 % + % of resp onde nt firm s 1999 1998 1995 f ig . 8 h a r d w a r e s y s t e m s 0 % 1 0 % 2 0 % 3 0 % 4 0 % 5 0 % 6 0 % 7 0 % 8 0 % 9 0 % 1 0 0 % m u lti-us e r s ta n d a lo n e p c s ne tw o r k ed p c s l a p to p s % of respo nden t firm s 1999 1998 1995 information technology and the qs practice by peter smith page 12 he australian journal of construction economics & building f ig . 9 g e n e r a l o f f ic e a p p lic a t io n s 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% word processing spreadsheet database presentation desktop publ. email accounting % of respondent firms 1999 1998 1995 f ig . 1 0 s p e c ia lis t a p p lic a t io n s o f t w a r e 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% estimating bqs cash flows t ime m an cad facilities m an life costs project m an cost database feasibilities % of respondent firms 1999 1998 1995 fig . 11 u se of ca d for m easurem ent 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% never seldom often daily f re q u e n c y o f u s e % of respondent firms information technology and the qs practice by peter smith the australian journal of construction economics & building page 13 5.4 computing systems operating systems the use of multi-user systems comprising a mainframe and dumb terminals has declined from around 40% of firms in 1995 to less than 10% in 1999. whilst this change may be more a reflection of the large proportion of small respondent firms in the 1999 survey it does indicate that many firms are moving more towards networked computers. the use of laptop computers has remained relatively static being used by only approximately half of qs firms. general software systems the surveys revealed that the majority of firms use mainstream general office application software as indicated in figure 9. one firm in the 1999 survey (sole practitioner) is still resisting change and has no computing facilities. the major change has occurred in the use of electronic mail (email). in the 1995 survey only 17% of firms used email but by 1999 this figure had increased to 85%. this provides a good example of how quickly email has been embraced as a major communication tool in business. specialist software systems figure 10 indicates that although the majority of firms use specialist application industry software for estimating, cost planning and bills of quantities (bq) preparation the same may not be said for other specialist areas such as time management, facilities management and the like. anomalies are evident in responses to the use of feasibility, cost monitoring, cost data-base, time management and cash flow forecasting software. the 1998/99 responses showed a decline, and in some cases, substantial declines in the use of specialist software for these areas. however, many firms have developed programs for these specialist areas in-house (largely based on spreadsheets) and many project management style programs provide "allencompassing" capabilities. in-house software is now used by over 60% of firms. the most alarming statistic in 1995 was that only 13% of respondents had cad facilities. over the ensuing 5 years this percentage has increased to 25% which indicates that some firms, at least, are venturing into the cad area. nevertheless, this proportion is still very low particularly if the profession is intent on remaining a key player in the project procurement cycle. whilst some respondents cite cost as the main reason for the non-use of cad, it is clear that the majority of quantity surveyors are incapable of communicating/transferring drawing information electronically with designers. this may well see these firms isolated from the chain of consultants in the not too distant future as information flow on construction projects increasingly becomes electronic. measurement tools the 1999 survey introduced a question relating to the use of electronic tools to aid the measurement process. the results in figures 11 and 12 show that the majority of firms still cling to traditional paperbased measurement with the use of electronic measurement tools quite rare. all but one firm use measurement software programs with buildsoft the most common. however, firms are clearly averse to using cad automated quantities with 85% not using cad for this purpose, 8% seldom using it, 7% using it often and no firms using it daily. given the low proportion of firms with cad facilities in the first place, these results are probably not surprising. the major reasons cited for not using cad are the cost involved in investing in the necessary hardware/software and training of staff, the incompatibility of different cad systems and problems with the automated capabilities of these systems. there are still many problems associated with using information technology and the qs practice by peter smith page 14 he australian journal of construction economics & building cad for measurement and the time when cad systems can automatically produce a detailed bill of quantities for projects generally (rather than being set up for specific projects) is still probably a long way off. but the reality is that most cad systems have the capabilities to, at the very least, automatically generate basic quantities in terms of areas, volumes and numbers of items. even the use of digitisers for measurement has been very low in the profession. 79% of firms never use digitisers, 13% seldom use them, 3% use them often and only 5% use them daily. even then, with the firms using digitisers, they are not available to all staff with no firm having more than 3 in the office. similar findings were made in the 1995/1998 surveys. digitisers have been around for nearly two decades and are considered by many to already be obsolete due to the advances in cad yet quantity surveying firms still resist their use. inaccurate results are cited by many as being the main reason for non-use but, in the author's experience, digitisers (particularly those that have been on the market over the past 5-10 years) are extremely accurate. many cad systems themselves have digitiser capabilities but, once again, are rarely used by practitioners. the results indicate that the profession is generally not utilising and evolving with systems that can automatically produce quantities. there is tremendous scope here for quantity surveying practices to improve productivity and cost efficiency by utilising such systems. electronic communication not surprisingly, the level of external electronic data exchange, other than by telephone or fax, is very limited. figure 13 shows that over 90% of firms still do not receive design drawing documentation in this form. there have only been minimal increases in this area since the 1995 survey. the 1999 survey shows in figure 14 that, even with the firms that do transfer drawings electronically, the level of transfer is very low. 3% of firms transfer 1-5% of drawings electronically, 5% transfer 5-20% and the rest transfer no drawings electronically. fig. 12 use of d igitise rs for m easurem ent 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% never seldom often daily f re q u e n c y o f u s e % of respondent firms information technology and the qs practice by peter smith the australian journal of construction economics & building page 15 f ig . 1 3 e le c t r onic d at a e x c h ang e 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% arch dwgs eng dwgs consult dwgs specifications contract admin product info cost data % of respondent firms 1999 1998 1995 fig . 14 d raw ing d ocum entation t ransferred e lectronically 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 1 5% 5 20% 20 50% 50 100% % d w g s t ra n s fe rr e d e le c tr o n ic a lly % of respondent firms f ig . 1 5 o n l in e s e r v ic e s 0% 1 0 % 20 % 3 0 % 4 0 % 5 0 % 6 0 % 7 0 % 8 0 % 9 0% 1 0 0 % in te rn e t we b s ite e m a il p r o d u c t d a ta c o s t d a ta % of respon dent firm s 1999 1998 1995 information technology and the qs practice by peter smith page 16 he australian journal of construction economics & building some consolation though is that there has been a steady increase in the proportion of firms transferring cost data, product information, contract administration information and specifications electronically. inter-office communications were also shown to be limited. whilst the majority of affiliated practices had direct electronic links, firms demonstrated little electronic communication with clients, consultants and contractors. in 1995, only 7% had links with consultants and only 1% with contractors. this had only increased to 14% and 11% respectively by 1998. access to on-line services has improved as shown in figure 15. in 1995 only 17% of firms had e-mail facilities which indicated that the profession was generally not embracing information technology. this percentage has increased to 85% which is encouraging. additionally, use of the internet has increased markedly and close to 30% of respondent firms had web-sites by 1999. this figure is likely to have increased further by now. videoconferencing/telecommuting less than 20% of respondents to all the surveys had staff working outside their office using direct electronic links such as via a modem. the majority of those involved employees or contract quantity surveyors working from home. less than 5% had electronic links with staff working on site. videoconferencing facilities are not used by any of the firms surveyed. 5.4 future expectations the next section of the surveys asked firms to give their opinions on a series of propositions relating to the possible future impact of general industry changes and information technology advances. the propositions and results are shown in table 1. the predominant response for each year is shown in bold. the predominant response categories were largely the same for each year. the responses clearly indicate that the majority of practitioners believe that information technology will have a significant influence on their future working environment. over 74-82% agreed that greater use of it will enable quantity surveyors to provide better services for their clients. despite this, the survey results indicate a relatively low commitment to the use of it advances. the main disparity in results between survey years lay in two questions relating to the possible demise of the technical measurer and the decline in practitioner numbers. in 1995 opinion was relatively evenly divided on the impact that it advancement will have on the technical qs whose main function is measurement but in 1998/1999 only 26% and 32% of firms respectively agree with this proposition. this may be prompted by continuing problems with the development of cad automated quantities. nevertheless, approximately 60% of firms believe that cad networking facilities and knowledge will be necessary in the next five years and approximately 70% believe that the profession should be actively involved in promoting, developing and utilising cad automated quantities. this is clearly at odds with what firms are actually doing with the survey results show a low level of cad usage by quantity surveying firms. although 67-77% of respondents believed that the qs is well placed to take advantage of the increased use of it in the construction industry, the survey results show that the profession is clearly not exploiting this advantage and is largely taking a reactive rather than proactive approach. finally, with perhaps unfounded optimism, 76-83% of firms are of the opinion that the qs will be a key player in the construction industry in 5 years time. the current level of it usage in the profession does not parallel such optimism. information technology and the qs practice by peter smith the australian journal of construction economics & building page 17 6 it strategies for quantity surveying firms the following strategies flow from the findings of the research underpinning this paper. these strategies are not intended to be exhaustive and do not provide detailed examples of how these strategies might be achieved. rather they are aimed at providing "food for thought" for quantity surveying practitioners to assist in determining the it approaches that best suit their particular firm and circumstances. 6.1 maintain and develop professional expertise in core competencies the first strategy for firms has nothing directly to do with it. firms need first and foremost to ensure that their quantity surveyors have sufficient professional expertise in the core competencies and skills of the profession and continue to develop this expertise. adequate "on-thejob" training should be in place for inexperienced employees and to also complement tertiary education. too much focus on the use of it may lead to the deterioration of fundamental professional skills that will increasingly become necessary as technological advances continue to automate technical activities thus requiring practitioners to operate at a more highly skilled and professional level. the danger of inexperienced or incompetent staff utilising sophisticated but "user friendly" software is obvious. table 1: future expectations strongly agree no disagree strongly agree opinion disagree 1995 1998 1999 1995 1998 1999 1995 1998 1999 1995 1998 1999 1995 1998 1999 general practice the role of the qs as an independent consultant will expand in the future n/a 20% 16% n/a 58% 58% n/a 8% 8% n/a 11% 15% n/a 3% 3% future qss will mainly be employed as part of a professional team in multi-disciplinary practices providing integrated "in-house" services 1% 2% 3% 19% 17% 34% 21% 8% 16% 51% 62% 47% 8% 11% 0% the qs will be a key player in the construction industry in 10 years time n/a 34% 13% n/a 49% 63% n/a 8% 8% n/a 5% 16% n/a 4% 0% information technology the impact of it on the construction industry will be minimal in the next 5 years 0% 3% 0% 20% 5% 3% 18% 3% 3% 49% 49% 60% 13% 40% 34% the impact of it on the construction industry will be minimal in the next 10 years 1% 2% 0% 5% 2% 0% 18% 5% 0% 52% 29% 53% 24% 62% 47% further advances in computing and it generally will see the end of the technical qs measurer 4% 8% 3% 47% 18% 29% 4% 11% 13% 35% 51% 50% 10% 12% 5% it advances will lead to fewer but more highly skilled qss n/a 14% 6% n/a 32% 52% n/a 14% 11% n/a 37% 28% n/a 3% 3% cad networking facilities and knowledge will be essential for the qs in 5 years time n/a 20% 18% n/a 46% 39% n/a 12% 27% n/a 18% 16% n/a 4% 0% the qs profession should be actively involved in utilising, developing and promoting the use of cad automated quantities n/a 25% 21% n/a 42% 55% n/a 9% 16% n/a 18% 8% n/a 6% 0% only larger practices have the resources to take advantage of it 6% 9% 13% 19% 20% 24% 15% 11% 16% 42% 42% 42% 18% 18% 5% greater use of it will enable the qs profession to provide better service to clients 32% 31% 32% 43% 45% 50% 16% 15% 10% 9% 6% 8% 0% 3% 0% the qs is well placed to take advantage of the changes in the construction industry which will flow from the increased use of it 25% 23% 29% 42% 54% 42% 24% 17% 16% 8% 3% 13% 1% 3% 0% information technology and the qs practice by peter smith page 18 he australian journal of construction economics & building nevertheless, practitioners need to be far more adaptable and willing to change their standard work practices than in the past. the pace of change will make this increasingly important. weisberg (2000) points out that the most significant problems that firms are likely to face in implementing new technology and business changes will be people management, not technology. this may particularly be the case with older practitioners who worked through the relatively stable work environments of the 1970s and 1980s and are now confronted with unprecedented change in the workplace. in contrast, many young (but inexperienced) construction professionals are extremely computer literate and adaptable and, in many firms, are relied upon to lead the development of technological change within the organisation. the time is not far off when school leavers/university graduates entering the industry will have spent their whole schooling and education lives surrounded by computers and advanced technology with the result that this technology will be second nature to them. however, wesiberg (p. 12) contends that these computer "whiz kids" and the experienced "old heads" of the industry will have much to learn from each other. "successful companies will recognise that today's graduates know more about computers than most of their more experienced professionals. on the other hand, these young people probably have disturbingly little knowledge (about the application of their professional training) in the real world. experienced professionals and new computer hotshots have much to learn from each other. companies that are going to win tomorrow's competitive struggles are the ones that recognise how to meld their experienced staff with the computer-hip newcomers". 6.2 learn, utilise and evolve with cad there is no question, in the author's mind, that quantity surveying firms, and indeed all construction professionals, need to utilise and gain expertise in cad sooner rather than later. cad systems will be at the centre of future information management system and virtual projects and, consequently, professionals will need cad capabilities and expertise just to be a player. whilst 2d cad currently predominates in the industry, the industry is moving towards 3d object oriented cad and smarter firms looking to the future will embrace this cad format. 3d cad also offers far more possible uses for the quantity surveyor. the most obvious benefit for quantity surveyors lies in the use of automated quantities with enormous productivity gains already possible. the preparation of quantities in the traditional paper-based mode is tedious and time-consuming and typically accounts for over 80% of the total time spent in preparing tenders, budgetary estimates and cost plans. lend lease, one of the largest contracting organisations in australia, have ascertained that their estimators spend approximately 80% of their time measuring and only 20% of their time actually pricing and compiling their tender/budget prices. their objective is to turn those percentages around with their estimators spending only 20% of their time measuring. cad generated quantities are seen as the means of achieving this (legg 1998). rather than being a threat, automated quantities actually have the potential to provide tremendous opportunities for the profession. removing much of the technical drudgery, albeit the traditional "bread and butter", of the profession will provide practitioners with more time to focus on developing sophisticated cost management systems and a wider range of value-added services. this will provide the potential for firms to be able to provide a wider range of value-added services on a larger number of projects. the important thing is not who or what prepares the quantities (as long as they are accurate) but more what is done with the quantities. many practitioners are sceptical, with information technology and the qs practice by peter smith the australian journal of construction economics & building page 19 good reason, about the automated quantities capabilities of cad systems. there are still many problems with utilising commercial "off the shelf" cad software to generate quantities. however, these problems are being overcome and most programs, at the very least, are capable of generating basic lineal, area and volume measurements with many able to produce quite detailed item quantities. hence, it is possible now for practitioners to extract a significant proportion of a project's quantities from automatically generated quantities in spreadsheet formats which can be linked directly to many estimating/measurement programs. 6.3 invest in necessary technology many firms cite cost and the time required to learn cad and other software/technology as the main inhibitors to investment in the it area. however, the greatest cost for employers usually lies in their actual workforce. the average annual salary of a qualified quantity surveyor in australia is approximately $55,000 per annum which equates to approximately $80,000 when salary loadings are taken into account. cad software and the necessary hardware can be purchased for $6000-$8000 for one licence with this figure decreasing for additional licences. whilst time and money must be spent learning how to use these systems, the technology costs are actually relatively low when compared to salary costs. when one considers the potential productivity improvements the cost of investment in cad may not only be negligible but may not be a cost at all in the long term due to the enhanced profitability of the firm's operations. looking at the broader picture, cad capabilities and expertise will more than likely result in increased business opportunities. 6.4 form strategic alliances with designers nevertheless, most firms remain loathe to invest in this technology due to the costs, the training required, the many problems associated with cad and the uncertainty surrounding the level of return on investment. a strategy for these firms may be to use a small select group of employees to "test the water" and develop and explore the potential. smaller projects could also be used to test new technology. it is easy to be dazzled by the sales pitch of hardware/software vendors but it is only through detailed “hands-on” use that firms can really evaluate the usefulness of the technology for their firm. a smarter approach may well be to form strategic alliances with design firms and “design and construct” organisations at the leading edge of cad utilisation and development. a good example of this is woods bagot, a major architectural/engineering firm who are at the forefront of developments in 3d object oriented cad. cad experts within this firm have, on many occasions, expressed the view to the author that they (and their clients) could benefit greatly from appropriately skilled quantity surveying firms or individuals who can work and evolve with them in their cad development. this is particularly the case with automated quantities generation and linking this data to information management models. woods bagot are in the process of trialling some of their latest developments on some of their smaller projects and, once again, have expressed interest in linking with quantity surveyors. there is considerable untapped potential with such alliances. cad development has been typically led by designers whose main interests are not automated quantities. this component of cad systems is often simply a by-product developed in an ad-hoc manner. however, as developments in information management systems become more sophisticated and awareness of the importance of quantities to such systems increases, the need for the input of cost management and measurement experts is being widely recognised. alliances with organisations like the one outlined above would enable a firm to add value to their cad learning curve and to develop niches in the marketplace. information technology and the qs practice by peter smith page 20 he australian journal of construction economics & building 6.5 be prepared to share information as construction processes become increasingly automated and information management systems become more sophisticated the whole construction process will become substantially more information-oriented as we head towards virtual electronic procurement patterns. participants will not only need the technological capabilities to be a part of this information flow but will also be increasingly required to share their information. the cultural shift that will be required of quantity surveying firms to allow access to their valuable cost data bases (often compiled over many years if not decades) will be considerable. this will not only be a major issue for quantity surveyors but for most construction professionals. 6.8 diversification/specialisation of services the survey results outlined earlier indicate that quantity surveying firms are diversifying their scope of services to better meet industry/client demands and to secure their long term future. the disr research described earlier considered such diversification to be critical to the future of the profession as a whole. the survey results show that the proportion of income obtained from non-traditional and non-building work has risen markedly in the past 5 years. facility management and the push for more sustainable development in the built environment represent two huge new growth areas for the profession in terms of new services. the financial management skills of the quantity surveyor can be applied in many different areas both within and outside the property industry and many firms are beginning to realise the opportunities that this creates. 6.9 multi-skilled team such diversification and specialisation will require firms to have employees (or consultants) with a very broad range of skills, expertise and professional training. diversification represents considerable risk for firms without the necessary skill and expertise to carry out the new services. accordingly, many quantity surveying firms are now employing construction professionals from a variety of “non-qs” backgrounds to augment their services. a multi-skilled and qualified workforce will also provide firms with greater opportunities to expand their scope of services. 6.6 continuing professional development continuing professional development (cpd) is a requirement for members of most professional associations and the construction industry is no exception. rather than relying solely on their employers, practitioners need to also take responsibility for their own professional development. it is a classic area for cpd due to the regularity and speed of change and such personal development can be of enormous benefit to a firm. conclusion information technology presents the profession with many challenges, threats and opportunities. whatever direction the profession and it advances take, the financial management expertise of the quantity surveyor will remain in demand. the uncertainty really lies in what capacity and for whom the quantity surveyor will be working and whether the individual independent quantity surveying firm will continue to exist in its current form. it is clear that computing and information management expertise will be a necessary component in the tool kit of the future quantity surveyor. information technology advances will continue to automate technical processes thus raising practitioners to a higher professional plane whereby their professional skill and expertise will be of paramount importance. the need for highly developed it skills will also become a concomitant requirement but the former will need to precede the latter before the future quantity surveyor will be in a position to provide services of value. before it can be used at a professional level, practitioners must information technology and the qs practice by peter smith the australian journal of construction economics & building page 21 develop the relevant core competencies in their chosen areas. nevertheless, the surveys do indicate that the quantity surveying profession has enormous room for improvement in terms of embracing and utilising information technology advances in smarter ways. the quantity surveyor is not alone in this respect with the rest of the industry generally in the same boat. however, due to the relatively small size of the profession, perhaps independent quantity surveying firms stand to lose more than most if they fail to keep in touch with developments and do not embrace the opportunities and meet the challenges as they arise. references de valence, g. (2000), "the emerging digital economy" in information technology reader volume 3, construction economics unit, university of technology sydney disr (1998), "information technology in the building and construction industry current status and future directions, department for industry science and resources, canberra dpws (1998), "information technology in the construction industry making it happen", nsw department of public works and services, sydney eden, j. (2000), "government leadership directions, actions and timeframes for nsw construction authorities and the australian procurement and construction council", construction it 2000 conference, april, sydney hutt, r. (2000), "managing, motivating and training in the information age", construction it 2000 conference, april, sydney legg, b. (1998), “cad and the qs”, presentation at industry seminar, university of technology sydney, july spigelman, j.j. (2000), "just, quick and cheap a standard for civil justice", australian construction law newsletter, issue 70 weisberg (2000), "in building design the young need the old and vice versa", chartered building professional, march assessing knowledge retention in construction organisations: cases from the uae mohammed arif, (university of salford, uk) malik khalfan, (rmit university, australia) james h. barnard, (apex operations group, usa) nathan a. heller, (tarleton state university, usa) abstract the purpose of this paper is to present different issues facing the problem of knowledge retention by construction sector companies in the uae. existing framework in the area of knowledge retention has been used to assess three large construction consultancies in the uae. the case study methodology used in this paper highlights some key issues in the area of knowledge retention in the uae. based on the analysis of the knowledge retention system the major drivers for its successful implementation are prevalence of a culture of sharing knowledge, reward and recognition for sharing knowledge, a technology platform that can accommodate multi formats of files, awareness of knowledge retention system and its benefits among its employees, and top management support. the paper presents three case studies and draws conclusions about the uae construction sector. although the three companies are large companies, there are several small and medium sized enterprise (sme) operating in the construction sector in the uae. future researchers need to look at these smes. through the three case studies, several issues related to the implementation of robust knowledge retention practices have been identified and highlighted for the uae construction sector. keywords: knowledge retention, knowledge management, organisational culture, knowledge retrieval, knowledge leakage, knowledge sharing introduction knowledge has become widely recognised and accepted as a valuable organisational resource in the business community. nowadays, companies are facing an environment characterized by levels of complexity, globalisation and dynamism. furthermore, the dynamic global business market is distinguished by the rapid growth in the construction industry sector; effects of globalization and various world trade agreements have created a revolution and intense competition in the business environment. given the competition, retention of both the workforce and the knowledge they possess has become a big challenge for corporations worldwide. people retire, find better jobs, or take a break from work, and what leaves with them is their knowledge. with the ongoing globalisation, and competition, organisations quite regularly poach on workforces of each other. with better offers from competition, it is not easy to hold on to your workforce, and that is a fact one has to live with. however, the blow of losing the employee might be softened a little bit, if the knowledge of the departing employee is retained. this paper presents three case studies of construction consultancies in the uae, which throw light on practices that can potentially help retain some knowledge in the organisation. the following section discusses a framework to assess processes that constitute a knowledge retention system. the paper then discusses three case studies from construction consultancies in the uae. it is followed by a section that analyses the cases and presents some best practices. the last section summarizes the findings and concluding remarks of the cases. australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 56 background and literature review gurteen (1998) defined knowledge management (km) as “an emerging set of organisational design and operational principles, processes, organisational structures, applications and technologies that helps knowledge employees dramatically leverage their creativity and ability to deliver business value”. alavi and leidner (2001) defined knowledge management (km) as the systematic process of acquiring, organising, and communicating (knowledge sharing) knowledge (both tacit and explicit) of organisational members so that others may make use of it to be more effective and productive. similarly, egbu (2006) define it as a process that creates, shares, distributes and uses the knowledge in the organisation. within the construction context, the km process has been perceived as the combination of a series of activities for identifying, capturing, sharing and using knowledge. km is a widely accepted success factors for organisations dealing with complex tasks. one of the major challenges for organisations is to manage knowledge assets for the purpose of gaining competitive advantage in every sector of industry including the construction sector (fong and choi, 2009). kamara et al. (2002) pointed out that km strategies can help to avoid the repetition of similar mistakes from past work and therefore improve work efficiency. in other words, km strategies can avoid additional effort, reduce the time spent and save money. figure 1 the knowledge retention model the main km process can be classified into four sub-processes; creation or acquisition, sharing/transfer, retention or storing, usage/application (alavi and leidner, 2001; kim and lee, 2010). each of these sub-processes are extensive areas of research within their own right. however, the focus of this paper is just the knowledge retention aspect of the km cycle. arif et al. (2009) have developed a model to assess knowledge retention in an organisation. the model is depicted in figure 1 below. the reason this model has been selected is due to the knowledge saved in it or support systems retrieving knowledge for reuse australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 57 fact that this model was developed specifically for the construction companies in the uae. due to this specific application to the country and sector, we decided to apply this model. this model draws from the work of nonaka and takuchi (1995) on seci model. the seci model deals with processes involved in making tacit knowledge explicit, hence steps 1 and 2 in the figure. however, the model used in this paper takes the concept of seci model two steps further. the first one is the process of saving the knowledge in an it system which can facilitate the retrieval, reuse and updating of knowledge after its future use, hence steps 3 and 4 in the figure. the classic definition of knowledge proposed by davenport and prusak (1998) is “a fluid mix of framed experience, values, contextual information, and expert insight that provides a framework for evaluating and incorporating new experiences and information. it originates and is applied in the minds of knowers. in organizations, it often becomes embedded not only in documents or repositories but also in organizational routines, process, practices, and norms.” in this paper we want to take this definition forward and define knowledge retention as a formalized process of elaborating, extracting, storing and retrieving knowledge to facilitate informed decision making. the first step involves socialization and sharing knowledge at individual level. individuals are important not only because they themselves, are a source of retained information, but also because they largely determine what information will be acquired and then retrieved from other’s memory. nonaka (1994) argue that knowledge in an organisation is created at an individual level. walsh and ungson (1991) consider individuals as an excellent starting point for examining information acquisition, retention and retrieval processes. according to mckenna (2006) there are two types of knowledge; one tacit and the other explicit. tacit knowledge is composed of an accumulation of experience in the form of insight and wisdom, which the person may have difficulty in communicating to others but can easily utilise in the performance of a particular task. by contrast, the explicit knowledge lends itself to codification or classification and can easily be expressed. "the explicit knowledge created , should be a strong reflection of best practice within the alliance group, should exhibit shared ownership, and should be able to be easily understood outside its linguistic, organizational and cultural context" (rice and rice, 2005). some of the factors that contribute to sharing tacit knowledge within an organisation are teamwork (nonaka, 1994) and face to face communication (mcmanus et al, 2003). renewing knowledge is another concept that comes from sharing the knowledge. new knowledge is created by people who share and transfer their knowledge and expertise throughout the organisation from individual to individual, individual to a team or group, team or group to individual, or team or group to team or group (bender and fish 2000). syed-ikhsan and rowland (2004) argue that knowledge transfer requires the willingness of a group or individual to work with others and share knowledge to their mutua l benefit. so the effectiveness of a knowledge retention system rests very strongly on how willing people are to socialize and how the organisation facilitates the process of socialization. organizations can facilitate this step of socialization by organising meetings, events, and providing opportunities to virtually socialise using newer web 2.0 technologies such as twitter or facebook. the second step in the knowledge retention process is called codification, where the tacit knowledge is converted into explicit knowledge. patel et al. (2000) define explicit knowledge as the most common type of knowledge. it is 'readily available' and can be codified and structured in a way that makes it easily transmissible. it is the kind of knowledge that is recorded, and allows people to find it and use it. it can be found in a range of diverse sources, such as human australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 58 resources data, meeting minutes and the internet. they define tacit knowledge as being hard to articulate with formal language as it is personal knowledge embedded in individual experience and involves intangible factors such as personal belief, perspectives, and values. rice and rice (2005) argue that in order to effectively capture the tacit knowledge into explicit form, creative and varied range of compilation and storage systems are vital. what is really important is to capture tacit knowledge in an explicit form without losing the context. we do accept that not every piece of tacit knowledge can be converted into explicit form, and we might not be able to do much about it. but what we can do, is to maximize the conversion as much as we can. one thing we can do to enhance the efficiency of knowledge capture is to capture it in multiple formats. some knowledge might be more effectively captured if it is stored in the form of video or voice of the owner of the knowledge, and maybe converting it into a text file will result in loss of some of the context of the knowledge. so the conversion from tacit to explicit form should not be just in the form of a text file but should have multiple types of files that can potentially add context to the knowledge. this step can be facilitated by providing it repositories and databases that are easily searchable. the third step is the process of combination. in this process the knowledge is captured into organisational memory. in order to construct an organisational memory we need to first understand the roles it plays. according to walsh and ungson (1991) a consideration of organisational memory reveals that it plays three important roles within the organisation. first, it plays an informational role; the information content that is housed in memory's retention facilities can contribute to efficient and effective decision making. second, organisational memory fulfils a control function; it can reduce the transaction costs that are often associated with the implementation of a new decision. third, organisational memory can play a political role. walsh and ungson (1991) suggest five storage bins for retention facilities; individuals, culture, structure, transformation and ecology. mcmanus et al. (2003), argue that the knowledge must be arranged in an organised coherent or systematic form, and that the determination of how to properly package the knowledge so that it can be available when and where needed based on necessity, is critical. future knowledge in the form of data and information can be stored in a variety of ways with access for all employees. it is also transferred in various ways such as e-mail, groupware, internet, intranet, and videoconferencing. in this sense, information technology should be seen as a necessary tool, but technology and its use is not in itself knowledge management or indeed knowledge transfer (bender and fish, 2000). the fourth step in the knowledge retention process is knowledge retrieval. walsh and ungson (1991), state that there are two concerns of knowledge retrieval. the first is the kind of events or circumstances that trigger the controlled search for information from memory. the second is how the various organisational attributes moderate the response to such triggering stimuli. at the organisational level, one example of automatic retrieval occurs when present behaviours are based on previous practices and procedures that have been shared and encoded in transformations, role structure, culture, and workplace ecology. gammelgaard and ritter (2005) argue that the retrieval consists of search and decoding processes. search is the process by which retained information is selected as relevant to a particular problem or goal. decoding is the reconstruction of the selected information to satisfy the user’s request. it is, therefore, useful to divide the retrieval process into two steps: the identification of knowledge, and the receivers’ individual decodification of the accessed knowledge. the filtering of particular information from memory that supports a particular agenda can serve as a means to enhance and sustain power (walsh and ungson, 1991). the knowledge management system must incorporate the ability to adapt to new knowledge so that it can be refreshed (mcmanus et al., 2003). the retrieved knowledge will be updated by the user and the updated knowledge has to be again captured into the system. in order to facilitate this step of internalisation, the system should have the australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 59 capability of codify and decodify using keywords. it should be in-built into the culture of the organisation to codify, store and then search the existing knowledge before one tries to create new knowledge. the four steps are shown in table 1. based on these four steps of knowledge retrieval process, we can specify four levels that indicate the maturity of an organisation in knowledge retention. the four levels and their characteristics are specified in table 1. the four levels are: level-1: the knowledge is shared amongst the organisation employee. level-2: the shared knowledge is documented (transferred from tacit to explicit) level-3: the documented knowledge is stored. level-4: the stored knowledge is accessible, can be retrieved and used easily. requirements level-1 shared at individual level level 2 codified/ documented level 3 stored/ retained level 4 retrieved/ used face-to-face communication meetings (formal and informal) nonaka (1994)and newell et al. (2006) how often meetings are held? are they minuted? are they stored? if yes, where? are they accessible? is it retrievable? sharing thinking process: brain storming session nonaka (1994) how are problem solved?(individually/ collectively) are the problems and solutions recorded? is it stored? if yes, where? is it accessible? is it retrievable? lessons learnt (at the end of the project phases, or at the handing over?) is the project problems discussed at the end? are those lessons learnt documented? where is it stored? are people aware of its existence? job rotation (between different branches in different cities and countries) bender and fish (2000) does the org. support job rotation system? n/a n/a n/a renewing knowledge bender and fish (2000) is the retrieved knowledge discussed before using? are the feedback / new knowledge documented? is the stored knowledge updated? is the updated knowledge accessible? self organised teams nonaka (1994) do they exist? is trust among employees built? is the created knowledge and ideas documented? is it stored? if yes, where and how? is it accessible? do people know how to retrieve it? training and coaching system are trainings held regularly? are the trainings / new knowledge documented? are they stored? if yes, where and how? is the training manual accessible for all employees? competition and award system is there any award for knowledge sharing? is there any award for documenting knowledge? is there a system allows people to store documents? is it accessible? is it retrievable? table 1 levels of knowledge retention in an organisation this paper uses the framework described above and documented in figure 1 to present three case studies of multinational construction consultancies in the uae. since these are multinational companies, they have maintained mostly similar processes worldwide with some influence of the uae culture. therefore, the practices highlighted in these studies can easily be adapted for other countries. the next section describes the methodology used for collecting australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 60 data for compiling these case studies. this section is followed by the section containing the three cases. methodology in order to capture the knowledge retention practices the framework described in the previous section was applied to three case-studies of multinational construction consultancies in the uae. a case study is defined as a strategy for doing research which involves an empirical investigation of a particular phenomenon within its real life context, especially when the boundaries between phenomenon being studied and the context within which it is being studied are not clearly evident (yin, 2003). this method of study is especially useful for trying to test/validate theoretical models by using them in real world/organisation situations, and testing whether scientific theories and models actually work in real life. the method of data collection was semi-structured interview. as fellows and liu (2003) argued, semi-structured interviews fill the spectrum between the structured and the unstructured extremes. the purpose of doing the interview is to get a wider picture and more detailed information about the knowledge sharing process and practices. moreover, it allows for non-verbal communication or body language which has an impact on the responses. for the purpose of this study the three largest multinational construction consultancies were selected. three people each were interviewed in the three organisations we will call companies a, b, and c. out of the three employees in each of our participating organizations, one was the regional manager, and the other two employees were design engineers (see table 2). as part of the study, we also elicited the views of 30 employees each from each of those three organisations. although the data from these surveys are reported elsewhere, the views from the respondents of the questionnaires corroborate the views from the three interviewees. the interviews took place in each employee’s office. although there were no time constraints, it took between 45 minutes and one hour to complete the interviews. each participant was apprised of the relevance of the study and the structure of the knowledge retention model. all of them were also provided with printouts of figure 1 and table 1. position education total experience duration with the company company a 1 regional manager phd 30 15 2 design engineer bachelors 5 5 3 design engineer bachelors 9 4 company b 1 gcc manager masters 35 12 2 design engineer bachelors 8 8 3 senior design engineer masters 12 5 company c 1 regional manager masters 27 11 2 design engineer bachelors 6 3 3 design engineer bachelors 8 4 table 2 interviewee profile this was done in order for the respondents to put their thoughts in the context of the model. the questions asked are documented in appendix a. the questions were not asked in a specific order, flexibility was given to people, to talk without much restriction of rigid question australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 61 order or check lists. this flexibility gave the chance for people to explain in detail, the system they have in their companies. in addition, if they had any it system, forms or processes related to knowledge management, they were asked to show them to the researchers. case studies company a company a is a multi-disciplinary construction and architectural engineering consultancy firm and is regarded as one of the top 5 in the world in terms of size and revenues. it has 200 different offices around the world; and performs activities in a wide spectrum of construction engineering areas, spanning from design and architecture to procurement and construction management. it has around 17000 employees worldwide, 2000 of them are based in middle east and 1200 are uae based. it has been realised through the interviews that company a does encourage communication through a variety of meetings and special activities such as ‘architectural fridays’, ‘excellence awards’ and ‘mentoring sessions’. everyone agreed that face-to face communication both formally and informally is encouraged and an environment exists where people talk freely to each other, irrespective of their position in the company, a culture that interviewees attributed to a flat organizational structure. however, only formal periodic department and project update meetings are minuted. company a has a very well structured and formal mentoring programme which encourages teamwork and knowledge sharing between individuals (both senior and junior staff). the organisation encourages team problem solving and, often, decisions on projects are taken, based on views from different employees involved. several project and departmental improvement programmes involve brainstorming sessions where the session procedures and outcomes are documented and circulated. post project review documents are required by all project managers after each project, and they are saved on an intranet based database. however, there have been instances where people have retrieved older documents from past projects and have realized that the practices and technology used in those projects are outdated, yet no one has updated it; hence on several occasions employees have found the past information of very little help. however, company a management does encourage employees to ensure that the information from the past they will be using on their projects, is valid for the situation, or if it needs to be updated, they do end up updating it after their project is complete. anyone updating the information needs to ensure that it is saved as the latest version of the older information and is properly archived and documented in order to ease the process of retrieval of any version of information (latest or older) by users in the future. company a strongly supports the idea of job rotation and it is part of its policy. sometimes, however, and due to the lack of resources, the managers are reluctant to release their good employees and send them somewhere else. each employee is entitled to attend three training programmes per year, and training manuals as well as advertisements for future training programmes are stored at a company library so employees can access them anytime. but a significant majority of training programmes are primarily focused on developing softer skills, some engineers and designers realize that they are able to develop softer skills through these training programmes but their technical skills become obsolete with time due to lack of these training programmes. people who update their technical skills through graduate programmes do not conduct any formal training or dissemination for other colleagues as their own graduate degrees are not funded by the company. so most of them regard going for advanced technical degrees in construction as personal fulfillment and enrichment, more than organizational development. the company has some programmes for encouragement of voluntary knowledge sharing. "rising star programme" is a competition of innovative ideas, where all employees can participate with their own ideas. those ideas are then evaluated and selected for further review australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 62 by a team of managers. each candidate then prepares a poster explaining their ideas and all the relevant knowledge associated with it. the topics can be either about any relevant technical, management or environmental issue. the winners are awarded cash prizes. through this programme, good ideas are collected and archived in the company intranet based system. people in the architecture department also share their ideas through “architectural fridays”. in each of “architectural fridays” session, an architect prepares and presents a power point presentation, and then the subject is discussed. this gives opportunity for people to present their ideas, share it, discuss it and get feedback from other employees. there are regular meetings at managerial level also, where knowledge is shared across department and these meetings are minuted and the minutes, archived. there are also formally organized knowledge sharing sessions. a call goes out to invite presenters to come and share their experiences from a recent project or company activity, two weeks prior to the session. whoever volunteers, then has to do a powerpoint presentation in front of all the employees of the organization at that location. this presentation is then archived on the intranet-based database. the knowledge archiving system used is a database that is accessible from the company intranet. at the moment, the database is still being populated. an extensive document management system is being added to this system in order to access drawings and other project documents from the past. a project to enhance the system to store and facilitate retrieval of all forms of information (data, documents, drawings, audio, and video clips) is underway and has 30 people working full time to operationalise as well as populate the system with all the past information. the knowledge sharing, intranet-based system, once completed will also have the capability to start a chatroom session with any other employee and archive the conversation in the database. once the intranet-based system is fully operational, it will contain the files and library used to produce designs and drawings, feedback reports classified by project (name or code) and by project type, technology review papers, design solutions, specifications and the organisation's standard ways of solving problems. it would also contain such files as british engineering and architectural standards (as these are the ones followed in the uae), introduction booklets of projects and technologies, notes for unusual jobs and experiences, and knowledge related to sustainability as well as green design, training manuals, presentations from employees, training videos and all formal departmental and project meeting minutes. the system currently is, and in the future as well will remain accessible to all employees except some confidential financial data, which will be accessible to people with some level of internal clearance. there is a library on the premises that houses hardcopies or manuals and training booklets, videos and dvds. there is also a document management service that stores hardcopy drawings and other technical documents from past projects. most of these repositories will be incorporated on this intranet-based system over the next few years. this is a huge project and some of the main difficulties facing the project include: the amount of time and effort required to populate the database, the perception among employees that once this system is operational the amount of time spent by employees in documenting lessons learnt would be significant; and sooner or later with aggressive project deadlines people may start to ignore the system altogether, and would there be an incentive for employees to use this system since this would be extra work for them? two of the employees interviewed were not sure how the time required for feeding and retrieving the information would be accounted for. would it be budgeted into projects like current post project review, or would it be charged to the overhead account? however, one of the interviewees who is a senior manager assured us that the company is aware of these issues and is trying to devise procedures and practices to alleviate these concerns. all three employees were asked to rate the organization currently and they all felt that it was between levels two and three. they all said that almost formal meetings are documented, and a majority of them are stored as well, but quite often with pressing project australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 63 deadlines the storage process takes a back seat. the other reason why they wanted to rate the current system a notch below level three is due to the fact that the past information is still being populated on the intranet-based database. once the intranet based system is completely populated, the status will move to above level three, where the information is documented and stored. for it to become a level four organization, a wider practice of use of the system, both for feeding the experience and conducting research prior to starting a new project, will have to prevail. in order to do that an elaborate value marketing of the system among employees will have to be conducted. once employees are informed about the usage and value of the system, the participation rate would be definitely higher. some sort of incentive for using the system can also potentially increase the usage. the incentive could be a reward system for submission, or recognition for using and updating past knowledge. company b company b is an engineering and project management consultancy. it provides consultancy and project management services in the fields of: transport, highways, building, land development, telecommunications, health and education. it has around 4000 employees worldwide, 1050 of them are based in middle east and 450 are uae based. the atmosphere in the company is quite casual and the organizational structure quite flat. so employees feel at ease communicating both formally and informally with employees from their own as well as other departments at all levels. formal meetings are minuted. there are no special events or initiatives like the ones in company a for knowledge sharing. all the sharing takes place either at an informal level or through formal project and departmental meetings. however, the culture in the organization is such that all the problems in the area of management, engineering, or people issues are solved through formal process improvement initiatives driven primarily by top management. lower and middle managers have to seek higher approval and buy-in, prior to any process improvement initiative. monthly reports are circulated among all employees on progress made in different projects, and any other ongoing initiatives in the company. however, they are not stored on any searchable database which is easily and remotely accessible. each departmental manager is responsible for managing the knowledge in his department, in terms of making knowledge and experiences from the past accessible to at least employees from their own department but this knowledge repository is nothing more than a folder with hardcopy files which has minutes and reports arranged in a chronological or alphabetical order. other than the manager itself, very few employees access them. job rotation is acknowledged as a very important issue but is not practiced frequently. in some projects that require specific skills, people are seconded for a few weeks or months and then they come back to their parent department. each employee is entitled to one training programme a year and the organization has the online subscription for harvard business review. the company also has subscription to the elearning module of harvard, where employees can enroll in online training programmes. company b has recognized the lack of knowledge management system and has started on an initiative to develop an in-house system. a global knowledge manager has been appointed who is based in the uk. in addition, a knowledge champion has been appointed in each region. the company has an email system for each country it has offices in, and the servers of all the global locations are connected. there exists a document management system in each country where one can retrieve drawings and technical documents of different projects. the company is currently in the process of establishing an intranet knowledge management system based on microsoft sharepoint™ platform. this intranet based system will have eight components. the first one will have information about the company globally, regional information about best practices, bidding, project management, organizational structure, human resource plan, skills, australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 64 job description, marketing plans and procedure, and intranet usage guide. the second part of this system will be a standards library, which will contain technical and regulatory standards globally and regionally. the third part of this system will be a news portal publishing global and regional monthly employee magazines and archiving them. the fourth part of the system information on job description, available skills, required skill, and will also incorporate the current harvard e-learning module. the fifth part will have commercial data, regarding past bids, financial data, profit statements and projections. this part of the system will be accessible by people only at a certain level of management. the sixth component will have hr related information regarding vacation for each employee, timesheets, payroll, and project spending on monthly and weekly basis. the seventh component will have some standards guidelines type of documents, like guides on writing project bids, project strategies, departmental strategies, cvs etc. the last component of this system will have a place for managers to store departmental and project meeting minutes. currently, this system is being implemented and training for the system is being planned. however, we could not get information about any timeframe planned for this system’s implementation despite probing. currently, procedures and protocols are also being put in place to ensure proper usage and updating of this system. the organisation can be evaluated between levels one and two of the maturity model. where there are meetings and informal knowledge sharing opportunities but not everyone stores and archives knowledge. company c company c is a consultancy firm specializing in planning, design and management services for infrastructure development. it employs 6000 people in more than 70 countries, 1200 of them are based in the middle east region and 900 in uae. company c encourages communication both formal and informal within a department, but to communicate with other departments, one has to go through their line manager. formal departmental and project meetings are minuted and circulated among all participants. like company b, in company c as well, the major process or system improvement initiatives are let by higher level management. there is a knowledge management system that has information on global best practices, lessons learnt, and technical standards. but very few people in the uae were aware of the existence of this system. the current system is primarily driven and maintained by the uk office of the organization. although, other offices have access to this system, they know very little about it. practices like job rotation do not exist. but employees are often seconded to other locations for short periods of time. each employee gets to attend one training programme a year on technical issues. several in-house training programmes for management skills improvement are available through an in-house e-learning system. company c has an extensive intranet based knowledge management system with seven components. the first component is the news and bulletin board, where the monthly employee magazine for the company is placed in soft form. there is one more monthly magazine which has articles and updates on project progress and client relations. this magazine is also available on in this section. the second component of this system is the client information section. in this section, information regarding all the existing clients and a history of past and present projects is stored. the third component has information about the organizational structure, vision, mission, and business principles of organization. this component also has the overall organizational structure as well as organizational structure of its five business groups. under each business group there is information about business development, management, resources, skill groups, training, finance and operation. the fourth component is the business development system. this section has information on past bids and a bidding support system australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 65 that helps employees prepare bids for new projects. the fifth component of this system is the employee operational resources repository. this section has guidance and operating principles of the company in the areas of procurement, dispute resolution, expert witness, legal agreements, company statistics, and health and safety guidelines. this component of the system also has lessons learnt system where employees can enter new practices and experiences. this component also has an e-library which has several e-books and reports. the e-learning system described earlier is also a part of this component. the sixth component is the business systems component. parts of this system have restricted access. this section contains the commission management system which has comprehensive profit and earnings statement for senior management to access and evaluate. this also has information on legal contracts and overview of legal clauses under different kinds of existing contracts. this system also provides facilities utilization information with layouts of all the office spaces. the last component of the system is called the people system. this section contains employee cvs with information about their specific skills, specializations, location etc. this component also has information on job openings, and recruitment, staff surveys, training programme based information and hr procedures. based on our discussions with employees we found out that although this system is quite elaborate and extensive; still people do not use it that often. especially when it comes to the lessons learnt part of the system, not many people use it and update it with their own experiences. multiple people posting their experiences on the system might use different keywords as there is no monitoring or protocol for the system. there is no training programme available for employees to explain the benefits, and functionality of the system, so most of the employees learn it as they go. there is no incentive or programme that encourages the use of this system either. one of the managers we interviewed did accept that they are aware of the sparse usage of the system and are looking at ways to improve the usage. this system can be rated between levels two and three of our framework, as not all the knowledge that can be stored is being stored and the usage is quite limited. discussion and analysis table 2 presents a summary of the analysis of the three cases presented in this paper. the first column highlights the major criteria used for analysis, and the results of the analysis of the three cases is presented in the cells of the corresponding row. out of the three companies analysed in this study, there is one element that is common between them; the element being the use of information technology. although they all are at different stages of implementation, they all appreciate the value that can potentially be add ed through the use of technology. however, what is quite different about the three companies is, how they have positioned their it systems different, strategically. company a has several knowledge sharing initiatives like architectural fridays, and rising star award. these initiatives have been going on even before the it system was conceived and have contributed to building a culture where knowledge sharing occurs and is accorded appropriate recognition. so the culture of sharing the knowledge has been in existence and now the use of technology will further facilitate and enhance this culture. so the role of technology is that of a facilitator. the impact of organizational culture and climate on knowledge sharing and retention has received considerable attention in recent years (spender, 1996; nonaka and takeuchi, 1995). there are different cultural constructs that have been investigated by researchers in knowledge sharing and retention research. in our study we operationalized the impact of culture through planned activities (eg. architectural fridays, and rising star awards) as well as associated rewards. companies b and c have yet to implement a planned associated activities that arguably contribute to knowledge sharing and retention. whilst company a has implemented with australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 66 evidence showing that benefits have accrued through these planned activities. same could be said about the reward systems. for completeness, there are other cultural constructs which this study hadn’t addressed, but important to note here for future research. some of these cultural variables have been identified by olomolaiye (2007) and include teamwork participation, top management openness for discussions with employees, encouragement of creativity and dynamism (including the notion of a no blame culture) and emphasis on individual initiatives and freedoms. for companies b and c, no such knowledge sharing initiatives exist, and the planned and existing it systems in those two respective companies are being put in place to store the corporate information, and some knowledge that exists in explicit form. no matter how elaborate these systems are, their ability to encourage someone to convert their tacit knowledge into an explicit form and then storing it, is questionable, to say the least. in both these companies strict lines of communication and top-down nature of most performance improvement initiatives means that a culture of knowledge sharing is not as prevalent, as was the case in company a. so the knowledge sharing driver in case of company a is the culture, and technology has been used merely as a tool. whereas, in the other two cases, the sharing of knowledge has been left to a technological initiative, with an assumption that once technology is in place, people will use it. this difference in paradigm is quite significant, and forces us to go back to the debate of what is the role of information technology in the operations of a company. is it a driver or the facilitator? (arif et. al, 2005) company a also has one more thing in its favor through these knowledge sharing initiatives. through these initiatives, there is a reward and recognition system in place which provides an incentive for knowledge sharing. a significant body of past research has shown that incentives, rewards, and recognition play a very crucial role in encouraging people to share their ideas (woodman et al. 1993; amiable et. al., 1996; oldham and cummings 1996; fairbank and williams, 2000; brief and aldag, 1977; frese et al, 1999; carrier, 1998; recht and wilderom, 1998; stenmark, 2000). availability of such a reward or recognition system, will definitely encourage a culture of knowledge sharing, as discussed above. one other technology related issue that all three companies have incorporated into their systems is the ability to capture files in multiple formats. as we have mentioned in the past, it is not possible to convert all forms of tacit knowledge effectively into explicit knowledge. the biggest danger in converting tacit knowledge is the use of context (patel et. al. 1999: 76; collins 2001a: 72; collins 2001b: 108; ambrosini and bowman 2001: 812-3; herbig and büssing 2003: 167; tsoukas 2003). sometimes the variation in voice pitch or the facial expressions of the owner might add a different level of context and intensity to the knowledge. therefore, it is important that if possible, we try to convert not only the content but the context, and by having the ability to capture files in different formats, we do acquire some of that capability. however, we might never be able to get to 100% effectiveness in conversion of the content with the context, we can definitely improve it. out of the three cases, company c has a technology platform that is fully operational. however, the usage is quite infrequent due to lack of any training programme. it is very important to have awareness campaigns to highlight the benefits of knowledge sharing leading to organizational knowledge retention and training for people on how to use the available technology platform to share their knowledge as well as use knowledge from the past. with tight work and project deadlines, and the time involved in documenting, saving and retrieving knowledge it is often possible that employees will overlook the knowledge retention system. therefore, it is important that top management be committed to the knowledge retention process and have budgetary provisions for charging the time involved in using and australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 67 updating the system. management also needs to encourage employees to use the system more frequently and effectively. initiatives like emails sent to employees, discussion of knowledge retention system in staff meetings, posters and publicity material about the system placed all over the facility could be some of the initiatives that top management can contribute in and encourage knowledge retention in the organization. one more issue involved with knowledge retention system is the configuration management. the archiving system needs to have a numbering policy or system in place that archives the files in some sort of chronological order. the other major configuration related issue is the use of keywords, and cataloguing. there needs to be some way to ensure that two people saving knowledge about same issue catalogue it under the same keyword so that future retrieval is easy. in order to ensure that steps like having an administrator for the system monitoring the new entries or a list of keywords in a database is important and will contribute to configuration management and proper cataloguing. the impact of organizational structure on knowledge retention, can be complex especially when organizational structure can be operationalized into centralization (extent to which authority and decision making is concentrated at the top), complexity (number of occupational specialization and task differentiation), stratification (number of status, layers, or levels), and formalisation (degree of emphasis placed on following rules and procedures in role performance). in our study evidence suggests that the level of centralization in cases a, b, and c is low allowing for greater ease in knowledge retention at the unit level. however, for this knowledge retention to be organization wide, the importance of supporting it system becomes paramount. but in order to take full advantage of this it system knowledge in its tacit form cannot be used. conversion to explicit form is an absolute pre-requisite. in this study the cases analyzed were regional offices of big organizations, and the level of occupational specializations and task differentiation (i.e. engineers, architects, designers) was low hence the impact that task differentiation could have made was minimal. however, it is an issue worthy of note and future in-depth analysis. olomolaiye (2007) has shown that high levels of task differentiation and occupational specialization could impact negatively on knowledge sharing and retention. same could be said of organizational stratification. although the three cases analyzed in this study showed a low level of organizational stratification, further analysis of highly vertical organization is needed for future research. in addition, our study indicates that the degree of emphasis placed on following rules and procedures is low to medium therefore, the probability of success in knowledge retention is higher olomolaiye, 2007). in our case studies only company b is going ahead with a knowledge champion for their system. the role that a knowledge champion plays in knowledge retention and sharing is vital. such a role helps to embed positive culture and climate for knowledge sharing and retention. he/she also acts as an individual with specific responsibilities to make knowledge retention “work”. by implication he/she is expected to be conversant with the workings of the it systems, and should be able to visualize the role of knowledge and its impact on functioning of the organization (jones et al, 2003; zhang and faerman, 2007). lessons learnt for future research this research has analyzed cases in order to assess the applicability of a knowledge retention model. it would be interesting for future researchers to look at the acceptability of these knowledge retention processes and it system, and analyze the drivers and barriers from the users perspective. it would also beneficial to document tangible benefits of these systems and ways of measuring those. this documentation of benefits could also be used for making australasian journal of construction economics and building arif, m et al. (2012) ‘assessing knowledge retention in construction consultancies: cases from the uae’, australasian journal of construction economics and building, 12 (2) 55-71 68 business cases for investments by organizations in knowledge retention systems. in this paper we have documented some issues highlighting the relationship between the softer, social and technological elements for a knowledge retention system. however, significant research is needed which adopts a multi-methodological approach in studying the complexity inherent in this interplay. summary and conclusions the goal of this research paper was to analyze knowledge retention practices and suggest drivers for knowledge retention. in order to analyze the knowledge retention practices a model developed by arif et al (2009) was used as a framework. this model has four step knowledge retention process. the first step is sharing of tacit knowledge between individuals and groups. the second step is the conversion of tacit knowledge into explicit knowledge. the third step was the storage of this knowledge and the last step was the retrieval and update of the knowledge. the framework also defines four levels of organizational knowledge retention. the level one is when the knowledge is shared amongst the organisation employee. the second level is when the shared knowledge is documented (transferred from tacit to explicit). the third level is when the documented knowledge is stored, and the fourth level is when the stored knowledge is accessible, can be retrieved and used easily. one of the limitations of this paper is that these multiple levels and their specific characteristics described in table 1 have been proposed by the research team through internal discussions and past experiences. however, they would need to be validated through a more elaborate future study. based on the framework, three cases of three construction consultancies in the uae were analysed. based on the analysis of the knowledge retention system the major drivers for its successful implementation are prevalence of a culture of sharing knowledge, reward and recognition for sharing knowledge, a technology platform that can accommodate multi formats of files, awareness of knowledge retention system and its benefits among its employees, and top management support. the knowledge retention approach presented in this paper is holistic in nature and the authors contend that it should be an important addition to the nonaka and takuchi (1995) knowledge management process. the study findings reveal the importance of motivation, leadership support, creation of appropriate platforms/infrastructure will create a conducive environment for knowledge retention. although this list of drivers is not exhaustive, with more cases, future research and additional analysis more drivers will be highlighted. but still, this paper has made some significant observations that can be used to take the research in the area of knowledge retention forward. references alavi, m. and leidner, d. 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(technical, meeting, lessons learnt) 3. system characteristics: a. ability to retrieve knowledge b. type of knowledge documented c. awareness of what is really documented d. usefulness of the information documented e. time consuming (documenting and searching) f. accessibility 4. how do you deal with the problem of loosing knowledge of people who leaves the company (retirement, resignation)? does the existing system support the retention of employee's knowledge? 5. are you satisfied with it? 6. how often the employees get trainings? is there is any place where the company training manuals are stored? 7. at what level do you classify knowledge sharing in your organization, and why? responsible logistics systems, international journal of physical distribution and logistics management, vol 1 individual learning in construction projects: professions and their approaches ingeborg wasif, per-erik josephson and alexander styhre chalmers university of technology, göteborg, sweden abstract new materials, use of sophisticated technologies and increased customer demands, in combination with growing competition among construction companies, have led to a high degree of specialization. for successful integration of the different professional specialists, there is a need for shared learning between project co-workers. based on twenty eight interviews in six different swedish construction projects, this paper illustrates strategies for individual and shared learning, among different actors and across various organizational boundaries. the results indicate that personal networks are the most common source of learning for all professions. while clients, architects, and designers also engage in reading and attending courses, site managers and workers are less engaged in these activities. experimenting and organizing for learning appear to be underutilized strategies by all professions. this leads to the conclusion that attempts to increase learning have to address the differences in learning behaviours of the various groups. further, focus on experimenting and organizing for learning is a possibility to change the learning behaviour from learning as a consequence of problems to learning for future improvement. key words: construction projects, individual learning, networks, experimenting, reading, organizing introduction the increasing complexity of individual work tasks creates either a need for a higher degree of standardization and industrialized building methods or a need for increased organizational learning that enables the individual to deal with this complexity. the first alternative, standardization and industrialization, decreases the complexity of individual work tasks even when the variety of architectural or technical solutions are limited, and work tasks tend to become monotonous. this paper focuses on the second alternative, increased learning, which can enrich work tasks and increase people’s ability to handle challenges, such as new customer demands, high-tech materials, or advanced technological solutions. seen in this light, the demand for organization learning is contingent on the complexity of the tasks; in highly complex construction projects, when standard operation procedures are complicated to apply, there is a more substantial need for organization learning that would help the actors handle the situation. for handling already standardized and well-known procedures, the importance of organization learning is less accentuated. since the complexity in construction projects is increasing, both in terms of technologies and materials used, and in terms of the need for coordination and collaboration between actors and occupational and professional groups, organization learning is becoming an important feature of construction companies. chinowsky (2001) argued that enhanced organizational learning is becoming a necessity to stay 2 competitive in the construction industry. holt et al. (2000) concluded that organizational learning is a necessity for construction firms to survive and meet customer demands. appelbaum and gallagher (2000) put it even more succinctly, arguing that survival depends on the ability to learn in an organization. previous research on learning in projects has mainly focused on theoretical discussions of the possibilities of enhancing learning (e.g. argyris and schön, 1996; senge, 1990; tell and söderlund, 2001). the focus of the few empirical studies conducted has been mostly on one company or one single profession (see e.g. gheradi, 2000; chinowsky and meredith, 2000; bang and clausen, 2001) or one single factor influencing learning (e.g. rameezdeen, 2003). however, construction projects are normally carried out by a single company. instead, the project organization involves numerous individuals from different companies, with different professions and hierarchical layers. this fragmentation raises the need for synchronic learning between project co-workers and diachronic learning between project organizations. to date, only a small number of studies have addressed organizational learning in project organizations e.g., bresnen et al., 2004; scarbrough et al., 2004). based on a study of construction projects in sweden, this paper examines how project co-workers (e.g. client representatives, project managers, designers, site managers, workers and sub-contractors) learn in construction projects. differences and similarities in actors’ learning behavior are discussed. the paper closes with a discussion of possibilities to support learning within and among the different projectco-workers. individual learning a prerequisite for organizational learning since the 1990s the literature about organizational learning has grown rapidly and numerous concepts and theories have evolved. some examples are the theoretical, non-prescriptive, and value neutral literature about organizational learning and the practical and action oriented stream about the learning organization (argyris and schön, 1996). yeung et al. (1999, p. 28) considered “learning to be organizational when ideas and knowledge generated by individuals within the organization are shared across organizational boundaries of space, time and hierarchy”. similarly, cook and yanow (1993) related organizational learning to learning that is achieved by the collective instead of the individual. however, an organization itself is not able to learn; it is dependent on the learning of its members. the interrelation between organizational and individual learning is of importance since organizations store their knowledge in e.g. routines or histories, while individuals may enter and leave the organization at certain times (fiol and lyles, 1985; argyris and schön, 1996; hong, 1999). “all learning takes place inside individual human heads; an organization learns only in two ways: (a) by the learning of its members, or (b) by ingesting new members who have knowledge the organization didn’t previously have” (simon, 1996, p. 176). huber (1996) described organizational learning as a process of knowledge acquisition, information distribution, interpretation and organizational memory. commonly, individual learning is the main means of expanding or changing the knowledge base of an organization, which makes learning on an individual level necessary for any organizational learning. 3 individual learning definitions of learning vary, but have in common that learning is a different behavior or response based on experience and/or new information to the same stimuli (e.g. weick, 1995). fiol and lyles (1985, p. 811) defined learning as: “the development of insights, knowledge, and associations between past actions, the effectiveness of those actions, and further actions.” in this context it is important to distinguish between information and knowledge. “information is a flow of messages, while knowledge is created by that very flow of information and is anchored in the beliefs and commitment of its holder” (nonaka et al. 2001, p. 13). further, pawlowsky et al. (2001, p. 783) argue that the diffusion of knowledge is dependent on the willingness to share knowledge, which in turn is dependent on a climate of mutual trust and a culture of sharing. tools for distributing knowledge are of no use as long as the organization’s culture and incentive systems do not promote the sharing of relevant information. in terms of practical work it is useful to separate learning occurring when co-workers in an organization handle emerging practical problems and learning that derives from a comprehensive reflection on how day-to-day work is accomplished. following argyris and schön’s (1996) distinction between single and double-loop learning, the former type of learning is attending to practical concerns while the latter form includes abstract and self-reflective thinking. in day-to-day work in construction projects, it is single-loop learning that is the predominant form of learning. learning in the construction industry several companies work together in construction projects towards producing one product while considering their own goals. therefore, project organizations involve numerous individuals and groups of individuals that have rarely or never worked together. additionally, high personal turnover characterizes construction-project organizations. all project co-workers are regularly exchanged after the design phase and many are exchanged when a new project phase begins. hansen et al. (2005) argued that focusing on shared learning between phases, as well as within the team and among teams is necessary to increase the level of knowledge. further, most coworkers are involved in the project only over a short period of time. the high personnel turnover causes loss of information, knowledge, and skills (spatz, 2000). project organizations often face difficulties to establish long-term learning. instead learning is most often individual, unstructured and short-term (kasvi et al., 2003; schindler and eppler, 2003). similarly, scott and harris (1998) argued that learning within the construction industry is unstructured. what they mean is that information is gathered, but rarely used for future learning. similarly, huemer and ö stergren (2000) found few systematic approaches for learning within construction companies and even those were rarely used. anheim (2003) argued that learning mainly takes place at an individual level while learning within the construction project team is limited and mainly occurs among project co-workers belonging to the same profession. bryans and smith (2000) stated that long-term oriented learning outperforms the more common short-term oriented training. still, it might be questionable that learning always creates positive effects. gheradi (2000), for example, argued that organizational learning may strengthen wrong or inefficient routines. 4 in summary, the general literature on organizational learning, as well as the literature on learning in the construction industry focuses on the individual as the main source of organizational learning. most studies considered learning behavior in a single company (e.g. huemer and ö stergren, 2000) or for a single profession (e.g. agyris and schön, 1996; yeung et al., 1999; gheradi, 2000; sverlinger, 2000; anheim, 2003). little has been written about project organization learning involving multiple companies and professions with widely differing learning behaviors. achieving organizational learning in such project organizations is dependent on the co-operation of project co-workers and a learning structure that is able to incorporate different ways of learning. method this study is based on a multiple case-study approach, which is useful in explorative studies (yin, 1994). it includes six construction projects conducted by different contractors. each project is regarded as one case since construction projects represent isolated units with clear boundaries. the construction companies in this study suggested the projects which they thought were suitable for the study. the authors then selected projects that would cover a range of variables in the construction projects, such as new construction of service and industrial projects, construction and reconstruction of infrastructure project, and renovation and reconstruction of housing projects. further, the kind of client is different in the projects: a company owned by the local government, a large private company, a local government, an internal client, and two private companies. the selected projects included small, medium, and large sized products. five projects were carried out as a design-build contract and one project was carried out on a yearly contract. the projects were either of low or medium complexity. table 1 provides an overview of the project characteristics. interviews, both individual and in groups, were carried out with 41 individuals from the six selected construction projects. the interviewees represented the main actors in construction projects (see table 2 for more details). individual interviews lasted about one hour while the group interviews lasted approximately two hours. as far as possible, the interviews were held at the construction sites. some of the interviews with clients and designers were held at their offices. the interviews held in the first two projects (a and b) were general and explorative, concerning the interviewees’ organizational learning possibilities. an interview guide drew on the literature on organizational learning and the main questions were based on yeung et al.’s (1999) study of organizational learning capability, especially on their architecture for learning. these covered the six building blocks: culture, leadership, competence, consequence, governance and capacity for change. the interviews in the other four projects (c, d, e and f) aimed at identifying specific situations where learning takes place in construction projects. the interviewees were asked to describe a novel work situation that they had encountered in the project. the interview then developed around this learning situation and explored the building blocks based on the practical example. based on the interviews we could identify five main learning approaches: learning through individual networking; learning through organizing; learning through experimenting; learning through reading; and learning through attending courses and seminars.individual interviews 5 table 1 project settings table 2 interview settings ` project a project b project c project d project e project f product type newconstruction service building new-construction industrial building reconstruction infrastructure infrastructure building reno-vation reconstruction client company owned by local government large private company local government internal client private company private company contract form design-build contract designbuild contract yearly contract design-build contract design-build contract design-build contract size small large small medium small medium complexit y medium low low low/medium low medium individual interviews client project manager client client client project manager project manager site manager building project manager construction engineer architect hvac designer architect site manager heavy construction contracting engineer hvac designer foreman site manager work foreman work foreman hvac designer group interviews four workers (hvac, electrical installation, carpenter, student) and foreman sub-contract or steel construction and foreman steel construction architect, structural engineer, and hvac designer site manager, foreman, and worker site manager and site manager from a parallel project foreman heavy construction, foreman building, and painter architect and site manager 6 in the next step, the separate results were compared and discussed until agreement was reached on a final category. several sets of categories were used, for example reasons for learning (problem solving, or active improving) or learning styles (networking, organizing, experimenting, reading, and attending courses).the findings were compared with the existing literature on organizational learning. individual learning in construction projects even though the interviewees argued that they learned new things in their day-to-day work, many project co-workers had problems identifying specific situations in their daily work where learning occurred. construction workers and site-managers had difficulties identifying learning moments, but architects, structural engineers and hvac designers could identify lessons learned from the projects in question.  learning through individual networks learning through networking is perceived to be most common approach to individual learning in the construction projects we studied. although different professions approach learning differently, there are few differences between the various companies. learning was often associated with problems occurring in a work situation. in general, project co-workers tried to solve these problems on their own. if this was not possible, the most common way to solve them was through using their individual networks. one reason was that asking somebody for advice was generally seen as a weakness, especially for older site managers. younger site managers were more likely to ask for advice when a problem arose. the site managers appreciated being asked and were as helpful as they could be. many designers believed that the best way to learn is by doing the task and correcting emerging errors on their own. one hvac designer said: you have to know the building sector. there are so many things that you can only learn by direct experience. unfortunately, that involves repeating mistakes (hvac designer). the clients and architects also thought that they learnt by making mistakes and correcting them on their own, although many mistakes could have been avoided by collecting information from other project co-workers involved in the project, or from people involved in a similar project. however, many of the older project co-workers thought that it was embarrassing for them to admit not being in control. this tendency was firmly engraved in site managers, but even project managers and clients exhibited similar traits. younger project co-workers faced fewer difficulties of this kind and thus did hesitate admit their lack of knowledge. moreover, they could blame their lack of knowledge on their limited experience. one sub-contractor expressed his reluctance in asking for advice in the following way: i think it is embarrassing to talk about what i did wrong. i think we could win a lot if we would talk about the mistakes we make (sub-contractor). learning with a goal to improve is of little importance to most project co-workers. many co-workers were skeptical about new materials or methods; they preferred to work with well-known materials and methods. still, there were some differences between the professions: the higher qualified project co-workers were more likely to 7 ask for advice to improve their work performance than the less qualified project coworkers. a project manager stated: how often do i get a call? generally, people who are good at their job call often, while those that perform poorly do not call at all (project manager). individual networks were commonly used by all project co-workers to solve problems as well as to improve project performance. for site managers and workers, activating individual networks was the usual learning approach, using face to face communication and the telephone. designers used the telephone and email to learn from their personal network. common for all personal networks was that they are homogenous, meaning that only persons with similar background (e.g. profession) were included. these persons did not necessarily belong to the same company. learning through organizing besides solving problems with the help of individual networks, many problems were solved during scheduled project meetings. these project meetings were seen as opportunities to become familiar with other project co-workers, providing numerous possibilities to discuss problems within the project network. however, many meetings were unproductive due to several reasons. first, everybody took care to not criticize a project member, resulting in problems not being addressed with due diligence. an architect explained the purpose of follow-up meetings in the following way: in the best case, follow-up meetings for the exchange of experiences are held during the project. while drinking coffee and eating cake, we talk about the current phase of the project. under pleasant conditions we discuss difficulties and the time schedule. the purpose with these meetings is to avoid repeating mistakes (architect). secondly, many project co-workers felt uncomfortable to reveal their mistakes in front of potential clients or partners. this was especially true when project co-workers were competitors in other projects. finally, workers did not normally attend meetings with project co-workers, even though most workers thought that they might have gained valuable information and a deeper understanding for the whole project if they had had the possibility to attend meetings. most project co-workers agreed that learning from colleagues is important for them to improve their performance. for example, project co-workers located at the main offices, i.e. not at the construction site, saw possibilities to enhance their performance through interaction. designers saw spontaneous interaction as a valuable resource to learn from each other in projects. developing a holistic understanding was an important reason for designers to interact with other professions. furthermore, they saw it as a possibility to further develop their own capabilities. an engineer articulated her view on interaction in this way: well, you learn new things all the time. in the end you become a theoretician when you only sit and deal with cost, and lose connection with reality. that is a big risk, but if you have the possibility to take part in the production you understand the link between theory and practice better (engineer). 8 clients saw interaction with other project co-workers during the construction process as an opportunity to further develop the product as well as their own competence. one client described his benefits from interacting with others: every two weeks i attend the general meeting at the construction site. it is a good possibility to learn. it is a really good way to keep up to date (client). informal interaction is generally preferred. however, organizing construction projects in a way that creates space for formal exchanges of ideas among project co-workers can increase understanding of others’ situations and opens up for discussion of problems and possible solutions. regular meetings are a means of enhancing learning. another way of organizing for learning is to enable project co-workers to engage in different work tasks to broaden their insight in the construction project.  learning through experimenting experimenting was not a preferred method for learning in the six construction projects. the high costs for potential failures and the difficulties to predict the long-term quality of new materials were often mentioned as reasons. consequently, most project co-workers preferred well-tested materials and existing routines. one hvac worker explained his preferences: i would like to use something that has been widely used over several years. somebody else can make the mistakes of using the wrong materials or techniques first. i have no wish to use a new material if it is only an improvement of a product that was good enough already. i am a bit sceptical of using brand new products (hvac worker). project co-workers perceived that they had a lot of freedom in designing work tasks or choosing certain materials. still, the majority preferred to stick to what they knew, avoiding the risk of failure due to insufficient experience. as another hvac worker expressed it: yes, there are possibilities of using new materials and work methods, but our industry is very conservative. unfortunately, nobody likes to experiment and everybody avoids being the first to make a mistake (hvac worker). most project co-workers saw experimenting according to customer demands as a possibility to test and verify different opportunities. this possibility was also seen as a challenge to improve technical solutions and test unknown materials. nevertheless, worries about quality and their reputation limited experimentation. this means that only products that were new to an actor, but well established in the market, were likely to be tested. a client expressed his view on experimenting in the following way: a building exhibition is a good opportunity to try new boundaries and experiment, but i think that buildings designed to be used for 50 years or more cannot only be a playground for experimentation (client). in general, it seemed that larger projects increased the likelihood to experiment with new materials. the main reason for this was that the potential increase of benefits in 9 quality as well as profit was significant, while the financial risk in smaller projects was often too risky for clients and project managers. learning through reading there are a variety of trade journals related to construction. some of these are general while others focus on a specific technological area. most interviewees perceived trade journals as a good source to follow-up on the developments in materials, tools, methods, and trends in the construction industry. however, the large number of journals made it difficult to find timely information. moreover, this overload of input resulted in actors skimming rather than reading articles. especially clients that needed a comprehensive view felt themselves at a loss at the vast amount of information: i read trade journals. last week i got ten different journals. i was nearly drowning. i do not read especially much, but i try to go through them. at least i read “byggindustrin” [a weekly construction magazine] (client). architects used trade journals extensively to follow new trends and novelties, both domestic and international. to deal with the vast number of publications several architects organized relevant articles in ways that made them more accessible for solving specific problems during projects. designers mainly used journals to follow new technical developments, and also to follow legal discussions. they also used magazines primarily as input to solve crises or incidents that occurred: sometimes, the job means a lot of research and searching for information. well, there was a lot of research in this case. i was talking to people who published some literature about this specific problem. then i went to “byggcentrum” (a information center concerning construction) and searched for literature there. that’s basically what i could do (hvac designer). project co-workers situated in the main offices said that they were overwhelmed by trade magazines. workers and site managers, on the other hand, reported that their access to literature was limited. site managers mainly perceived trade magazines as an easy way to follow and discuss developments in the construction industry although they faced difficulties in applying the information to their work. one site manager expplained: sometimes, we get trade journals on site. not very often though. if i read anything interesting, we discuss it during the coffee break (site manager). construction workers had little access to magazines at their workplace; therefore they hardly used journals as a source of information. learning through attending courses and seminars all the interviewees associated learning with attending courses and industry seminars, independent of the interviewees’ professions. courses and seminars were seen as the main source for up-to-date information about new materials, tools and methods. however, the number of courses offered seemed to vary in different professions. the courses offered to clients, architects and technical consultants were apparently satisfactory regarding quality and quantity: 10 sometimes seminars are arranged where i can get some information about new things. that is what i am basically interested in (client). the courses offered to workers and site managers, on the other hand, were perceived as too few. in addition, most courses for workers and site managers were held by the unions, which limited the choices of topics to union related issues: there are hardly any courses provided if i do not count the courses arranged by the union. they arrange many. but, courses arranged by the company are few. they are only for those responsible for safety, who do not have the appropriate education yet (worker). therefore, workers considered most of the courses of limited value to themselves since they rarely covered areas of technical interest. in addition, the teaching methods were perceived as too theoretical, and therefore workers had problems seeing the practical applications. some workers saw courses as an escape from everyday routines: some people would like to attend courses because it is a break from everyday work life. i prefer to work. well, that might depend on the course. there are many interesting courses. for example, we had a course about the construction process from initiation to completion, which was really interesting (foreman). the skeptical attitudes to courses may have been strengthened by the lack of encouragement from higher management, mainly because courses entail extra costs and absence from work. a worker expressed it like this: there is never time to attend courses and such. everything has to be done fast nowadays (worker). to sum up, most interviewees from all professions agreed that they would be interested in attending courses if the contents would be more interesting and relevant. further, courses could serve as platforms for meeting other people with similar interests and problems, and to create personal networks that might be helpful in practice. discussion during the interviews, we observed that many project co-workers had difficulties talking about knowledge and learning issues. they mainly associated learning with attending courses whereas everyday work was not regarded as an arena for learning. during the interviews, we could overcome these difficulties by asking them to refer to practical work examples e.g. through describing problems that occurred during the construction project and how they got solved, or discussing ideas for improvement that were generated and applied during the project. some of the literature on organizational learning discusses the learning behaviour of certain actor groups (e.g. senge, 1990; gheradi, 2000). however, research concerning multi-disciplinary groups with different learning behaviours are rare. clients, architects and other designers, on one hand, and site managers, construction workers and subcontractors on the other hand, approach learning differently. 11 clients, architects and technical consultants were generally positive towards learning and could easily recognize the benefits of deeper understanding. generally, this group of actors appeared to have few difficulties to interact with each other. however there were also differences between these sub groups of actors. these differences seemed to have less influence on their ability to interact. for example architects showed interest in following new developments and trends, which they recognized as an extension of their work tasks. their willingness to combine explicit knowledge from different kinds of sources such as trade jounals, exhibitions, or the work of others was more developed than that of any other actor. designers in general were more interested in following development in new materials, technology and tools to stay competitive and to meet customer demands. they readily interacted with other designers, regardless of their professions because of a common understanding of technical issues. nevertheless, technical consultans had difficulties in applying the experiences they were informed about from architects, site managers and workers. the clients were the most diverse group. many had been former contractors, but showed similar understanding and learning behaviour as the designers and architects. others were one-off clients who needed to understand the basics. their interest in learning varied since one-off clients were already challenged to follow the main events and were in need of explicit knowledge. professional clients were interested in following trends and developments and were able to enhance their knowledge based on mutual understanding regarding architects and designers. however, there seemed to be less interaction with other actors than designers and architects. in general, this group showed a good ability to share explicit knowledge. however, underlying tacit knowledge seems to be much more difficult to share. site managers and workers showed difficulties associating learning with anything other than courses, and were rather critical of learning. they seemed to be sceptical about any new development, materials, tools, or methods. other sources than personal networks were little used for gathering information. it is possible to distinguish further between workers and site managers. site managers were in a position that demanded, on the one hand understanding for designers and, on the other hand, they had to transfer information to the workers. this situation entitled behaviour of responsibility and independent decision-making, without involving others. site managers had difficulties admitting that they had problems. this was especially true for older site managers participating in the study while younger ones had less difficulties asking for advice. often, site managers showed difficulties converting explicit knowledge to make it available in their daily work since they were prone to depend on their routines. workers mainly exchanged knowledge among themselves, even across company boundaries, since their interaction with other actors was limited. learning occurred mainly in working situations, where tacit knowledge was transferred between project co-workers. for this reason it seemed difficult for them to identify learning situations or what they had learnt. site managers and workers shared a great deal of tacit knowledge through socialisation (e.g. working together, showing each other how to do something). however, they failed to express this knowledge explicitly.. theories about organisational learning are based on homogenous groups. examples are actors at one hierarchical layer (yeung et al. 1999) or groups of actors with similar educational background, such as consultants (sverlinger, 1999), or senior managers (e.g. yeung et al. 1999). projects involve several hierarchical layers and 12 numerous actors with different professions and educations. therefore, it is difficult to talk only about one, single, integrated learning organisation. it would be more appropriate to talk about several communities of learning characterized by different learning styles and prejudices towards other groups in the same organisation. furthermore, it is difficult to describe the construction project as one learning culture. there are at least two cultures that share many characteristics: the culture of clients, architects and designers and that of site managers, construction workers and subcontractors. moreover, each profession appears to nurture its own idiosyncratic learning behaviour and style. this creates difficulties in forming one project culture, which is probably the reason for the lack of interaction between different actor groups. taking into account that a learning culture and learning approach differed among the actors highlights the necessity to integrate different ways of organisational learning into one concept. achieving joint learning among professions in construction projects could be a possibility to enhance the project’s learning and thereby improve performance (e.g. kasvi et al., 2003; schindler and eppler, 2003). this study points at two implications. one practical implication is that the construction industry needs to develop capabilities and mechanisms for coping with diverse learning cultures and fragmented project organizations. today, each project co-worker is individually responsible for his or her learning outcome. following this, we could argue that this learning situation rather enforces existing ways of working than develops new creative processes. the theoretical implication is that, although, scarbrough et al. (2004) and bresnen et al. (2004) have pointed the way, there is a need for research on project management and organizational learning. projects are examined from a range of perspectives, but the ability to learn between and within projects is still little explored. conclusion in this paper we have identified five learning styles in construction projects: learning through personal networks; learning through organizing; learning through experimenting; learning through reading; and learning through attending courses and industry seminars. these approaches were of different importance for the various project co-workers. by structuring the two main styles: networks and organizing, so that that are seen as learning possibilities and by giving them higher priority are two ways to increase construction project learning possibilities. an option is to include site managers and workers more often in meetings with other groups of actors and thus strengthening their feelings of belonging to the construction project organization. this would also create a possibility to exchange theoretical and practical knowledge, which would enhance learning. for example, site managers or workers could provide valuable insights on practical implications already during the design phase of a construction project. to cope with customer demands and to improve quality, all project co-workers need to be encouraged to experiment. lessons learned from experimentation were strongly related to individuals; however to limit financial risks it is necessary to make them accessible to a broader audience. reading and attending courses have to be structured and built into the project organization’s structure in a way that allows project co-workers to benefit from each other’s learning. especially, there has to be more focus on the site managers’ and workers’ learning since these are less involved in learning activities than other actor groups. speaking in theoretical terms, the study of the six construction projects contributes to the situated learning perspective advanced by lave and wenger (1991). organizational learning is in this 13 perspective contingent and context-bound and anchored in everyday standard operation procedures: organizational learning is what takes place amidst everyday work and in the handling of emerging problems and challenges. references anheim, f. 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(1994) case study research, design and methods, 2nd ed. newbury park, sage publications microsoft word paper 5 dec.doc an analysis of the use of information technology for project management in the new zealand construction industry by dr suzanne wilkinson the australian journal of construction economics & building page 47 an analysis of the use of information technology for project management in the new zealand construction industry dr suzanne wilkinson, senior lecturer, department of civil and resource engineering the university of auckland, auckland, new zealand introduction information technology usage for project management planning and control is becoming increasingly sophisticated. however, within the construction project management environment in new zealand there seems to be a lack of appreciation of the tools and techniques available to assist project managers with the effective running of their projects. this paper discusses some of the deficiencies in the use of project management software in the new zealand construction industry. it draws on original research in the form of a questionnaire that was designed to assess the level of information technology use, the effectiveness of this use and the overall willingness to change. project management in new zealand project management as a means of achieving completion of projects is now in common use in new zealand. whereas the traditional organisational management of residential and commercial construction projects was primarily used in new zealand, a recent trend has seen a move towards other types of procurement methods. in other countries this trend has also been happening. chappell (1991) from his work in the uk, stated that “…until comparatively recently, virtually all building contracts were constructed using traditional procurement methods, which means that the employer commissions an architect to design a building…the work then proceeds on site with the architect inspecting and carrying out certain functions under the contract…”. this was certainly the case in new zealand and the traditional way of procuring projects is still in popular use. however, there has been a gradual erosion of this tradition and now projects are managed in new zealand by any number of methods, such as design and build, management contracting and project management. wilkinson (1998) suggested that with this change of tradition, there has been, within new zealand, an expansion of project management companies or project management divisions within companies offering project management services. again, this is not a new zealand specific phenomenon. in the united states, work by meredith and mantel (1995) commented that “the use of projects and project management continues to grow in our society…the past several decades have been marked by a rapid growth in the use of project management as a means by which organisations achieve their goals…” . in new zealand, the quantity surveying profession has been quick to adopt project management as one of its key services. lamb (1994) suggested 67% of quantity surveying companies in new zealand offered project management to their clients as one of their key services. the study suggested that project management is becoming a large part of the business of quantity surveying companies. one quantity surveyor commented that “10% of business at the moment [is] in project management and we are forecasting that …in 5 years time…it will be 20%”. this was backed up by another quantity surveyor from another company in new zealand who suggested that project management was a main service. he said that as a percentage of business “project management…[is] about 10%, it’s quite big”. in addition to the growth of project management in quantity surveyors' business, there has been a rise in the number of project management companies starting in business. these companies focus solely on providing project management services and many of them provide it to the construction industry. having seen that project management is in common use in new zealand as a an analysis of the use of information technology for project management in the new zealand construction industry by dr suzanne wilkinson the australian journal of construction economics & building page 48 means of procuring construction projects, the next section examines the use of information technology for project management planning and control, in both new zealand and internationally. information technology for project management doherty (1997) researched the use of information technology in the new zealand construction industry. doherty's survey considered the use of software packages generally and also briefly for project management. he reported that 32% of construction companies nationally were using project management software. the results suggested that the most common software system was microsoft project (39%) but that many users used spreadsheets for project management rather than a customised project management package. he suggested that the most common barriers to increasing the use of computers, including those for project management use, in the new zealand construction industry were satisfaction with existing methods and lack of finance to update systems. other than reporting how many companies were using project management software, doherty did not assess the technology specific to project management use. however, doherty did report that there are a large number of people working in the construction industry who maintain their existing system because they are unaware that other systems exist. another research project by igbaria et al (1998) specifically directed at small firms in new zealand found that mainly customised software packages were being used. they also found that, amongst other things, system usage and user satisfaction were positively correlated with perceived ease of use and perceived usefulness. internationally, cox and hampson (1998) have examined, among other things, the use of project management software. they found that the highest level of importance of application for the successful management of their project was given to excel. of the packages available specifically for project management, they found that primavera was marginally preferred to ms project. similar work, analysing project management software, can be found in an article by colin and retik (1997). they analysed the role of project management software and advanced information technology techniques in reducing construction delays. their research analysed the characteristics, technical features and specialist features for sixteen project management software packages. they divided the packages into base level, mass market level, advanced and sophisticated packages. they found that, when analysing these packages for their ability to assist with delays and claims, base level packages (databases presumably something like ms excel) were not suitable for the construction environment, while mass market packages were suitable but had limited application for delays and claims. they suggested that advanced packages (such as primavera) were best suited to the purpose of claims and delays and that sophisticated packages offer an integrated system and were the most expensive. the research did not provide details of how many companies in the uk were relying on which software system. from the work of doherty (1997) and confirmed in this research, it is possible to show that mass market packages are the packages most likely to be used for project management by new zealand construction companies (eg microsoft project and timeline). advanced packages, such as primavera, are not being used by a large number of companies in new zealand and sophisticated packages are, at the moment, not being used at all. other reports tend to confirm the underuse of computer technology in the construction industries in various countries. dawood (1999) reports that the construction industry in the united kingdom is behind other industries in terms of the utilisation of information an analysis of the use of information technology for project management in the new zealand construction industry by dr suzanne wilkinson the australian journal of construction economics & building page 49 technology for production planning and scheduling and other technical and managerial operations. similarly, the results of a questionnaire by stewart et al. (1998) to australian firms to evaluate the use of information technology in the australian construction industry found that new technology was largely being ignored. the research found that the current use of information technology within the australian construction industry and the quantity of resources devoted to research and development of information technology were both low. this is also the case in hong kong construction industry where another study found that hong kong construction companies are quite conservative in their adoption and use of information technology (1999). there has been much literature that focuses on the benefits, such as increased productivity and competitiveness, that information technology use can bring to the construction industries in various countries. for instance, sarshar et al (1994) commented on a method for improving the information technology use in the construction industry to increase productivity. froese et al (1997) discussed the integrated computer system for supporting construction management. cox and hampson (1998) believe that improving computer skills of project managers can provide construction firm with a competitive advantage in an increasingly competitive international market. a similar discussion was presented by mitropoulos and tatum (2000) who found that, along with technological opportunity, one of the key forces driving construction firms to adopt new information technologies was competitive advantage. meredith and mantel (1995) argue that there are many problems with the current trend in project management information systems (pmis) towards the integration of software. most commonly there are errors in managing the pmis rather than the project itself, excessive computer involvement with computer activity replacing project management, pmis reports which mask real project problems, too much information overwhelming managers and thus hiding problems, pmis reports which replace direct communication, a dependence of project managers on computer reports before reacting to problems, and the management of symptoms of problems rather than the problems themselves. research methodology the research discussed in this paper aims to identify the use of information technology for project management in construction companies in new zealand. in the first instance a literature review was undertaken which identified the current use of project management companies managing construction projects. from this a questionnaire on project management service use was sent to construction companies in auckland. all companies surveyed offered project management as one of their main service. the types of companies chosen were engineering consultancies, quantity surveyors, contractors and project management companies. the companies were identified through web sites, construction institutions (new zealand institute of quantity surveyors (nziqs), institution of professional engineers new zealand (ipenz), new zealand institute of building (nziob)) and telephone listings. auckland was chosen for the study since it contains one-third of new zealand’s population (of approximately 3.8 million) and the majority of construction company headquarters. currently, in auckland, there are, in the telephone listings, 93 engineering consultants, 47 quantity surveying companies and 29 building project management companies. the engineering, quantity surveying and building contractors had to be contacted to see whether they offered project management as a service before sending the questionnaire. finally, 80 questionnaires were sent to those an analysis of the use of information technology for project management in the new zealand construction industry by dr suzanne wilkinson the australian journal of construction economics & building page 50 companies offering project management as a service. the questionnaire contained a mixture of open and closed questions. of 80 questionnaires and follow-up letters sent to companies in auckland, 35 responses to the questionnaire were received, a response rate of 44%. although the research was limited to auckland, given that new zealand has a small population, and many of the auckland companies operate out of the other three major cities (wellington, christchurch and dunedin), the results can be seen as representative of the whole country. in addition, the issues raised in the research can be compared to other countries and, as will be seen, many of these results are applicable internationally. this paper discusses the results relating to numbers of companies responding to various questions and an analysis of their comments. statistics are provided for the profile questions relating to the companies surveyed. for information technology use, discussions relating to the various aspects of information technology use then presented. results the results discussed here are in two sections. the first are the results from the questionnaire that discuss the general composition of the companies responding to the survey. the second section provides the detailed analysis of technology use for project management when managing construction projects in new zealand. company profiles table 1 shows the types of companies responding to the survey. a spread of companies is apparent which gives an indication of the placement of project management services within the new zealand construction industry. as stated earlier, there has been a growth in the project management services offered and the range of companies offering these services are a reflection of this growth. (table 1) table 1 company type type of company number/24 percentage project management engineering consultant with project management division quantity surveyors with project management division contractors with a project management division engineering consultants without separate project management division contractors without separate project management division 5 4 6 4 3 2 21 17 25 16 13 8 companies in the survey had a range of experience in providing project management services (table 2). however, the spread of results does tend to suggest that project management is relatively new as a service offered to the new zealand construction industry, with 71% of companies having less than 21 years project management experience. new zealand has a small construction industry where few companies employ large numbers of staff. this means that the numbers of employees working in project management are likely to be small. table 3 illustrates this point and shows that the majority of companies, 74%, an analysis of the use of information technology for project management in the new zealand construction industry by dr suzanne wilkinson the australian journal of construction economics & building page 51 responding to the survey said that they had 10 or fewer employees involved in project management or their project management division. (table 3) table 2 years experience with construction project management years number/24 percentage 1-10 11-20 21-30 31-40 41-50 51-60 61-70 71+ 9 8 2 1 1 1 1 1 38 33 9 4 4 4 4 4 table 3 numbers employed in project management services numbers employed number/23 percentage 1-10 11-20 21-30 31-40 41-50 51+ 17 1 3 0 0 2 74 4 13 0 0 9 given the smallness of the new zealand construction industry, it is hardly surprising that the usual size of projects in financial terms is small. table 4 illustrates this point where only 29% of companies work on projects of a nz dollar value greater than 10 million. the most common dollar range for projects was the category 1 million to 10 million with 52% of companies working on projects in this range. (table 4) table 4 typical costs of projects costs (nz$ value) number/23 percentage <50,000 50,000-250,000 250,000-500,000 500,000-1,000,000 1,000,00010,000,000 10,000,000+ 1 8 5 8 12 7 4 33 21 33 52 29 collectively, these results provide a picture of the current new zealand an analysis of the use of information technology for project management in the new zealand construction industry by dr suzanne wilkinson the australian journal of construction economics & building page 52 construction industry and its association with project management. they confirm the small nature of the construction industry and show that project management is relatively new as a means of managing construction projects. results: information technology use of the companies responding to the survey, 58% used project management software packages for project management planning and control. this means that 42% of companies are not using any current software, even though they are offering project management as one of their services. of those 58% using project management software packages, by far the most popular package in use was microsoft project (71%), with only 28% of the companies were using primavera, suretrack and/or timeline. 21% of the companies had developed their own in house project management systems. integration of microsoft excel and microsoft project was used by 28% of the companies as their main project management software. the companies who offered project management as one of their services but were not using project management software were usually relying on microsoft office as their main software, using spreadsheets and databases as their main source of project management documentation. the profiles of the companies using project management software and those not using project management software varied. the average number of years experience in providing project management services for those companies using the software was thirty years. the average number of years experience in providing project management services for those companies who were not using the software was significantly fewer at eleven years. this leads to the conclusion that companies with less experience are less likely to invest in the specialised project management software. companies with fewer employees working on project management are also less likely to use the project management software. the average number of employees working in project management in a company which used project management software was nineteen, whereas the average number of employees working in project management for those companies who were not using the software was four. there was also a difference in the cost of the projects that the companies were undertaking. 75% of those companies not using the software had projects of usual size below one million dollars, compared with 53% of those companies using the software. only 8% of companies not using the software did projects of a dollar value greater than 10 million, whereas 17% of companies using the software said that the usual dollar value of their projects was in this range. in summary, the smaller the usual dollar value of projects undertaken by the company, the less likely the company is to use the software. those companies using project management software provided insights into the advantages and disadvantages of the software and allowed an assessment of whether the software packages were being effectively used. the survey found that the packages were not being used to their full potential. packages were frequently being used for project planning and developing a schedule, but not being integrated to include budgeting and cost control which was often being carried out in parallel on other software. it appeared, from this research, that the project management software was primarily being used for time management. to this end, the software was used for time control, monitoring, updating, re-planning and as early warning of potential time related problems. the research shows that there is an awareness of the advantages of the software available but a reluctance to an analysis of the use of information technology for project management in the new zealand construction industry by dr suzanne wilkinson the australian journal of construction economics & building page 53 make full use of the software. those companies that were users of the software for time management commented that the packages were essential for a range of things such as determining critical path, establishing milestones, repairing /highlighting progress and slippage, performing complex calculations quickly and recalculating scenarios quickly. others commented on their use for assisting with communication, monitoring ability and reporting control and time management. given the complexity of construction projects, comments about the volume of the data and the need to update the programmes frequently was a common reason for using the software. as an aid to communication in the capacity of report standardisation and production, the packages were seen to be invaluable. companies commented on the usefulness of providing presentations to client and project teams. however, an acceptance of the limitations of project management software was evident from the survey. the main problems, as specified in the survey, were to do with the lack of information technology control, people's dependence on the system, and the lack of adequate monitoring. for information technology control, the main problems appear to be with interfacing with other software and hardware, understanding the software, and with finding the software inflexible. configuration issues between software and hardware and incompatibility with inhouse control systems were mentioned as the main problems. problems associated with people's dependence on the software were the second group of comments that showed an acceptance of the limitations of the software. issues which need to be carefully managed related to people having a blind acceptance of the output to the extent that they thought that printing out the results was the solution. similarly, comments about the general mistakes being made were common such as people not setting initial parameters/constraints correctly or failing to identify all logic connections, ‘forcing’ dates to ‘look right’. these comments tend to suggest a lack of experience with the software when developing the initial stages of projects. another important problem highlighted was a suggestion that a reliance on the software could stop personnel from doing the real tasks such as keeping in contact with clients and others. lack of experience with the software was a cause of concern, one respondent commented that often the people who knew the process logic best had no project management package skills or experience. as a summary of these concerns, the following quotation provides some insight into the people aspects of the use of project management software "the software is meaningless if you do not have the sound knowledge and experience of how projects are investigated, designed, built and commissioned. project management is primarily a ‘people’ activity with technology, software etc a tool to assist. personality and experience are assisted not replaced by technical skill." finally, there were also problems relating to the software that suggested monitoring using the software was difficult and not being effectively carried out. it was thought that this lack of ongoing monitoring reduced the effectiveness of the software. as mentioned earlier, the project management software did not appear to be used for cost control during construction project management. most companies (80%) were using other software, which was not project management specific, as their main cost control systems. the question arises as to why this was happening. mostly, the answers relate to the use of the companies' own cost control package, either a customised excel spreadsheet or a specific cost control packages. one of the reasons given for this was that these packages further limit the possibility of errors. one respondent replied "cost control is achieved by being alert to the progress of the project and proactive to an analysis of the use of information technology for project management in the new zealand construction industry by dr suzanne wilkinson the australian journal of construction economics & building page 54 respond to problems. [project management] software packages do not provide this...". of the 20% of the companies using integrated systems, including for cost control, on some of the projects there was recognition of some benefits. these were that the project management software was useful for comparing progress vs. time with payment claims vs. time and also could be useful in checking budgets and reporting on variances to cost plan. similarly, another advantage to using an integrated system allowed for the production of time risk scenarios to assess time related cost overruns or savings. the results presented here provide an analysis of the current use of project management software in the new zealand construction industry, suggesting that there are areas, e.g. for controlling costs, where the software is not generally not being used. discussion given that project management is now in common use as a means of achieving completion of projects in the new zealand construction industry and internationally, it may be thought that companies ought to have the latest technological capabilities in order to be effective and competitive. from the literature discussed, this is the current mode of thinking. however, looking for a competitive edge was not raised as one of the reasons for using project management software in this research survey. in new zealand, it appears that a lack of state of the art project management software does not prevent companies competing for project management contracts. given new zealand's unique size and position internationally, it seems that the companies undertaking project management for construction projects in new zealand are not internationally up to date, in software terms, or particularly concerned about this situation. they seem to choose to stick to tried and tested methods of project management rather than invest time and money in new integrated systems. this is not to say that the best technological capabilities do not lead to a competitive advantage in countries without the peculiarities of the new zealand market. but, most new zealand companies offering project management as a service are small and do not tend to compete internationally. little experience, companies with few employees and companies working on projects below one million dollars are those companies less likely to use the specialised project management software. however, the new zealand construction industry is characterised by such companies so it is hardly surprising that the findings show a reluctance to invest in sophisticated software. the barriers to the use of the project management software raised by doherty (1997) hold, although this more detailed research has uncovered other problems associated with project management software use. these problems fall into three distinct categories; lack of information technology control, people's dependence on the system, and the lack of adequate monitoring. where software packages are in use, base level packages, as described by colin and retik (1997), are the packages most likely to be used by new zealand construction companies (e.g. microsoft project and timeline). advanced packages, such as primavera, are not being used by a large number of construction companies in new zealand and sophisticated packages are, at the moment, not be used at all. even when using project management software, most new zealand construction companies choose not to use the packages to their full advantage. packages being used for project planning and developing a schedule, but, despite their capabilities, were not being integrated to include budgeting and cost control which was often being carried out in parallel on other non integrated software. this may lead to inefficiencies, but it appears that, specifically within the new zealand construction environment, companies have developed their own means of operating. where software an analysis of the use of information technology for project management in the new zealand construction industry by dr suzanne wilkinson the australian journal of construction economics & building page 55 packages are being used is in larger companies and/or on higher cost projects and/or in companies that are likely to compete internationally. conclusion the results of this research shed light on the use of project management software for the new zealand construction industry. it seems that whilst some use of the software is apparent, the new zealand construction industry is far from using integrated project management software to effectively manage construction projects. the results suggest that there are problems associated with using the current software. many of the problems outlined tend to stem from the lack of confidence that new zealand companies have with the software available and with the capabilities of the personnel using it. relevant factors associated with the lack of software use in new zealand have been discussed. the results of this research point to an internal industry that appears to be working without the need for sophisticated software, which, as some respondents point out tends to get in the way of the more important tasks, such as face to face reporting with the clients. although of interest, future sophisticated project management software will only gain full use when the benefits of the software can be seen to outweigh the costs. currently, in new zealand, this does not seem to be the case. acknowledgements the author wishes to acknowledge the work of two graduate students, ousama mutada and gamal hussain, in assisting with the collection of the data. references [1] chappell, d., 1991, which form of building contract?, architecture design and technology press, london, pp. 3339. [2] wilkinson, s., 1998, the growth of project management in the new zealand construction industry, second international conference of construction project management, singapore. [3] meredith, j., mantel, s., 1995, project management: a managerial approach, john wiley & sons, new york, usa. pp. 4-8. [4] lamb, w., 1994, a survey of services, information technology and quality assurance in quantity surveying firms in auckland, report for unitec school of architecture and construction, auckland, new zealand [5] doherty, j., 1997, a survey of computer use in the new zealand building and construction industry, building research association of new zealand, study report no 80, wellington, pp 10-13 [6] igbaria m, zinatelli n & cavaye a, (1998), analysis of information technology success in small firms in new zealand, international journal of information management, vol 18 (2), pp103-119. [7] cox, r.f., hampson, k.d., 1998, construction project managers and computer usage: an international review, in j. yang and w.p. chang (eds.), building education and research, e & fn sppn, london, pp 214-223, [8] colin, j., retik, a., 1997, the applicability of project management software and advanced techniques in construction delays mitigation. international journal of project management vol. 15(2), pp 107-120 [9] dawood, n., 1999, a proposed system for integrating design and production in the precast building industry, the international journal of construction information technology, vol. 7(1), pp 7283 [10] stewart, p., beswick, s., lingard, h., 1998, strategic use of it in the australian construction industry, the international journal of construction information technology vol 6(2), pp 27-38. an analysis of the use of information technology for project management in the new zealand construction industry by dr suzanne wilkinson the australian journal of construction economics & building page 56 [11] shen, q.p., fong, p., 1999, a study of information technology applications among contractors in hong kong, the international journal of construction information technology, vol. 7(1), pp 1-19 [12] sarshar, m., aouad, g., brandon, p., 1994, improving project organisation through strategic planning of information, the international journal of construction information technology, vol. 2(3), pp 7794 [13] froese, t., rankin, j., yu, k., 1997, project management application models and computer assisted construction planning in total project systems, the international journal of construction information technology, vol. 5 (1), pp 3962 [14] mitropoulos, p. & tatum, c.b, 2000, forces driving adoption of new information technologies, journal of construction engineering and management, vol 126 (5), pp340-348 assessing occupant comfort in an iconic sustainable education building rick best and brian purdey, (bond university, australia) abstract the building that houses the mirvac school of sustainable development at bond university is the first educational building to achieve a six green star rating from the green building council of australia. it has won numerous awards since opening in august 2008 including being judged the rics (royal institution of chartered surveyors) sustainable building of 2009. after more than two years in use a post-occupancy evaluation study was carried out to assess the performance of the building from the viewpoint of the users; both resident staff and transient students. results for factors such as lighting, thermal comfort, noise and air quality were compared to benchmarks established by the usable buildings trust. the evaluation also assessed the occupants’ perceptions of the building’s impact on their own productivity. users generally find the building provides a comfortable work environment although a number of areas of performance were noted as posing some concerns. these included intrusive noise in some parts of the building and some issues with glare in daylit teaching spaces. such concerns were found to be in accord with the results of previous studies and they highlight some recurrent problems in “green” buildings designed to maximise the use of natural ventilation and natural light. these design challenges and how occupant satisfaction is to be measured and benchmarked are also discussed in the context of this comparative building study. keywords: green building, post occupancy evaluation, education facility, usable buildings introduction it seems obvious that any manufactured product, whether a car, a television or a building, would be tested in use to see if it works well. buildings, although very expensive products, tend to be one-off creations so unlike cars and televisions they are seldom tested, redesigned and refined in the way that mass produced items are. it could be argued, however, that as each building is individually designed that feedback from completed buildings, particularly those of similar function located in comparable environments (geographical, social, financial and so on) would routinely be sought in order to inform the design of subsequent buildings and thus to improve these designs. in reality this is not the case and good buildings often go unnoticed while poor building performance is often not publicised (leaman et al., 2010). the result is that the same mistakes are repeated and the process of improvement that occurs in manufacturing is seldom duplicated in the design and construction of buildings. the advent of green buildings in recent years has seen some major changes in the way base buildings are designed with much greater emphasis on energy efficiency, material choice and water usage. these new designs have also provided opportunities to create different built environments – workspaces which emphasise quality as well as cost performance criteria (vischer, 2008). understanding how satisfied occupants are with the workspaces they occupy has underpinned post occupancy evaluation of buildings since the 1980’s (marans and spreckelmeyer, 1982; oldham and rotchford, 1983; ornstein, 1999). but with the advent of green buildings there has been a renewed interest in the satisfaction of occupants of these buildings. there is some evidence that greener buildings enhance satisfaction, reduce australasian journal of construction economics and building best, r and purdey, b (2012) ‘assessing occupant comfort in an iconic sustainable education building’, australasian journal of construction economics and building, 12 (3) 55-65 56 absenteeism or sick leave and promote improved productivity as a result of the improved internal environment conditions (e.g. romm and browning, 1994; paul and taylor, 2008; armitage et al., 2011). however, based on user assessments, not all green buildings perform well, while others are rated better than conventional (“non-green”) buildings (edwards, 2006). leaman et al. (2007) in their australian comparison of 22 “green design intent” buildings and 23 conventional buildings found that the most comfortable green buildings in terms of noise, temperature, air and lighting, were rated better than any of the conventional buildings. conversely the buildings that were most poorly rated were also green buildings. leaman and bordass (2007) found similar results in their review of 177 uk buildings. these results point to the challenges in translating building design intent into occupant satisfaction given the likelihood that there will be other influencing factors. when green buildings work well they work very well but when, for whatever reason, predicted building performance is not realised in use then the occupants express dissatisfaction. murugan and kato (2010) carried out a limited comparison of two conventional buildings and the one green building on the bond university campus (the mirvac building) and found that the green building scored better in regard to nearly all the factors included in their survey which included temperature, lighting, incidence of fatigue, headaches and colds and general satisfaction with the workplace. the mirvac school of sustainable development the mirvac school of sustainable development at bond university is located on the gold coast in queensland, australia (bond, 2011). the climate in the region is described as “humid sub-tropical” (derm, 2010) with hot, humid summers and mild to cool winters. the mirvac school comprises two buildings opened in august 2008 that are generally considered as a single unit having been designed and built together. the building received the rics sustainability design award in 2009 and achieved a six green star (design) rating (gbca, 2011), the first education building in australia to receive this top rating (best, 2010). the main building has three floors with teaching spaces at ground level and offices, meeting and utility rooms on the upper floors. the smaller building, known as the living lab, is a single storey building that is used for meetings, seminars and occasional teaching. a sophisticated building management system (bms) controls various building functions including switching to natural ventilation mode when external conditions (temperature and humidity) are such that 100% outside air can be utilised. most spaces have manually operated windows and individually switched ceiling fans that can be operated independent of the air conditioning system which is available in enclosed offices via individual occupant controlled units and other spaces such as teaching studios and the living lab on an asneeded basis. most of the artificial lighting in the building is controlled by movement and lighting level sensors. research method the concept of green building design and the techniques used are still relatively new, every green building is, to some extent, a prototype as different design concepts are tested in use. in order to increase our understanding of what works best in practice and to improve future designs it is important that newly constructed buildings are formally scrutinised. to this end a detailed post occupancy evaluation (poe) was carried out in mid-2011 to gather information from the users’ perspective on the performance of the mirvac school building. the evaluation separated building users into two groups: resident users (staff and researchers who occupy office space in the building) and transient users (students) and australasian journal of construction economics and building best, r and purdey, b (2012) ‘assessing occupant comfort in an iconic sustainable education building’, australasian journal of construction economics and building, 12 (3) 55-65 57 applied the paper based bus methodology 2 page occupant questionnaire 2011 workplace with response instrument (ubt, 2011) developed by the usable buildings trust (ubt) in the uk. the bus methodology has been in use for over 20 years having been developed and refined over time and is supported by an extensive database with benchmarks, possibly useful for comparison purposes. the survey questionnaire covers a variety of factors related to occupant satisfaction. it is not limited to indoor environment factors such as thermal comfort and noise intrusion but includes general questions regarding the occupants’ perception of the building (e.g. image, safety, cleaning, availability of meeting rooms) and operational issues such as speed and effectiveness of responses to problems related to building use (adjustments to temperature and lighting for example). to achieve higher response rates ubt recommended using a paper-based survey questionnaire which was hand delivered to staff and students over a period of two weeks in june 2011. staff who were away from the university during the survey period were given the option of completing an online version to maximise responses. respondents rated their level of satisfaction with the various building attributes, generally on a seven point likert type scale. some questions provided the opportunity for respondents to add written comments. key findings a total of 85 survey responses were collected; 50 were transient users and 35 resident users. this represents an overall response rate of around 20% of the total number of regular building users which is at an acceptable level. survey results were processed by the usable buildings trust as part of the licence agreement. the consolidated results for the whole sample and those for the two distinct user groups are summarised in table 1. assessment of occupant comfort using the bus methodology relates to functional comfort (vischer, 2007) and the overlapping concepts of occupant satisfaction with the built environment and its possible impact on work performance. occupant comfort is addressed in the survey through questions relating to four basic parameters (air, lighting, noise and temperature) and an overall comfort question. each comfort parameter is rated using three types of seven point scale with 4 being the neutral mid-point. a type scales have best results at the high point (i.e. a score of 7), b type scales are centred with the best result at the midpoint (i.e. a score of 4) while c scales have the best result at the lower end (i.e. a score of 1). occupants also rate their perception of self-assessed productivity impact on a nine point likert type scale (from 1 = productivity decreased by 40% or more, to 9 = productivity increased by 40% or more), in 10% increments. to simplify interpretation, the bus methodology also colour categorises results for each parameter as “red” signifying a problem area, “amber” as a potential problem and “green” to indicate a satisfactory result. the colour code is determined statistically by comparing the mirvac building’s mean score for each variable (e.g. air in summer) against the average score for the last 60 buildings surveyed by bus (leaman, 2011). in this case the average scores are for other australian buildings. using this colour categorisation the mirvac building study, in relation to occupant comfort, returned 15 satisfactory results (green) including overall comfort, nine potential problem areas (amber) and three clear problem areas (red). australasian journal of construction economics and building best, r and purdey, b (2012) ‘assessing occupant comfort in an iconic sustainable education building’, australasian journal of construction economics and building, 12 (3) 55-65 58 indoor air quality air quality in the building is generally well regarded by occupants with mean scores for overall perceptions of air quality in both winter and summer greater than 5. air in summer was the only variable to be rated “red”, while air in winter was the only other variable in this section not to be rated “green”. occupants perceived the air to be a little humid in summer and a little dry in winter. parameter residents transients all users scale type and range rating air in summer dry/humid 4.88 4.28 4.54 b 1: dry 7: humid red fresh/stuffy 3.24 3.54 3.45 c 1: fresh 7: stuffy green odourless/smelly 2.81 2.85 2.85 c 1: odourless 7: stuffy green still/draughty 4.13 3.89 3.99 b 1: still 7: draughty green overall 4.94 5.13 5.06 a 1: unsatisfactory – 7: satisfactory green air in winter dry/humid 3.62 3.68 3.66 b 1: dry 7: humid amber fresh/stuffy 2.62 3.28 3.01 c 1: fresh 7: stuffy green odourless/smelly 2.68 2.72 2.72 c 1: odourless 7: stuffy green still/draughty 4.12 3.72 3.89 b 1: still 7: draughty green overall 4.82 5.27 5.11 a 1: unsatisfactory – 7: satisfactory green lighting artificial light 3.79 4.02 3.93 b 1: too little 7: too much green glare from lights 2.97 3.77 3.45 c 1: none 7: too much amber natural light 4.24 4.40 4.33 b 1: too little 7: too much amber glare from sun and sky 3.76 3.54 3.64 c 1: none 7: too much amber overall 5.09 5.29 5.23 a 1: unsatisfactory – 7: satisfactory amber noise noise from colleagues 4.35 3.96 4.12 b 1: too little 7: too much green other noise from inside 3.85 3.77 3.81 b 1: too little 7: too much red unwanted interruptions 4.18 3.66 3.85 c 1: not at all 7: very frequently amber noise from outside 4.85 4.33 4.53 b 1: too little 7: too much red overall 4.97 5.06 5.04 a 1: unsatisfactory – 7: satisfactory green temperature in summer hot/cold 3.31 3.80 3.60 b 1: too hot 7: too cold amber stable/varies 4.45 3.46 3.88 b 1: stable 7: varies during day amber overall 4.88 4.72 4.77 a 1: uncomfortable – 7: comfortable green temperature in winter hot/cold 4.68 4.33 4.47 b 1: too hot 7: too cold amber stable/varies 4.59 3.62 4.02 b 1: stable 7: varies during day green overall 4.97 5.63 5.38 a 1: uncomfortable – 7: comfortable green comfort overall 5.77 5.60 5.69 a 1: unsatisfactory – 7: satisfactory green table 1 mean scores for key comfort parameters australasian journal of construction economics and building best, r and purdey, b (2012) ‘assessing occupant comfort in an iconic sustainable education building’, australasian journal of construction economics and building, 12 (3) 55-65 59 lighting lighting does not appear to satisfy occupants with the exception of natural lighting. glare from both external and internal sources is a problem for some, with glare from lights being one of the few variables to show a substantial difference in perceptions between residents and transients. lighting overall was perceived by both groups to be acceptable but not completely satisfactory (mean scores: 5.09 for residents and 5.29 for transients). occupant comments identified two specific issues of concern. for residents, office lights that are controlled by sensors dim in the late afternoon, or switch off when occupants are at their desks and there is insufficient movement to keep the lights on. for transients a common complaint was the difficulty reading whiteboards, particularly when used as projector screens in the teaching studios. noise noise is an area of some concern with two red, one amber and three green ratings. the problem areas identified were noise from outside and other noise from inside. the transient users’ scores were more favourable across all of the five noise parameters than those of the sedentary users. temperature overall temperature in winter and summer returned satisfactory scores (green). the variables temperature in summer: hot/cold and temperature in winter: hot/cold were both identified as potential problems, but no temperature parameters were rated in the red category. overall comfort the overall comfort score was a healthy 5.69; this suggests that although there are some concerns in regard to particular aspects of comfort, both resident and transient users are generally comfortable in the building. the bus methodology includes the calculation of a comfort index and a forgiveness index. the comfort index is derived from seven key variables: temperature in summer and winter, air in summer and winter, noise, lighting and overall comfort. it is calculated by averaging the z scores for the seven “overall” comfort variables (baird et al., 2011). figure 1 shows the comfort index for the mirvac building (the filled circle) in the context of the australian comparison buildings; the result shows the building to be in the top 10% of buildings in the dataset. figure 1 comfort index scores for the mirvac building and the benchmark buildings australasian journal of construction economics and building best, r and purdey, b (2012) ‘assessing occupant comfort in an iconic sustainable education building’, australasian journal of construction economics and building, 12 (3) 55-65 60 the forgiveness index is an indicator of how tolerant occupants are of the conditions in a building (leaman and bordass, 2007). it is calculated by dividing the mean score for the variable comfort overall by the average of the mean scores for the variables temperature in summer overall, temperature in winter overall, air in summer overall, air in winter overall, lighting overall and noise overall. higher values suggest that occupants are more inclined to “forgive” the building if comfort conditions are not exactly as they would prefer. figure 2 shows the forgiveness index for the mirvac building (the filled circle) in the context of the australian comparison buildings; the result shows the building to be within the top 15% of buildings in the dataset and only marginally below those buildings that scored higher for this indicator. while encouraging this result is not particularly significant as the range of scores is quite narrow and it appears that most buildings in the ubt benchmark dataset score similarly for this index. figure 2 forgiveness index scores for the mirvac building and the benchmark buildings benchmarks the ubt benchmarks utilised in this study of the mirvac building are based on the last 60 buildings studied using the bus methodology. the benchmarks are calculated using a combination of the mean scores and scale midpoints so that a “green” score for any variable indicates performance well above the benchmark (leaman, 2011). as the benchmarks are based on a rolling data set it is to be expected that as building design improves and more recent buildings are studied and added to the dataset that the benchmarks will rise. leaman (2010) analysed samples of building data from the periods 1990-1999 and 2000-2008 and concluded that this does appear to be happening. discussion one of the difficulties in studies such as this is finding suitable benchmarks to measure perceived performance against. wilkinson et al. (2011) tried to establish benchmarks based on the expectations of respondents who completed their questionnaire. they then compared the same users’ perceptions of performance in regard to the various parameters against their prior expectations. two interesting results emerged. one was that in most cases the average expectation of the users was around 6 on a 7 point scale (where 7 = “very satisfactory”), suggesting that few users actually expect their workplace conditions to be better than just satisfactory. the second was that with almost every parameter the two target buildings, both described in the paper as “relatively new sustainable office buildings”, scored well below the users’ fairly modest expectations. in terms of occupant comfort the mirvac building was found to perform very well when compared to the ubt benchmarks. while there are some specific concerns with noise and lighting, the overall scores for these variables were both above 5, indicating satisfactory performance the mirvac building is located next to a moderately busy road and on a roundabout that includes a bus stop, these factors contributing to problems associated with noise intrusion from outside the building for both resident and transient users. in their written comments a number of respondents noted that traffic noise does intrude on the side of the building that faces the road and that having australasian journal of construction economics and building best, r and purdey, b (2012) ‘assessing occupant comfort in an iconic sustainable education building’, australasian journal of construction economics and building, 12 (3) 55-65 61 windows open on that side can interfere with activities such as meetings. the scores for transient users were more favourable across all of the five noise parameters compared with resident users. at first glance this may appear to be counter-intuitive given that most of the resident users occupy individual offices and thus have the option of closing doors and windows to isolate themselves (acoustically at least) from the rest of the building and the outside world. in fact those who choose this option must rely on their air conditioning unit to supply fresh air and many prefer to have doors and windows open; the trade-off is that they may be exposed for more noise from both inside and outside the building. transient users spend less time in the building and so may be less concerned by noise simply because they are not subject to interference on a daily basis. residents who trade off acoustic comfort for thermal comfort conditions are likely to be more dissatisfied with noise given the evidence that people do not adapt to noise disturbance over time (witterseh et al., 2004). baird (2010) used the ubt survey to gather data from eight buildings in warm-temperate climates in australia and new zealand, all of which were considered to be “cutting edge, sustainable buildings”. of the 32 mean scores for the four main noise variables (noise from colleagues, noise from other people, other noise from inside and noise from outside) 26 were below the mid-point (neutral) score. in baird’s study the mean scores for noise overall included two buildings below the mid-point, two above the mid-point and four that were neutral, indicating generally satisfactory overall performance. in two instances while the mean scores for the four main variables were below the mid-point the noise overall mean scores were neutral. by comparison, all respondents to the mirvac building survey rated satisfaction with noise overall above the mid point at 5.04, with only noise from outside and other noise from inside being identified as problem areas. noise intrusion from outside is a function of the choices individual occupants make regarding a trade off between thermal and acoustic comfort, which is related to green building design. noise intrusion becomes a problem because of the ventilation strategy with openable windows and the intent to reduce use of air conditioning in all spaces. this is a particular problem in the living lab where it is largely impossible to open the large glass doors on the side facing the roundabout – the trade-off is always to keep the building closed and use the air conditioning or struggle to be heard over the traffic noise during meetings/classes. this problem is, of course, not restricted to the study building but is a major problem for most sustainable buildings, particularly those located in city areas where city noise can be intrusive and prohibits or severely limits the adoption of natural ventilation strategies. dissatisfaction with other noise inside the mirvac building may be related to green design. residents leaving office doors open to allow natural ventilation expose themselves to noise disturbance from inside the building. one respondent mentioned noise from one of the print (photocopier) rooms, another mentioned noise from work being done by students in the internal courtyard (this is a temporary measure) and one complaint related specifically to the noisy closing of office doors due to the closers on those doors. several residents, however, commented that simply closing their office doors was sufficient to control noise from inside the building. materials choice aimed at reducing embodied energy in partitions may contribute to noise disturbance in classrooms for residents and transients alike. two transient users commented that the operable walls between the teaching spaces on the ground floor did not block australasian journal of construction economics and building best, r and purdey, b (2012) ‘assessing occupant comfort in an iconic sustainable education building’, australasian journal of construction economics and building, 12 (3) 55-65 62 intrusive sound sufficiently while another suggested that the bells located in an adjacent tower (which chime at 9am, noon and 3pm each day) are “not needed”. these results suggest that while users do note specific noise concerns in green buildings noise problems are not a serious issue overall. while the noise overall result was satisfactory, scores for the four specific variables under the lighting heading were adjudged as amber, or problematic these apparent contradictions in noise and lighting are not uncommon. previous studies (leaman and bordass, 2007; baird et al., 2011) have shown similar results with concerns identified in regard to particular variables but overall scores indicating a reasonably high level of satisfaction. leaman and bordass (2007) suggest that this is due to occupants of green buildings being more tolerant of their buildings’ shortcomings; the forgiveness index result shown above might support this view. baird et al.(2011) link this sort of result to the nature of the client organisation; in their study they found that with more or less every building they studied, and they were all buildings that had won awards for sustainable design and/or achieved high ratings using tools such a leed, breeam or green star, the client had “a particular commitment to sustainability” and “planned to be the long-term owner-occupier of the building”. this is certainly true of the mirvac building, as it houses the school of sustainable development and, being a university building, it is owned, occupied and operated by the university and is expected to be in use for many years. the perceived problems with variables relating to noise and lighting comfort cannot be ignored even though overall results were good. leaman and bordass (2007) note that “[o]ccupants are complaining much more about noise than they used to” and suggest that noise is the major cause of problems in some buildings with natural ventilation or advanced natural ventilation. lighting is a recurrent problem in green buildings with designs often intended to maximise use of daylight and provide connection to the outside world for occupants. armitage et al. (2011) found that “abundant natural light” and “having a view” were two factors that employees liked most in the workplace. attempts to provide these attributes can often lead to problems with glare from outside and a number of respondents from both groups commented on the problem of intrusive daylight when projectors are in use in teaching spaces. this illustrates another basic problem: the lights in the teaching studios are controlled by sensors so when blinds are down to reduce the incoming daylight the sensors automatically increase artificial light levels. there is no manual switching in these spaces so slide shows and movie projections are difficult to see. leaman and bordass (2007) describe situations where blinds (often retrofitted after occupants complain about workspace receiving too much daylight) are often drawn and as a result artificial lights have to be on most of the day. in the mirvac building where lights are sensor-controlled there is little or no scope for occupants to control the balance between artificial and natural light and this does lead to frustration for users particularly in the teaching spaces. time dec jan feb jun jul aug 9am 67 70 72 69 65 61 3pm 69 70 70 58 55 58 table 2 monthly average humidity (%): gold coast (bom, 2011) the only other problem area identified was for air in summer: hot/humid, however, all other results in this section were green (including the air in summer: overall). humidity is rated higher in summer, and this is to be expected given that in the december-february period average humidity in the area is generally higher than in the june-august period (see table 2 australasian journal of construction economics and building best, r and purdey, b (2012) ‘assessing occupant comfort in an iconic sustainable education building’, australasian journal of construction economics and building, 12 (3) 55-65 63 for average gold coast humidity levels) and most of the building is not routinely sealed and air conditioned. it is not unexpected that staff and students in a school of sustainable development would be more inclined to make allowances for factors such as humid conditions in summer and thus rate comfort overall to be good in spite of having to tolerate some periods with humidity above comfortable levels. the relatively high forgiveness index result reinforces this view. temp dec jan feb jun jul aug max 27.7 28.6 28.5 21.3 21.1 21.8 min 20.5 21.8 21.8 13.1 12.0 12.5 table 3 average monthly maximum and minimum temperatures: gold coast (bom, 2011) summer temperatures can be moderately high (see table 3 for monthly average temperatures) and while winters are mild (see table 3) in the month before the survey was conducted (in june and thus during winter) the bms did have a malfunction with the comfortable temperature somehow resetting to 15 0 c; this resulted in the bms putting the building into natural ventilation mode. this meant that windows in corridors and in the top of the atrium were automatically opened (and could not be manually closed) as well as the air conditioning units being disabled so that occupants had no heating option. for several days the occupants were not able to control the indoor temperature and as this coincided with a period of cool daytime temperatures it is very likely that occupants’ perceptions of winter temperature would have been negatively influenced at the time of the survey. in spite of that event the temperature scores were good with no parameters in the red category. conclusion the study confirms the continuing challenges associated with evaluating and benchmarking occupant satisfaction with comfort conditions in green buildings. the historical evidence is that not all green buildings perform well, while some have been rated better than conventional (“non-green”) buildings the buildings most poorly rated by occupants are also green buildings. the results from the mirvac building survey can only be compared with a rolling data set of buildings with variable green design intent – an “apples versus oranges” comparison with perhaps limited value. this points to the need for further research to develop better evaluation and benchmarking methodologies. however, in terms of occupant comfort the mirvac building performs well in its own right and also when compared to the usable buildings trust benchmarks for australian buildings and those studied in warm-temperate climates. the survey results do identify a handful of specific areas where occupants perceive that there are problems variables relating to noise, lighting and thermal comfort which cannot be ignored. the study has produced occupant ratings that run generally true to form for green buildings. scores for summary variables such as overall comfort were slightly better than specific variables under the same heading, while noise intrusion, lighting quality and sensor control were the problematic areas. given occupants are complaining much more about work disturbance than they used to, this suggest noise is the major cause of problems in most modern workplaces with naturally ventilated buildings perhaps making further contributions. the results for lighting also point to the complex task of balancing natural light, artificial light and glare in design in order to deliver optimum lighting conditions to a majority of building occupants. improved occupant satisfaction and performance may be less about green design intent but occupant knowledge of how to manage the situational constraints presented by this new type of built environment in order to deliver the outcomes required. australasian journal of construction economics and building best, r and purdey, b (2012) ‘assessing occupant comfort in an iconic sustainable education building’, australasian journal of construction economics and building, 12 (3) 55-65 64 acknowledgements the study was funded by an internal grant for early career researchers offered by the institute of sustainable development and architecture at bond university. judy doherty assisted with data collection. references armitage, l., murugan, a. and kato, h. (2011) ‘green offices in australia: a user perception study’, journal of corporate real estate, 13 (3) 169-180 baird, g. (2010) sustainable buildings in practice: what the users think, routledge baird, g., christie, l., ferris, j., goguel, c. and oosterhoff, h. (2011) ‘user perceptions and feedback from the ‘best’ sustainable buildings in the world’, ecolibrium, june, 30-37 best, r. (2010) ‘specifying and sourcing materials for a best practice education building’, in: zachar, j., claisse, p., naik, t. and ganjian, e. 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(2004) ‘the effects of moderate heat distress and open-plan office noise on sbs symptoms and on the performance of office work’, indoor air, 14, 30-40 zhang, y. and altan, h. (2011) ‘a comparison of the occupant comfort in a conventional high rise office block and a contemporary environmentally-concerned building’, building and environment, 46 (2), 535-545 http://www.usablebuildings.co.uk/fp/index.html http://www.weatherzone.com.au/climate/station.jsp?lt=site&lc=40764 on-site labour productivity of new zealand construction industry: key constraints and improvement measures serdar durdyev and jasper mbachu, (massey university, new zealand) abstract productivity is key to the survival and growth of any organisation, industry or nation. some factors constrain the achievement of the set project objectives in the new zealand building and construction industry and are responsible for the reported steady decline of productivity and performance. this study aims to identify the key constraints to on-site labour productivity and improvement measures. using the descriptive survey method, views of some project managers, contractors and subcontractors in new zealand were canvassed via pilot interviews and questionnaire surveys at the qualitative and quantitative data gathering stages, respectively. multi-attribute technique was used to analyse the quantitative data. results showed that the key external constraints to on-site labour productivity comprise, in order of decreasing impact, statutory compliance, unforeseen events and wider external dynamics. the internal constraints were found to have much higher impact on onsite productivity than the external factors. in order of diminishing levels of impact, the internal constraints comprise reworks, level of skill and experience of the workforce, adequacy of method of construction, buildability issues, and inadequate supervision and coordination. . the factors underlying each broad category of external and internal constraints are reported. the relative levels of impact of the identified constraints are expected to guide the project team in addressing the constraints in a cost-effective manner. keywords: construction management, labour productivity, new zealand construction industry, performance improvement, productivity constraints. introduction productivity enables an organisation to be competitive, achieve set goals, meet stakeholder value propositions and maintain strategic and financial health. at the industry level, productivity enables the sector to maintain satisfied clientele, attract investment, remain viable and contribute to the economic growth and well-being of the nation. for instance, the department of housing (dbh, 2008) observes that the level of activity and the productivity of the building and construction sector underpins new zealand‟s economic recovery and growth, adding that “what happens in the building and construction sector has a „multiplier effect‟ on the wider economy” (p. 6). improvement in the productivity of the new zealand construction industry is therefore of critical importance considering its $388 billion worth of current building stock, excluding land (csg, 2010) and its significant contribution of approximately 5 percent to the gdp (dbh, 2008). it is against this background that the report of the building and construction sector productivity taskforce (bcspt) (dbh, 2009, p. 2), that “productivity, especially labour productivity has been disappointing and is limiting the sector‟s ability to respond positively to change”, should be seriously considered. the report re-echoes the urgent need to address this worrisome development by asserting that “the performance and productivity of the sector is critical for the performance of the new zealand economy”. in an earlier study, duncan (2002, p. 1) concludes that, “an improvement in „efficiency‟ of the building and construction sector – defined as a reduction in the cost of work put in place – will have a positive effect on every other sector, and consequently on the national economy”. australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 19 sufficient evidence suggests that on-site productivity measurements should be the basis for making productivity improvement decisions (oglesby et al., 1989, mccullouch, 2007, carlos and paul, 2010). this study will focus on on-site productivity constraints, since addressing these constraints will provide the much-needed productivity improvement in the industry. productivity in context productivity is a complex concept that could be interpreted in varied contexts depending on the objectives sought; the objectives in turn determine the parameters involved in its assessment in relation to the benchmark used for its comparison. at the macro-economic level, the building and construction sector productivity taskforce (bcspt, 2009) sees productivity as an industry‟s ability to convert inputs into outputs. generally, productivity is a measure of how well resources are leveraged to achieve set objectives or desired outputs. this is a definition that fits well with different perspectives; it emphasizes creativity and innovation, which target achieving more outputs with less resource inputs by re-engineering the production or service delivery process and optimising the resource leverage. the benchmark for comparison is critically important because productivity outcome in itself is meaningless except if it can be compared with a benchmark. the comparison could be intraentity i.e. comparing productivity outcomes within a given entity across a time period with a view to gaining insights into the implicit trend. it could also be inter-entities i.e. comparing productivity outcomes across similar entities with a view to determining the relative levels of productivity of the entities at a snapshot or across a time horizon. the objectives to be achieved, the resources employed, the measures adopted and the benchmarks used for comparison give rise to different definitions of or perspectives on productivity. the common threads in all definitions or contextual interpretations of productivity relate to:  effectiveness: i.e. how effective is the leveraging of the resources to achieve the set objectives? e.g. a system can be adjudged productive in effectiveness context, if the set objectives are achieved through effective resource leverage;  efficiency: i.e. in achieving the set objectives, how efficient was the utilization of the scarce resources in the implementation process? overall, an operational definition of productivity that fits well with the various approaches to defining the concept which draws upon the output-input paradigm is „the amount or quantity of output of a process per unit of resource input‟. this aligns with similar definitions by a number of authors (tran and tookey, 2011; page, 2010; enshassi, et al, 2007). equation 1 summarises the key features embodied in this definition. (1) where: output could be in units or dollar value of product or service, revenue generated or value added; resource input could be in units or dollar value relating to manpower (i.e. manhour), machinery (i.e. machine hour), materials (i.e. quantity), or money (i.e. dollar value). the nature of the resource input or a combination of inputs also informs the type of productivity and the measures used to evaluate it as shown in equation 1. the two most common types of productivity are the single-factor and multi-factor productivity; the former considers only one of the resource inputs as the denominator to equation 1, while the latter considers all resource inputs for a more holistic perspective. australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 20 constraints to onsite labour productivity based on the input-output paradigm, equation 1 shows that constraints to productivity could be one or more of the following categories: 1. constraints to the quantity or dollar value of the outputs; 2. constraints to the quantity or dollar value of inputs 3. a combination of the above. from a strategic perspective, particularly as it pertains to the construction project implementation, constraints to productivity relate to the factors constraining the achievement of set project objectives. to this effect, several studies in the past have identified typical constraints to productivity in the construction industry. for instance, wilkinson and scofield (2010) identify the choice of procurement system as having significant impact on the achievement of time, cost and quality targets for a project. mbachu and nkado (2007) identify factors relating to the acts or omission of the key role players including clients, consultants and contractors, as well as project characteristics and external factors. the egan (1998) report, though focused on house building, points to several constraints including processes and overuse of materials, poor management of relationships and the workforce, unambitious targets and ineffective measurement of performance as some of the productivity constraints. as it relates to productivity, the central argument of the egan report is that without best practice procedures and measurable indicators to help monitor the progress of improvements, the mission to produce better projects (including improvement of productivity) will not be achievable due to faulty processes and lack of benchmarks. in the new zealand context, page (2010) identifies level of trade skills, project organisation and design detailing. the bcspt report (dbh, 2009) points to sector wide skill shortage, approach to procurement of construction projects, lack of innovation in the construction practices, and the impact of regulations as drivers of low productivity growth of the new zealand building and construction sector between 1997 and 2008. the report also identifies design problems, poor supervision and workmanship, and faulty materials as prime causes of defects and low productivity. however, the report admits that the identified constraints are unlikely to explain fully the sector‟s poor productivity performance, and therefore calls for further research in this area. at the industry level, the department of housing (dbh, 2008) identify further constraints to productivity and performance of the sector to include: 1) loss of skills and capacity owing to the economic downturns; 2) the way the resource management act 1991 is applied, the significant costs and uncertainties it creates, and the lengthy process of land use decision under the act; and 3) high development fees charged as infrastructure contributions under the local government act 2002 and the rma 1991. from a more structured perspective, enshassi et al (2007) classify factors affecting labour productivity into 10 groups: manpower, leadership, motivation, time, materials/tools, supervision, project, safety, quality and external factors. on the other hand kazaz et al. (2008) group sub-factors influencing construction labour productivity under 4 main factors: organizational, economic, physical and socio-psychological factors. page (2010) identifies other factors such as site and design specific characteristics, the organisation and size of firms, level of skills and poor design details. in a recent study, tran and tookey (2011) looked at the economic factors impacting on labour productivity of a number of subindustries in new zealand; the authors found that the national inflation rates, construction employment and construction costs were the key determinants of the values of the productivity outputs (i.e. house and land prices) and inputs (i.e. labour and material costs). tran and tookey (2011) recommend further investigations of productivity of the industry as a whole looking at wider influencing factors. australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 21 gaps in the literature and the research objectives while past studies have identified various factors affecting productivity at all levels of the construction industry, the factors are not prioritised in terms of their relative levels of impact on productivity. the prioritisation is important because it would enable the project team to leverage the limited resources at their disposal to addressing those factors that have higher impact on productivity. this study aims to contribute to filling this gap. the specific objectives of the study are as follows: 1. to identify the key constraints to on-site labour productivity in the new zealand construction industry. 2. to analyse the relative levels of impact of the identified onsite labour productivity constraints. 3. to explore measures for improving productivity levels in the industry. research method the study relied on experienced-based feedback on the key on-site productivity constraints from those at the forefront of project implementation – the consultants, contractors and subcontractors – as the source of the primary data. the descriptive survey was therefore chosen as the most appropriate research method (leedy and ormrod, 2009; mbachu, 2008; cooper and schindler, 2006). this involved the use of pilot interviews and questionnaire surveys at the qualitative and quantitative data gathering stages, respectively. at the qualitative data stage, a convenience sample of nine interviewees comprising three each of project managers, contractors and subcontractors were interviewed on the constraints to onsite labour productivity in new zealand. the constructs generated were used to design a questionnaire which was subsequently pretested to ensure its clarity and relevance. the feedback formed the basis for redesigning the content and structure of the questionnaire so as to improve its appeal and ensuing survey response rate. the original intention at the quantitative survey stage was to use random stratified sampling techniques to collect representative samples from the three sampling frames comprising the membership directories of the association for consulting engineers new zealand inc (acenz), the new zealand contractors' federation (nzcf) and the new zealand specialist trade contractors federation (nzstcf). however, it was not possible to obtain the membership directories due to privacy issues. the researchers therefore resorted to the use of online search engines and the yellow pages to obtain a list of two hundred and fifty contacts comprising fifty project management consultants, one hundred and twenty contractors and eighty subcontractors in the three major cities of new zealand, namely, auckland, wellington and christchurch. the prospective participants were first contacted by phone to request their participation in the survey. only one hundred and fifty contacts – comprising thirty project management consultants, eighty contractors and forty subcontractors out of the two hundred and fifty potential respondents were willing to participate in the survey. emails were subsequently sent to the willing participants with a link to the questionnaire online requesting them to respond by completing the online survey within a specified timeframe in order to maintain anonymity of feedback. the ten to fifteen minute response to the online survey involved rating the constructs using a five-point likert scale, but with provision for further inputs on additional constructs which were not included in any given subset. data analysis the multi-attribute analytical technique was used to analyse the ratings of the respondents. this approach was recommended in past studies (mbachu and nkado, 2007; chang and ive, 2002) as the appropriate analytical approach to group ratings of the variables in a given set. the analysis involved the computation of the mean rating (mr), which is the average or australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 22 representative rating point for the collective ratings made for each variable in the subset. equation 2 shows the computation for the mr as provided by mbachu and nkado (2007).    5 1k jkpj )%r(rmr jki (2) where: mrj = mean rating for constraint factor j; rpjk = rating point k (ranging from 15); %rjk = percentage response to rating point k, for constraint factor j. level of significance of the constraint factors based on the mr values, the most significant constraint factor in a subset is one with the highest mr value. the constraint factor having an average or higher level of impact on onsite labour productivity is considered significant as shown in equation 3. significant constraint factor: mr > 2.5 (3) non-significant constraint factor: mr < 2.5 (4) where: 1 < mr < 5 on a rescaled 5-point likert rating scale. it should be noted that the middle of the 5-point likert scale is 3. however, on a transformed interval scale used in the computations, 2.5 is the lower end of the re-scaled middle band hence its use as the threshold of significance. results and discussions survey responses out of a total of 250 initial invitations, only thirty seven usable responses were received by the cut-off date; this represented about 15 percent usable response rate. the thirty seven usable responses were from project manager consultants (39%), contractors (53%) and subcontractors (8%). the feedback was therefore biased towards the contractors‟ views with very little inputs from the subcontractors. the follow-up reminders showed that the respondents, especially the subcontractors were busy chasing new tenders on account of the current economic recession and so had no time to participate in the survey. the demographic profiles of the respondents showed that the majority 77 percent – had at least 15 years work experience in the construction industry, 83 percent occupied high ranking positions in their respective organisations as directors, managers, or associate directors. the feedback was therefore from highly experienced subjects who had the authority to make important decisions about productivity in their respective organisations. this adds to the quality and reliability of the feedback, though the findings could not be generalised beyond the data points due to the non-representation of the target populations. key constraints to onsite labour productivity in new zealand at the pilot interviews, the recurring constructs mentioned by or alluded to by the interviewees as key internal and external constraints to onsite labour productivity in the new zealand construction industry were classified under broad categories. figure 1 shows the external constraints, which comprise three broad categories: statutory compliance, unforeseen events and other external forces. figure 2 presents the internal constraints, which comprise five broad categories: project finance, workforce, technology/ process, project characteristics, and project management. the subcomponents of each category are australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 23 external constraints statutory compliance: 1) health & safety in employment act; 2) resource management act; 3) local authority bylaws; 4) construction contracts act; 5) building act/building consent/building regulations; 6) employment relations act; 7) consumer guarantees act; 8) fair trading act; 9) arbitration act; unforeseen events: 1) inclement weather; 2) ground conditions necessitating revisions; 3) on-site accidents/ acts of god; 4) natural disasters; other external forces: 1) inflation/ fluctuations in material prices; 2) fluctuations in exchange rate; 3) energy crises/costs; 4) interest rate/cost of capital; 5) market conditions and level of competitions in the industry for jobs; 6) frequent changes in government policies/legislations impacting on construction; 7) rapid technological advances; 8) increase in industry or society-wide litigations/adversarial relations; internal constraints project finance: 1) late payments; 2) reworks; 3) under valued work/poor estimation; 4) dispute and litigation costs; 5) lenders‟ high interest charges; 6) high insurance premiums. 7) inadequate supply or high cost of needed resources: money, labour, etc. workforce: 1) level of commitment; 2) level of empowerment; 3) level of skill and experience 4) level of familiarity with current job and conditions: 5) level of involvement of direct labour or subcontract; 6) workforce absenteeism; 7) level of staff turnover/churn rate; 8) health of the workforce; technology/ process: 1) suitability or adequacy of: plant & equipment; 2) method of construction; 3) technology employed; 4) lack of awareness of or training on new technologies; 5) resistance to accept new technologies; 6) inadequate it infrastructure and application in construction industry; project characteristics: 1) site conditions: access, subsoil; topography; 2) project complexity; 3) buildability issues; 4) site location and environment; 5) type of procurement adopted; project management: 1) adequacy of planning and risk management process; 2) coordination; supervision; performance monitoring & control; 3) project organisational culture; 4) relationship management; 5) competencies of the project team; 6) project management style; 7) frequency of design changes; 8) client‟s over influence on the construction process; listed in the figures. in total, fifty-six factors were identified in the eight broad categories of internal and external constraints. figure 1 external constraints to construction on-site productivity figure 2 internal constraints to construction on-site productivity australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 24 at the questionnaire survey stage, the relative levels of impact of the broad categories and the subcomponents in each set were rated by the respondents to determine the significant and non-significant factors. the results in table 1 show the most significant factors under each broad category; the analyses were made in the following subsections under each broad category. broad category of constraints: subcomponent having the highest level of impact on on-site labour productivity internal constraints a project finance: rework b workforce: level of skill and experience of the workforce c technology/process: adequacy of method of construction d project characteristics: buildability issues e project management/ project team characteristics: coordination, supervision, performance monitoring and control external constraints a statutory compliance: resource management act b unforeseen events: ground conditions necessitating revisions c other external forces (economical, political, etc.): boom-bust cycles, market conditions and level of competitions in the industry for jobs table 1 subcomponents having the highest level of impact on productivity under the respective broad categories project finance related constraints the relative levels of impact of the sub-factors under the project finance broad category of on-site labour productivity constraints are analysed in table 2. results show that rework has the most significant impact on on-site labour productivity under this category with the highest mr value of 3.63. this result agrees with the findings of other authors (burati et al. 1992; cooper, 1993), who argued that the delays and costs associated with rework in construction have profound impact on productivity. in another study (love et al. 1999, 2000), it was found that the cost of rework ranged from 2 to 12 percent of the total contract value. to minimize the problem of rework in the new zealand construction industry, page (2010) suggests the use of quality management systems and improvement in skills training, particularly for onsite management and the management of multi-projects at the firm level. the next most influential factor is under-valued work or poor estimation at the tender price. to guard against this, henriod (2010) recommends the use of efficient tendering strategy involving a team approach to scrutinizing the tender documents for pitfalls and the pricing of the risks at pre-bid meetings. the involvement of the specialist trades and all key staff at these meetings helps to ensure that no important cost items are omitted and that the risks are properly priced. workforce related constraints table 3 represents the analysis of the relative levels of impact of the sub-factors under the workforce broad category of on-site labour productivity constraints. level of skill and experience of the workforce was rated as the subcomponent having the highest level of impact on onsite labour productivity. this result is consistent with some earlier findings (alinaitwe 2007; mojahed and aghazadeh 2007) that the level of skill and experience of the workforce is the key determinant of onsite labour productivity and performance. the next most influencing factor is the level of motivation or commitment of the workforce. this also concurs with henriod‟s (2010) conclusion that a happy team and improved work attitude can australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 25 result in tremendous improvement in labour productivity. henriod opines that high level of workforce motivation and commitment can be achieved through job security, effective reward system, culture of openness, trust and loyalty and the involvement of the people at the coalface in the decision making process. project finance related constraints: cash flow problems arising from: a level of impact b tr c mr vh h m l vl 5 4 3 2 1 % % % % % 1 reworks; 20.0 40.0 28.6 5.7 5.7 35.0 3.6 s ig n if ic a n t 2 under-valued work/ poor estimation 22.6 22.6 38.7 12.9 3.2 31.0 3.5 3 late payments; 14.7 32.4 35.3 11.8 5.9 34.0 3.4 4 high cost of needed resources materials, machinery: money, labour 14.3 31.4 25.7 14.3 14.3 35.0 3.2 5 dispute and litigation costs; 12.9 25.8 9.7 38.7 12.9 31.0 2.9 6 lenders‟ high interest charges; 0 13.8 24.1 51.7 10.3 29.0 2.4 7 high insurance premiums; bonds/ retentions. 0 5.6 30.5 38.8 25.0 36.0 2.2 table 2 productivity constraints related to project finance notes: a) levels of impact: vh = very high (5), h = high (4), m = medium (3), l = low (2), vl = very low (1). b) tr = total responses; c) mr = mean rating (see equation 2) workforce: productivity constraints arising from: a level of impact b tr c mr vh h m l vl 5 4 3 2 1 % % % % % 1 level of skill and experience of the workforce; 25.7 40.0 25.7 8.6 0 35.0 3.8 s ig n if ic a n t: m r > 2 .5 2 level of motivation/ commitment; 20.0 40.0 22.9 14.3 2.9 35.0 3.6 3 level of familiarity with current job and conditions; 8.6 45.7 31.4 8.6 5.7 35.0 3.4 4 level of empowerment (training and resourcing); 11.4 42.9 22.9 22.9 0 35.0 3.4 5 level of involvement of direct labour or subcontract; 11.8 29.4 35.3 23.5 0 34.0 3.3 6 workforce absenteeism; 8.8 17.7 44.1 23.5 5.9 34.0 3.0 7 level of staff turnover 2.9 20.0 42.9 25.7 8.6 35.0 2.8 8 health of the workforce; 0 21.2 42.4 30.3 6.1 33.0 2.8 table 3 productivity constraints related to workforce notes: a) levels of impact: vh = very high (5), h = high (4), m = medium (3), l = low (2), vl = very low (1). b) tr = total responses; c) mr = mean rating (see equation 2) technology/ process related constraints analysis of the sub-factors under the technology/ process related broad category of onsite labour productivity constraints is presented in table 4. the majority of the respondents rated the adequacy of method of construction as having the greatest impact on onsite labour productivity. this is consistent with conclusions in previous studies (alinaitwe et al. 2007; sanders and thomas, 1993) that the method adopted in the construction process has far reaching implications on productivity and performance of the construction crew. however, the method depends on the design and what the owner or the engineer is willing to approve as the appropriate method in the circumstances. page (2010) recommends the use of modern design and construction methods such as modularisation and prefabrication and the avoidance of one-off designs. though rated as the least significant in the set, knutson et al. (2009) argue that the layout of the site is one of the most obvious of the impacts on australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 26 productivity. careful planning and location of the contract preliminaries could therefore ensure effective workflow and construction speed resulting in improved onsite productivity. technology/ process related constraints: productivity issues arising from: a level of impact b tr c mr vh h m l vl 5 4 3 2 1 % % % % % 1 adequacy of method of construction; 19.44 33.33 33.33 13.89 0.00 36.00 3.58 s ig n if ic a n t 2 suitability or adequacy of the plant & equipment employed; 8.57 37.14 28.57 20.00 5.71 35.00 3.23 3 resistance to accept new technologies; 5.88 29.41 38.24 26.47 0.00 34.00 3.15 4 adequacy of technology employed; 5.71 37.14 22.86 31.43 2.86 35.00 3.11 5 lack of awareness of or training on new technologies; 2.86 25.71 48.57 22.86 0.00 35.00 3.09 6 inadequate it infrastructure and application in construction industry; 0.00 37.14 34.29 25.71 2.86 35.00 3.06 7 adequacy of site layout. 3.03 18.18 33.33 42.42 3.03 33.00 2.76 table 4 productivity constraints related to technology/ process notes: a) levels of impact: vh = very high (5), h = high (4), m = medium (3), l = low (2), vl = very low (1). b) tr = total responses; c) mr = mean rating (see equation 2). project characteristics analysis of the subcomponents under the project characteristics set of constraints is presented in table 5. results show that buildability issues have the highest level of impact on onsite productivity. this finding support the conclusions of several studies (jarkas, 2010; lam and wong 2009; saghatforoush et al. 2009; lam et al. 2007) that buildability issues, especially where design details are lacking, could slow down onsite work progress. project characteristics related constraints: productivity issues arising from: a level of impact b tr c mr vh h m l vl 5 4 3 2 1 % % % % % 1 buildability issues; 20.00 40.00 34.29 2.86 2.86 35.00 3.71 s ig n if ic a n t 2 project complexity: scale; design; 20.59 35.29 32.35 11.76 0.00 34.00 3.65 3 site conditions: access, subsoil; topography; 17.65 41.18 20.59 20.59 0.00 34.00 3.56 4 site location and environment; 11.76 26.47 35.29 20.59 5.88 34.00 3.18 5 type of procurement adopted. 8.82 26.47 35.29 23.53 5.88 34.00 3.09 table 5 productivity constraints related to project characteristics notes: a) levels of impact: vh = very high (5), h = high (4), m = medium (3), l = low (2), vl = very low (1). b) tr = total responses; c) mr = mean rating (see equation 2). australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 27 project management/project team characteristics with the highest mr of 4.43 listed in table 6, coordination, supervision, performance monitoring and control set of constraints was found to be the most influential on-site labour productivity constraint factor under project management/project team characteristics group. this result was supported by (thomas and sakarcan 1994) who found that supervision and proper coordination of subcontractors have the most significant impact on on-site labour productivity. (abdul kadir et al. 2005) put emphasize on coordination with subcontractors, which was ranked as one of the influential factors in the study. furthermore jergeas (2009) and kpmg (2009) argue that effective project integration management, comprising the activities that integrate, coordinate and bring together the various functions and multiple stakeholders, is the key to achieving onsite productivity and performance. project management/ project team characteristics related constraints a level of impact b tr c mr vh h m l vl 5 4 3 2 1 % % % % % 1 coordination, supervision, performance monitoring and control; 54.29 34.29 11.43 0.00 0.00 35.00 4.43 s ig n if ic a n t 2 clients‟ overt influence on the construction process; 41.18 50.00 5.88 2.94 0.00 34.00 4.29 3 relationship management/ degree of harmony, trust and cooperation; 37.14 45.71 11.43 2.86 2.86 35.00 4.11 4 adequacy of planning and risk management process; 31.43 51.43 11.43 5.71 0.00 35.00 4.09 5 project organisational culture; 35.29 26.47 35.29 0.00 2.94 34.00 3.91 6 project management style; 22.86 40.00 31.43 2.86 2.86 35.00 3.77 7 competencies of the project team; 26.47 29.41 35.29 5.88 2.94 34.00 3.71 8 frequency of design changes/ change orders; 17.14 31.43 42.86 8.57 0.00 35.00 3.57 table 6 productivity constraints related to project management/ project team characteristics notes: a) levels of impact: vh = very high (5), h = high (4), m = medium (3), l = low (2), vl = very low (1). b) tr = total responses; c) mr = mean rating (see equation 2). statutory compliance related constraints table 7 presents the analysis of the subcomponents of onsite productivity constraints related to statutory compliance. compliance with the resource management act (rma) 1991 was rated as the most influential sub-factor. mcshane (1996) hints that the impact of rma on onsite labour productivity is profound especially in relation to resource content issues. the department of building and housing (dbh, 2009) also notes that a number of industry leaders see regulation in its broadest sense as a critical factor constraining the industry productivity through increased compliance costs, limitation on activity, stifling of innovation and reduction of efficiency on worksites. as a mitigation measure, the department believes that regulation should be used only sparingly and only if it is well designed. it is surprising to note that the construction contracts act (cca) 2002 – being the key legislation affecting construction contracts and operations was rated very low by majority of the respondents. perhaps, this could be due to the increased awareness of, and proactive response to, the act since all parties must now abide by its provisions. overall, having a working knowledge of the provisions of the legislations and regulations affecting their daily operations and taking proactive steps to their implementations would help the industry operators to sort out the compliance issues; the risk involved should be priced in the contracts. australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 28 statutory compliance related constraints: impediments arising from compliance with: a level of impact b tr c mr vh h m l vl 5 4 3 2 1 % % % % % 1 resource management act 8.82 29.41 38.24 17.65 5.88 34.00 3.18 s ig n if ic a n t 2 building act/ building consent/ building regulations 9.09 27.27 27.27 33.33 3.03 33.00 3.06 3 health & safety in employment act 2.63 23.68 44.74 10.53 18.42 38.00 2.82 4 local authority bylaws, 0.00 20.59 38.24 35.29 5.88 34.00 2.74 5 employment relations act 0.00 0.00 33.33 57.58 9.09 33.00 2.24 6 construction contracts act 0.00 12.50 15.63 50.00 21.88 32.00 2.19 7 arbitration act 3.57 0.00 10.71 39.29 46.43 28.00 1.75 8 consumer guarantees act 0.00 3.33 10.00 33.33 53.33 30.00 1.63 9 fair trading act 0.00 3.45 6.90 34.48 55.17 29.00 1.59 table 7 productivity constraints related to statutory compliance issues notes: a) levels of impact: vh = very high (5), h = high (4), m = medium (3), l = low (2), vl = very low (1). b) tr = total responses; c) mr = mean rating (see equation 2). unforeseen events group table 8 shows that ground condition as a sub-factor under unforeseen events has the greatest impact on on-site labour productivity in new zealand. this supports earlier finding (clayton, 2001) that unforeseen subsurface conditions can affect adversely the construction process and productivity in terms of costs and completion time in a project of any scale. productivity constraints related to unforeseen events a level of impact b tr c mr vh h m l vl 5 4 3 2 1 % % % % % 1 ground conditions; 20.59 44.12 29.41 5.88 0.00 34.00 3.79 s ig n if ic a n t 2 inclement weather; 14.71 41.18 35.29 8.82 0.00 34.00 3.62 3 on-site accidents/ acts of god; 13.89 25.00 30.56 30.56 0.00 36.00 3.22 4 natural disasters; 32.35 14.71 8.82 17.65 26.47 34.00 3.09 table 8 productivity constraints related to unforeseen events notes: a) levels of impact: vh = very high (5), h = high (4), m = medium (3), l = low (2), vl = very low (1). b) tr = total responses; c) mr = mean rating (see equation 2). other external forces group table 9 shows that, within the wider external factor broad category, the boom-bust cycles, market conditions and the level of competitions in the industry for scarce jobs was rated by the respondents as the set of factors having the highest impact on on-site labour productivity. this result is consistent with the findings of previous studies (tran and tookey, 2011; dbh, 2009; davis 2008) which equally acknowledged the damaging effect of the boom-burst cycle on the new zealand construction industry productivity and performance. the building and construction sector task force (dbh, 2009) notes that better management of the boom-bust cycle will help improve skill development and retention, reduce waste and give greater confidence to industry participants, adding that “how the government plans and manages its procurement with the sector can have a crucial influence on the sector‟s ability to better manage the business cycle” (p. 9). australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 29 external constraints a level of impact b tr c mr vh h m l vl 5 4 3 2 1 % % % % % c other external forces: productivity constraints arising from miscellaneous sources including: 1 boom-bust cycles, market conditions and level of competitions in the industry; 0.00 54.84 29.03 12.90 3.23 31.00 3.35 s ig n if ic a n t 2 inflation / fluctuations in material prices; 6.06 21.21 51.52 15.15 6.06 33.00 3.06 3 frequent changes in government policies/ legislations impacting on construction; 0.00 12.12 27.27 54.55 6.06 33.00 2.45 4 increase in industry or society-wide litigations/ adversarial relations; 3.45 6.90 24.14 62.07 3.45 29.00 2.45 5 interest rate/cost of capital; 0.00 6.06 30.30 57.58 6.06 33.00 2.36 6 rapid technological advances 0.00 3.03 30.30 63.64 3.03 33.00 2.33 7 fluctuations in exchange rate; 0.00 0.00 38.24 52.94 8.82 34.00 2.29 8 energy crises/ costs; 0.00 6.06 21.21 66.67 6.06 33.00 2.27 table 9: productivity constraints related to other external factors notes: a) levels of impact: vh = very high (5), h = high (4), m = medium (3), l = low (2), vl = very low (1). b) tr = total responses; c) mr = mean rating (see equation 2). relative levels of impact of the broad categories of productivity constraints the relative levels of impact of the broad categories of onsite labour productivity constraints are analysed in table 10. results showed that all the eight broad categories of internal and external constraints are significant, having achieved mr values greater than the threshold value of 2.5 (see equation 3). the internal constraint categories, comprising project finance, workforce, technology/process, project characteristics and project management, as calculated above, contribute 67 percent of the onsite labour productivity constraints, implying that the external constraints only contribute 33 percent. this result is in agreement with the findings of fabling and grimes (2008); the authors examine the relative importance of internal/ controllable and external/uncontrollable constraints to firms‟ performance and conclude that the differences in firm performance are explained in large measure by factors over which they have control rather than purely by exogenous factors. however, the relative contributions of the internal and external constraints should be interpreted on the ordinal, rather than interval scale. this is because the analysed relative percentage contributions are a result of the set of data used in the study. changes in the mix of variables for the internal and external constraints would probably lead to different result. thus, rather than being indicators of relative contributions on quantitative terms, the findings show that the internal constraint factors have weightier impact on productivity than external factors. the finding that the project management approach has the highest impact on onsite labour productivity concurs with the findings in previous studies (knutson et al. 2009; burati et al., 1992) that the way a project is managed, especially as it relates to the critical path and critical cost activities, is key to productivity and performance. however, a number of authors (mbachu, 2008; henriod and lantran, 2000) believe that positive net cash flow, being the lifeblood of the industry and the source of project finance, has the most profound impact on productivity and performance. australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 30 broad categories of internal and external constraints a level of impact b tr c mr rii (%) vh h m l vl 5 4 3 2 1 1) project management/ project team characteristics 17.14 40.00 28.57 11.43 2.86 35 3.57 14.14 2) project finance 14.71 50.00 17.65 11.76 5.88 34 3.56 14.09 3) workforce 11.76 44.12 32.35 8.82 2.94 34 3.53 13.97 4) project characteristics 2.94 41.18 41.18 14.71 0.00 34 3.32 13.16 5) unforeseen events 11.76 14.71 38.24 29.41 5.88 34 2.97 11.76 6) technology/ process 0.00 18.18 57.58 24.24 0.00 33 2.94 11.64 7) statutory compliance 0.00 20.59 47.06 26.47 5.88 34 2.82 11.18 8) other external forces (economic, political, industry, etc) 3.03 6.06 39.39 45.45 6.06 33 2.55 10.08 table 10 relative levels of impact of the broad categories of onsite productivity constraints notes: a) levels of impact: vh = very high (5), h = high (4), m = medium (3), l = low (2), vl = very low (1). b) tr = total responses; c) mr = mean rating (see equation 2). conclusions this study, as part of its key aim, has identified the key on-site labour productivity constraints in the new zealand construction industry and has prioritised the constraints based on their relative levels of impact. 56 sub-factors have been identified under 8 broad categories of internal and external constraints. compared to the external factors, the internal constraints were found to contribute far more to the onsite labour productivity issues in the new zealand construction industry. in the order of decreasing influence, the internal factors comprise project management, project finance, workforce, project characteristics and technology/ process. the key subcomponents under each of the five broad categories of the internal constraints are rework; level of skills and experience of the workforce; adequacy of method of construction; buildability issues; and issues around coordination, supervision and performance monitoring and control; respectively. under the three external constraint broad categories, the key subcomponents are compliance with the resource management act 1991; ground conditions; and the boom-bust cycles, market conditions and level of competition in the industry; respectively. in addition to understanding the nature of the identified constraints, some mitigation measures have been discussed for addressing the key subcomponent under each broad constraint category. in conclusion it is believed that by focusing on the relative levels of impact of the identified constraints, the project team could be guided well in their efforts to addressing the constraints in a cost-effective manner. recommendations for future studies this study focused on constraints to construction on-site productivity; however, there are several aspects to construction productivity. future studies should explore other influencing factors affecting construction productivity at all stages of the procurement process. as demonstrated in the demographic analysis of the respondents, the responses were largely from contractors and project management consultants. the results did not include many inputs from subcontractors who provided only 8 percent of the responses. it may be necessary to aim for representative feedback from subcontractors in future studies, as they are the key players on construction sites. also there was absence of feedback from clients and designers. further studies should also seek to capture opinions of these stakeholders as they significantly influence on-site procurement processes and performance outcomes. australasian journal of construction economics and building durdyev, s and mbachu, j (2011) ‘on-site labour productivity of new zealand construction industry: key constraints and improvement measures’, australasian journal of construction economics and building, 11 (3) 18-33 31 acknowledgement the work reported here was funded by the building research association of new zealand (branz) through the building research postgraduate scholarship, for which the authors are grateful. references abdul kadir, m.r., lee w.p., jaafar m.s., sapuan s.m. and ali a.a.a. 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railways, other air and water borne transport nodes and links and telecommunication systems. these have impacts on the efficiency of the economy as a whole by reducing the costs for which producers would have to pay to produce their goods. a nation that lacks physical objects like factories, roads, and raw materials suffers from an object gap, which depends upon saving and accumulation (romer, 1993). specifically, easterly and rebelo (1993) show that investment in transport and communication is consistently correlated with economic growth after controlling for private investment. the relationship between factor demands and public goods was noted among others by morrison and schwartz (1996), who estimate the role of infrastructure in aggregate cost functions, and find that infrastructure reduces private production costs. they suggest that increases in infrastructure must more than keep up with output growth in order to have a positive productivity growth impact. andrikopoulos and loizides (1998) state that fast growing output enables exploitation of scale, minimizes the problem of redundancy and requires an influx of new capital which itself may embody improved techniques. alternatively, munnell (1992) argues that infrastructure policy should focus on eliminating current distortions and inefficiencies. public construction was also utilized to achieve a balanced population growth between the central core and periphery of a country (portnov and etzion, 2000). investments in infrastructure are held to increase the efficiency and quantity of firms’ production and distribution. this is traditionally portrayed as downward shift in the marginal cost curve. hence, growth refers to an increase in the “quantitative level of activities and the scale of its associated social structures.” however, economies also change structurally over time, for example, changes from agricultural to industrial societies and from predominantly manufacturing to services. in modern post-industrial societies there are increasing amounts of economic activity associated with information and knowledge based services. public capital enhances the productivity of private capital, raising its rate of return and encouraging more investment (aschauer, 1989). for instance, transportation systems must enable manufacturing input and finished products to flow in a timely, synchronized fashion. large-scale air-cargo complexes, seamlessly connected with efficient highways, modern seaports, rapid railways, and other aviation nodes can support manufacturing industries and more efficiently link them to their regional and global sourcing and distribution systems. additionally, buurman and rietveld (1999) argue that improvement of transport infrastructure leads to better functioning of labour markets, which in turn may lead to higher labour productivities. land shortages are largely due to insufficient transport links. highway planning is intimately connected with housing and economic development policy (shmueli, 1998). a location with well established infrastructure will cause firms to cluster together at points in space which exhibit a high degree of centrality. the better a country’s transport system, infrastructure policy and economic growth: case of hong kong by r y c tse, b tang, e hui, y h chiang and j raftery the australian journal of construction economics & building page 67 the greater is the scope for internal specialization and division of labor, and the lower is the retail price of goods produced for the domestic market. there is evidence to support the contention that large, private-sector organizations in advanced economies have become increasingly concentrated in their major metropolitan centres (stephens and holly, 1981). the adequacy of infrastructure can be used as a measure of the productive capacity of a country. under-built infrastructure should be developed to allow accelerated economic development. from a more practical point of view, faced with insufficient infrastructure, there will be an opportunity cost in terms of higher unit costs for the individual firm and lower output, employment and international competitiveness for the economy as a whole. hence, the infrastructure itself represents a durable asset which not only yields productive services over a number of periods, but also requires time to construct before it is ready to combine with other factors to generate a product. thus investment in physical capital will be highly productive only if complementary factors of production are available. another demand-related effect of infrastructure occurs in the field of operations and maintenance. the impact of a piece of infrastructure may transcend the boundaries of regions, as a certain region may benefit from an airport, even though these facilities are not located in the region itself (buurman and rietveld, 1999). thus, trading activities may increase as a result of such spatial spillovers. the high population density in the territory makes the provision and maintenance of infrastructure provision more economical. in order to stimulate the economy, the government believes that increased expenditure on construction has “consequential benefits for individuals by providing employment opportunities” (the 1998-99 budget).1 to a certain extent, public work is being treated by the government as an economic stimulant. increases in public expenditure on construction and housing imply a steady stream of work for contractors and consultants. major infrastructure projects cover airport, port, road, railway, harbour reclamation and station development. above all, transport infrastructure projects are expected to take the lead in construction in the context of the slowdown in housing and commercial building at the bottom of the property cycle. these projects include both a number of strategic road links and mass transit systems. when completed, these major transport projects will significantly alleviate road congestion and improve intra-urban movements within the territory. the infrastructure projects will substantially enhance the development potential of vacant land along its alignment. this paper puts together a cohesive and comprehensive picture of where hong kong stands now with respect to infrastructure development. the interaction between the public and private sectors cannot be neglected. it is important to understand the role of government and the social costs and benefits of allocating resources to government use as opposed to allowing private enterprise and households to use those resources. the paper is aimed at bringing together the theoretical issues and the hong kong experiences that not only are of interest to developing countries, but which also seem to add up to something that might legitimately be called an integrated approach to public policy in infrastructure development. the paper is organized as follows. the next section discusses government’s role in infrastructure investment in hong kong, and draw attention to the trend for privatization of infrastructure projects. section 3 discusses the factors affecting future construction productivity. conclusions and the associated policy 1 among a basket of measures, infrastructure investment has been formulated and implemented to revive the local economy. infrastructure policy and economic growth: case of hong kong by r y c tse, b tang e. hui, y h chiang and j raftery page 68 the australian journal of construction economics & building implications are summarized in the last section. 2. government’s strategy in infrastructure projects although infrastructure commands a wide resource base, the public finance principle of the hong kong government is to restrict its increase in spending from exceeding the rate of economic growth. total government spending, including both capital and recurrent has grown in line with gdp. as a result, public expenditure, which is maintained at about 18% of gdp, remains low when compared with other advanced countries. in its efforts to maintain this position, the government is therefore reluctant to use its fiscal reserve directly to boost the economy during the economic downturn. hong kong has one of the most open economies in the world. more specifically, the construction sector occupies a similar position in the global context and is without doubt the most open in the region with no legal or institutional restriction on foreign contractors entering either the public or private construction markets (raftery et al., 1999). there is and has been, no cap on foreign equity entering hong kong. business competitiveness has been maintained through investment in effective infrastructure. in recent years, the hong kong government has become very positive towards privatization. moreover, the government realized that to maintain the pace envisioned for their economic and infrastructure development, the active involvement of foreign capital, technology and management know-how should be encouraged. experience shows that a partnership between the public and private sector has yielded fruitful outcomes in infrastructure development. under this partnership, the government is mainly responsible for providing a sound and stable investment environment, supported by a consistent regulatory framework and a low tax structure. the private sector, on the other hand, is expected to make the maximum use of its entrepreneurial and management skills to exploit the commercial opportunities arising. it is hoped that by so doing the government red tape can be minimized and maximum market efficiency can be achieved. in the early stages of development, some developing countries require a wide range of projects, some of which their indigenous firms lack the capacity and expertise to undertake. thus, they must rely on foreign firms to undertake the large and complex projects (drewer, 1980). partnership is generally suitable for infrastructure projects which demand a variety of techniques and knowledge. the formation of strategic alliances, in fact, is seen to be necessary because a construction firm cannot be expected to have all that is required to be effectively competitive. it may have a competitive advantage over others in some key areas but not in others. thus the formation of strategic alliances would be an effective way of overcoming weaknesses or drawbacks that a firm may be exposed to in the increasingly competitive domestic or international setting. the united nations centre for trade and development (unctad, 1996) suggests that partnerships have a potential use in transferring technology to developing countries. this approach could help polarize the financial and technical superiority of the developed countries and the corresponding inferiority of the developing countries. the construction industries of the developing countries will have to leapfrog in technology, finance and management knowhow. a possible approach is through joint ventures with developed countries’ construction companies (raftery et al. 1998). however, problems of technology transfer through joint ventures include: the complexity of technology and the transfer process; attitudes and abilities of transferees; motivations and practices of transferors; and government policies (sharif, 1983). foreign business believes that their ability to form true strategic alliances is crucial for long-term access to the chinese market. the chinese partners possess important specialized local market information that the foreign investors infrastructure policy and economic growth: case of hong kong by r y c tse, b tang, e hui, y h chiang and j raftery the australian journal of construction economics & building page 69 need. however, obtaining information in china is costly and time consuming for foreigners, particularly since much of it is not officially published, especially in foreign languages. thus, the pooling of resources through joint ventures reduces uncertainty, overcomes market imperfection and constitutes a form of internalization. against this background, the private sector has lot of opportunities in infrastructure investment in hong kong and mainland china. many strategic infrastructure projects are completed by the private sector, under the supervision of the government and quasi-government bodies. they have largely been completed on time and within budget. however, experience of the operational problems associated with the opening of the new airport in july 1998 clearly shows the complexity in managing these gigantic developments and the need for excellence in management and supervision. government spending on infrastructure made up a considerable amount of total expenditure. among total government consolidated expenditures, she spent 25% to 30% on construction and building. however, the asian financial crisis of 1998 has hampered the ability of the government to fund infrastructure projects in hong kong. property prices in the territory have fallen 50% from their peak in 1996. consequently, the share of landrelated fiscal revenue decreased significantly especially in 1999. contractions in internal consumption cause great concern about future demand and financial viability of the many proposed infrastructure projects. availability of private finance capital has become a major constraint. the total value of construction works has seen only moderate decrease, because the increased works on buildings has more than offset the decreased works on structures and facilities (table 1). it has been argued that, except in the cases of social need, the government should not be in the housing production business, and the responsibility should, over time, be transferred to the private sector. against this background, privatization of future infrastructure development becomes essentially an acid test of confidence in the private sector towards hong kong’s future prosperity. table 2 shows that private sector has participated quite extensively in various infrastructure projects. in so far as the domestic scene is concerned, these projects have had a fortuitous side-effect in providing additional employment to the current slacking economy in which unemployment has already risen to record high. in the light of the credit crunch and uncertainty associated with the local currency, the government is required to play a greater role in financing these projects than previously. the widespread nature of such market imperfections challenges the assumption that infrastructure will be available wherever the businessman/industrialist chooses to locate. however, because of a likely reduction in government revenues due to the economic recession, government participation in infrastructure development has to be achieved in the context of much weaker public finances. it is evident that railway infrastructure remains one of the most important investments for the government. the government plans to contribute substantial capital investment in major highway, rail, property, housing and port development. this is intended to improve the region’s international competitiveness, and to achieve a desirable interregional population shift. in order to help raise the large sum required for investment in infrastructure construction, it is also important to seek ways to attract private sector funding and maximize available resources in the community. implementation of infrastructure projects in hong kong would be shared between the government, various quasigovernment bodies and the private sector (see table 2). at the planning stage, the government has to ensure that the demand justifies level of provision. one of the main characteristics of infrastructure is that the fixed cost of providing the service is substantial whereas the marginal cost of providing access for additional users is infrastructure policy and economic growth: case of hong kong by r y c tse, b tang e. hui, y h chiang and j raftery page 70 the australian journal of construction economics & building relatively small (hillebrandt, 1979). it is thus important to ensure good value-formoney for resources committed. as these facilities are costly and take time to build, the government commits considerable resources in monitoring their demand and ascertaining the future requirements prior to making an investment decision. however, finding an appropriate implementation agent becomes a key consideration. different implementation agents are involved in particular infrastructure projects. however, in most cases, statutory or quasi-government bodies tend to take a leading role in implementing and managing development of infrastructure. these organizations are task forces established under specific ordinances, which stipulate their particular missions, responsibilities, resources, management structure and so on. the government has a strong link with these bodies and provides the essential support in accomplishing their tasks. but these organizations are outside the government bureaucracy in their daily operations. as such, they can avoid the usual red tape and be able to exercise private sector flexibility in expediting project implementation. there are a number of these quasigovernment organizations in hong kong. an important example is the implementation of the new airport project which is primarily under the airport authority (aa), supported by mass transit railway corporation (mtrc). the aa is a statutory corporation wholly owned by the government. the government is responsible for supervising and managing other private sector professionals and contractors involved in the actual on-site construction works. among all strategic infrastructure provision, the private sector appears to have a much heavier weight in developing port facilities. hong kong is a free port. but it is also the only major world port not being run by a port authority. the government is responsible for overall port planning and ancillary port services. most of the major port facilities such as the container terminals and river trade terminals are owned, developed and operated by the private sector. the strong financial position of the government gives it a relative advantage in funding large scale and expensive infrastructure. in any case, financing of infrastructure projects has three principal forms: (a) government’s funding under the capital works expenditure and/or direct equity injection; (b) private sector’s own investment funding; (c) borrowing from the local and overseas capital markets. furthermore, the government can use its annual revenues to finance public works. two funds are used in the budget: the capital works reserve fund (cwrf) and capital investment fund (cif). cwrf financially supports the public works programme. its income comes from the land premium and transfers from the general revenue account. property-related income has been a major income source, covering some 30-40% of the total government revenue in recent years (table 3). the government spends almost the same share of total expenditures on building and construction. on the other hand, some infrastructure projects have created many property development opportunities. thus the government is said to have developed land from land.2 financing of projects undertaken by the statutory bodies like the aa and mtrc tends to take a mixture of government equity and debt financing. according to past experience, the government normally injects a certain portion of equity as an initial start-up and working capital into the corporations. these organizations are then allowed to raise debt in both local and overseas capital markets. as the government wholly owns these bodies, their credit risks are minimal. when their projects are financially sound, their debt issues will attract good responses from capital markets. revenues generated from the infrastructure projects will then be 2 however, the government has been criticized for maintaining the high-land-price policy in order to expand their revenue. infrastructure policy and economic growth: case of hong kong by r y c tse, b tang, e hui, y h chiang and j raftery the australian journal of construction economics & building page 71 used to pay back the credits or ultimately as dividends to the government. these infrastructure projects were also partly financed through a land capitalization scheme (e.g. development of shopping areas, commercial real estate, and residential buildings). for example, hong kong mtrc not only receives its income through the fares, but the profit made on land operations is at round 15% of the construction cost. this makes hong kong mtrc the only profitable underground network in the world (duranton and deo, 1999). 3. why government’s role is important? even the most ardent advocates of free markets have always admitted that the provision of social overhead capital is a legitimate role for government in the process of economic development. in hong kong, the government’s stated intention is to promote a free market economy with little government intervention. however, infrastructure investment has several characteristics which make government involvement necessary: (a) infrastructure projects usually involve extensive land uses and/or zoning regulations. thus, government’s participation is to reduce transaction costs in the coordination of production activities. while property rights may be transacted through a wide variety of contractual arrangements, the contractual arrangements will be constrained by the costs of transaction (coase, 1937; cheung, 1969). in infrastructure projects, government is usually the resource owner,3 therefore government taking the lead is the result of the difference in pricing and measuring properties. our concern here is the contractual arrangements through which the right to develop the infrastructure is delegated to the 3 in hong kong the government owns all new land supply. private sector, so that a delimited set of development rights is surrendered in exchange for an income. note that private sector has the option of not joining. furthermore the development of one particular infrastructure project usually depends upon other strategic developments, such as transport network, etc. it cannot in general be the case that private decisions are superior to government decisions reached through the price mechanism.4 (b) even when the commitment to planning is there, the soundness of the plan will be limited by deficiencies in financial resources that can be overcome only partially with government’s participation. when an infrastructure project is developed, huge capital is locked into the project in the form of the physical structure built thereon. the future returns on infrastructure are often uncertain, and the fixed capital is irreversible once committed. private investors would be reluctant to put their funds into infrastructure projects whose payoff period is very long and whose benefits go in large part to free riders whom it would be almost impossible to charge. private construction tends primarily to major population centers of the country in which the immediate demand was greater and more profit could be expected (portnov and etzion, 2000). given the rigid and imperfect structure of the infrastructure projects, it is extremely difficult to sell the failed project halfway through the process to recover the investment outlay. thus government’s participation in infrastructure projects can be advantageous to the private sector by reducing the risks of new private investment. 4 the negotiation process may be cumbersome without government’s participation because private firms do not have the power to change land uses and lease modifications. infrastructure policy and economic growth: case of hong kong by r y c tse, b tang e. hui, y h chiang and j raftery page 72 the australian journal of construction economics & building certain types of risk, such as the uncertainty of whether a project will be financed or whether a project will live up to legal regulations, can also be viewed as transaction costs. however, the government’s role would be not only to reduce investment risk to private sectors but to promote the adoption of new technologies. (c) information concerning infrastructure development is not freely accessible and feasibility studies come at high costs. moreover the future income from an infrastructure project is highly uncertain. thus there is a cost of using the price mechanism. this implies that a third cost of discovering price is information cost (stigler, 1961). since many potential private investors have very limited knowledge of construction technology, possibilities for joint ventures with foreign companies, and other key information, government assistance in filling these knowledge gaps can constitute an important stimulus to private investment. even a well-prepared plan will be ineffective unless careful attention is paid to implementation. in general, the government has fuller information about territorial planning and future land uses than the private sector. given this head start, private firms find it much less of a burden to obtain the more detailed information that will be needed before a decision whether to invest can be made. the government has an interest in knowing what the private sector intends to do so that it can provide the stimulus or restraint deemed desirable to keep the economy moving toward the policy targets. the government tends to play a significant role in some other routine capital works projects, such as roads and harbour reclamation. other related capital works projects involve new land formation, highways construction and development of new town. resource coordination would be improved with government’s participation. as a result of the globalization and deregulation of markets necessitated by fiscal, technological and managerial constraints, three trends of recent developments in the construction industry in several asian countries are identified: (a) larger private sector participation in infrastructure projects; (b) increasing vertical integration in the packaging of construction projects; and (c) increased foreign participation in domestic construction. consequently the proportion of infrastructure works carried out by the private sector has increased dramatically in telecommunication, power, transport, water, energy, petrochemical and sanitation projects. obviously, the significant privatization and deregulation measures adopted by the public sector itself which, in turn, have been made necessary by domestic fiscal constraints. given limited domestic budget resources for infrastructure projects, public sector investments in many of the developing countries in the region used to be dependent almost entirely on foreign aid. however, it became evident that this way of investing was not enough and that public works projects need to tap the efficiency and resources of the private sector. nowadays, private sector participation is actively sought in the whole gamut of project phases – financing, construction, operation, etc. – especially in major capital-intensive infrastructure projects. the most popular form of private sector collaboration is the bot arrangement and its variants.5 5 the popularity of bot contract arrangements means that ‘construction only’ contracting is getting less preferable except in small-tomedium-scale projects. construction projects are becoming more complex and requiring more sophisticated technologies and financing devices. the more usual arrangement for large projects now is for contractors, developers and financiers to form consortia in order to seize these players’ respective expertise, in addition to reducing project risks. nevertheless the infrastructure policy and economic growth: case of hong kong by r y c tse, b tang, e hui, y h chiang and j raftery the australian journal of construction economics & building page 73 4. factors affecting construction producitivity infrastructure investment stimulates economic growth by making product and factor markets function more efficiently, and by providing better and quicker information flows between various levels of the economy. an economic analysis of public-sector investment seeks to evaluate the efficiency of government activities, and also to understand the way government spending and finance affects the private markets. one reason we demand government services is that in many cases government can provide us with items that we cannot easily make available for ourselves or purchase from private markets. governments also regulate production and consumption to achieve socio-economic goals as improved competitiveness and the attraction of foreign investment. success of foreign contractors in hong kong can be attributed to their technological superiority, their financial capacity, and their skills in forming strategic alliances with local firms. there are no major efforts coordinated by the hong kong government or the industry to raise the general technology level. expenditure on research and development by local contractors, particularly the indigenous local contractors, is negligible. although it has often been criticized that there is waste and mismanagement in government that results in unnecessarily high costs for infrastructure projects, our results indicate that public investment is as efficient as private investment. however, the government may have grown too much and too rapidly. some government services could be dispensed with entirely allowing the resources they absorb to be used elsewhere and allowing a reduction in taxes paid. for instance, some government assets and enterprises could be sold to private firms to be operated for higher efficiency. this section discusses the extent to which productivity participation of large financial institutions able to tap and mobilize sources of cheaper credit is becoming very crucial in these consortia. of private construction projects would be affected by technological development when more public projects is going to be privatized in the future. construction technology although construction technologies have made remarkable advances in some areas such as ultra-high-rise buildings. it is also true to say that construction technology has made few contributions to the improvement of productivity in the construction industry. for instance, the microelectronics revolution which was jacked up productivity in factories and offices has had little effect on construction work, where labour work still plays a significant role. however, the construction industry is strongly affected by the level of the seasonal labour influx from other industries. in the short-term the construction industry has not been able to attract young workers away from other, more glamorous industries by increasing wages and fringe benefits and by upgrading working conditions. leading contractors have been actively engaged in the development of robots designed to free human workers from unpleasant work, rather than to raise productivity (hasegawa and shimizu group, 1988). pries and janszen (1995) argue that japan has spent a lot of effort in r&d, but r&d is explicitly part of the strategic policy. construction productivity can be improved through an effective use of materials; by facilitating the inventory techniques; by developing methods of recycling waste materials; by reducing material production costs. the development of new materials having high strength but with a smaller cross-section can help reduce the input of materials and increase the free space within the building. however, each country must follow a unique process of technical change based on its original factor endowments and the pattern of its resource accumulation over time. technical change tends to be most effective when it is based on research which seeks to economize on the relatively scarce factors of production. an effective use of new materials in infrastructure policy and economic growth: case of hong kong by r y c tse, b tang e. hui, y h chiang and j raftery page 74 the australian journal of construction economics & building construction is particularly important in hong kong where land resources are scarce. the sources of innovation range from the lowest level (product innovation) to the highest level (process innovation). the character of innovation in the construction industry has shifted towards more complex and composite products. the proportion of material innovations decreased from over 50% in the 1950s to 20% in the 1970s (pries and janszen, 1995). besides this, the growing importance of environmental issues may have an adverse influence on the construction productivity. information technology increased global competition means that industry and government must work together to ensure that entrepreneurs have support networks of transportation, telecommunications, services, and knowledge centres. technological changes are also likely to alter space usage and the demand for real estate. the telecommunication/computing revolution will significantly reduce the office space needed per office worker through corporate downsizing the greater service-sector productivity (wheaton, 1996). a common thread in all of these arguments is the notion that global systems are increasingly prevalent to the international environment. these services are particularly important to small and midsized firms that often lack the scale or resources to justify full-time internal support staff to meet these needs. the challenge for business and government is to work together to integrate the infrastructure components into environments for increasing the economic competitiveness. it is important to develop elements of a more efficient surface transportation network advanced traveler information, traffic management, vehicle control and safety systems, commercial vehicle operations, electronic toll payment, and emergency management systems to reduce road traffic congestion and more efficiently link roads with air, rail, and seaport facilities. for example, u.s. companies spent more than 10% of the gross domestic product on logistics packaging, loading, transporting, and unloading goods in what many manufacturing associations consider to be an inefficient infrastructure system (kasarda and rondinelli, 1998). by the end of the 1980s, global information systems were developing rapidly, particularly within the context of multinational corporations. the development and diffusion of flexible manufacturing systems are receiving greatest attention now. modern business requires responsive commercial and service support. firms with flexible business practices must have quick, efficient access to financial institutions; marketing, sales, and consultancy agencies. manufactures need integrated telecommunications networks to get information on markets and orders, adjust their product designs and product runs, track and manage material flows and inventory, and upgrade management and employee skills. the efficiency of physical infrastructure can be improved with the emergence of the geographic information system (gis). transportation companies can implement gis applications that include navigation devices to provide drivers with a map display showing their current position and best route to a desired destination. regional and municipal governments have demonstrated a strong interest in these systems to support planning, engineering operations, and all facets of land-use administration, including electoral rolls and tax base analysis (tapscott and caston, 1993). to cope with the increasing trend that the multinational corporation evolves to a global configuration for its informationtechnology infrastructure, the hong kong government has proposed to build the cyberport a hi-tech enclave on 26 hectares of prime land on the western shores of hong kong island, a us$1.8 billion project with a private enterprise (pacific century group). the development will include an ultra-modern intelligent building complex, a state-of-theinfrastructure policy and economic growth: case of hong kong by r y c tse, b tang, e hui, y h chiang and j raftery the australian journal of construction economics & building page 75 art broadband telecommunications and information back-bone, and a wide range of shared facilities like high performance computers, a media laboratory, demonstration and exhibition facilities and a cyber library. as a strategic information technology infrastructure project, the cyberport forms part of hong kong’s mission to develop a knowledge-based economy and to position hong kong as the pre-eminent centre of innovation and technology for east asia and beyond. it is designed to attract a cluster of companies involved in leading-edge information technology applications and services, including multimedia and content creation involving 3-d graphics and animation. the hi-tech cyberport is supposed to help propel hong kong into the digital age and become an electronic commerce hub in the region. while 17% of the cyberport project will be dedicated office space, 75% will comprise luxury apartments and houses in order to finance the project. by conventional mode, the government is used to first taking the lead in financing such infrastructure projects as railways, roads and airport, and then have them corporatized and privatized, and this worked well in the past. however, in the cyberport project, the founding company bears all the development costs and risks and is responsible for financing the entire project. the government bears no investment risk but receives a share of profits from property sales and gets a cyberport. the cyberport will offer internet start-ups a package of services including venture capital, access to silicon valley expertise, capital market experience, links to other cyberwork ventures and office space. even small and medium-sized entreprises increasingly rely on international networks of suppliers, distributors, and customers to improve their global competitiveness. one would envisage that the lack of such information infrastructure can undermine the benefits that enterprises gain from international business and slow their response to global market signals. 5. conclusions public investment spending has a significant stimulative impact on domestic output and labour employment. the core question is that how much should governments do and how much should be left to private enterprise and initiative through market sale of goods and services? once we have established the basis for public infrastructure project, we have to examine the impact of government finance on private incentives and resource use. in this paper we have discussed the public-sector strategy of infrastructure investment. however, economy became more rigid, more dependent on the government as private participation in infrastructure was curtailed. against this background, we have discussed the government’s policy in the privatisation of the major infrastructure projects. thus, the need for more integrated approaches to the use of public finance in infrastructure investment is recognized. the trend towards partnership working reflects both the need to build agreement between various interested parties, and also the strength of the private sector, whose forces may be effectively combined with foreign ventures. the asian financial crisis in 1998 has hampered the ability and interest of the private sector to fund infrastructure projects in hong kong. thus, the economic base of the territory was seriously eroded and asset prices in the territory have fallen drastically. availability of private finance capital has become a major constraint. consequently, contractions in internal consumption cause great concern to future demand and financial viability of the many proposed infrastructure projects. nevertheless, it is the intention of the government to stimulate the economy by expediting the public works programme to meet the needs for land supply for housing and related infrastructure. the government believes that increased expenditure on construction has consequential benefits for individuals by infrastructure policy and economic growth: case of hong kong by r y c tse, b tang e. hui, y h chiang and j raftery page 76 the australian journal of construction economics & building providing employment in building work or by stimulating business activities that provide wider employment opportunities. the increased private sector participation in infrastructure projects, vertical integration of construction projects, and increased foreign participation in domestic construction characterize globalization in the region. however, this paper argues that government would have to take the lead in infrastructure development because there are transaction costs in the development process. while the government often takes the lead in overall infrastructure planning, implementation of the committed projects often relies on the joint efforts of the government, the statutory bodies and private companies. to the extent that government’s participation tends to benefit mediumand large-scale contractors more than small contractors, a well-established subcontracting system should be allowed. the competitiveness of a nation’s economy depends very much on its infrastructure. most developing countries, are not competitive in construction technology and finance. however, they can take advantage of technology transfer requirements in the investment agreements to help local contractors move up the learning curve. for example, the success of japanese contractors is attributed to their technological superiority, financial capacity, skills of forming strategic alliance with host governments and local firms. these strengths are nurtured by the indispensable presence of their government’s strong infrastructure policy. reference andrikopoulos, a.a. and loizides, j. 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(1998), “housing and highway planning in israel: an environmental debate”, urban studies, 35(11), 2131-2146. stephens, j.d. and holly. b.p. (1981), “city system behaviour and corporate influence: the headquarters location of us industrial firms, 1955-75”, urban studies, 18, 285-300. stigler, g.j. (1961), the economics of information, journal of political economy, 69, 213-226. tapscott, d. and caston, a. (1993), paradigm shift the new promise of information technology, mcgraw-hill, inc., new york. unctad (1996), emerging forms of technological cooperation: the case for technology partnership, united nations centre for trade and development, new york. wheaton, w.c. (1996), “a perspective on telecommunications technology and real estate: office, industry, and retail markets”, real estate finance, 13(2), summer, 13-17. works branch, pwp-project controls committee (1995), public works project controls overview, 1st issue, may 30, 1995. works bureau, hksar, works digest, various issues. infrastructure policy and economic growth: case of hong kong by r y c tse, b tang e. hui, y h chiang and j raftery page 78 the australian journal of construction economics & building table 1. gross value of construction works by main contractors (in thousand hk $) buildings structures & facilities at construction sites construction work at nonsites total 1995 39,694 (7.6) 33,891 (27.9) 26,222 (1.7) 99,807 (11.9) 1996 50,370 (26.9) 36,822 (8.6) 29,097 (11.0) 116,290 (16.5) 1997 69,025 (37.0) 29,957 (-18.6) 32,518 (11.8) 131,500 (13.1) 1998 82,626 (19.7) 19,349 (-35.4) 31,341 (-3.6) 133,316 (1.4) 1999 76,680 (-7.2) 16,873 (-12.8) 32,884 (4.9) 126,437 (-5.2) source: hong kong monthly digest of statistics (various issues). note: figures in parenthesis are growth rates in percentage. table 2. implementation body and burden-sharing for infrastructure projects authority burden sharing/organization major projects/responsibilities hksar government chief executive & executive council highest decision-making and approval body of all infrastructure projects. government bureaus and departments physical development planning and coordination of all infrastructure projects. monitoring progress and allocating public funds. quasigovernment bodies airport authority operate, develop and manage the new hong kong international airport at chek lap kok. mass transit railway corporation operate, develop and manage the airport railway link. kowloon-canton railway corporation operate, develop and manage the west rail and other cross-border railway projects. private sector private developers, professionals, consultants, contractors, etc. involved in port facilities development and railway station development. involved in actual construction works of all infrastructure projects. infrastructure policy and economic growth: case of hong kong by r y c tse, b tang, e hui, y h chiang and j raftery the australian journal of construction economics & building page 79 table 3. government revenue from property-related sources (in million hk $) general rates properties & investment land premium total property related revenue share of total revenue 1993/1994 4,461 8,256 43,560 56,277 39.1% 1994/1995 5,156 8,376 31,357 44,889 29.7% 1995/1996 5,805 8,735 44,881 59,421 38.8% 1996/1997 6,286 9,347 57,546 73,179 42.1% 1997/1998 6,258 17,323 53,516 77,097 33.7% 1998/1999 3,614 31,374 19,251 54,238 30.3% 1999/2000 7,132 23,016 34,810 64,958 40.0% source: hong kong monthly digest of statistics (various issues). an investigation into factors influencing construction costs based on japanese, uk and us contractor practice the australian journal of construction economics and building vol.2 no.2 27 an investigation into factors influencing construction costs based on japanese, uk and us contractor practice hong xiao and david proverbs university of wolverhampton introduction construction cost is known to be the top priority for construction clients (davenport, 1997) because it determines the return on their investments. it is also a major concern to contractors as construction cost relates closely to their competitiveness and profitability. while affected by many internal and external factors, construction cost is considered a reliable and measurable indicator of contractor performance (ahmed and kangari, 1995; tam and harris, 1996). through careful cost prediction and planning before the commencement of construction, and strict cost control and management during construction, contractors can realise their aspirations in this regard. contractors may also reduce construction cost through technological innovation and improvements in productivity and management (cida, 1993). improved cost performance benefits both clients and contractors, since this can lead to more competitive pricing for clients (akintoye, 1995). in the past two decades research on cost modelling has mainly been concerned with predicting and estimating the cost of construction projects at different phases. the cost model developed by singh (1990) was used for cost estimation of reinforced concrete beam and slab structural systems in high-rise commercial buildings. elhag and boussabaine (1998) developed artificial neural network (ann) models to predict tender price of education building projects. adeli and wu (1998) formulated a regularization neural network model to estimate the cost of construction projects. the parametric cost-estimating model developed by hegazy and ayed (1998) allowed users to reoptimise to their particular environment and predict budget costs of highway projects. chau (1999) used the plan shape index to forecast building construction cost during the early design stage. however, there has also been much effort directed towards identifying those factors found to influence project costs. for example, ireland (1985) developed a model for high-rise commercial building projects to investigate the effects of managerial actions on cost reduction. the cost model from dissanayaka and kumaraswamy (1999) was created to compare the impact of procurement and nonprocurement variables on time and cost performance in building projects in hong kong. the aim of this research is to compare and evaluate contractor performance internationally and to develop best performance models for contractors. this paper focuses on modelling cost performance. here, a multiple regression model for construction cost is developed based on the construction practices found in the worlds’ leading construction industries, namely japan, the uk and the us, to identify the factors paramount to the construction cost of high-rise building projects. after briefly introducing the research methodology used, this paper presents the development of the model, followed by a discussion of the measures found to improve cost performance. methodology as used by proverbs (1998) and by oecd/eurostat (edkins and winch, 1999; vermande and van mulligen, 1999), this research uses an appropriate hypothetical project (a six-storey concrete framed office building considered common to the three countries) as the basis for a semistructured questionnaire survey for accruing the performance data. a broad, but carefully worded description of the project, including its location, gross floor area, height, and some basic technological characteristics is provided. a certain degree of flexibility, such as whether the concrete elements are pre-cast or in situ, facilitates the inclusion of some national vernacular characteristics into the design. respondents (project managers of general contractors) are invited to answer questions related to the construction of the hypothetical project. relative figures in the form of percentages and ratios are used as much as possible to maintain the comparability of data and to hong xiao and david proverbs 28 the australian journal of construction economics and building vol.2 no.2 remove the need to identify matching or concurrent cases. this balances the requirements of the comparability and representativeness of data. details of the hypothetical project and the questionnaire can be found in xiao et al. (2000 and 2002). in the questionnaire, respondents were asked to estimate the construction cost, assuming that they were the general contractor for the hypothetical project. other information relevant to contractors’ management and production practices, such as the average number of design variations encountered during construction, the frequency of meetings with subcontractors and project teams, and preferred construction methods, was also sought. a survey was conducted simultaneously in japan, the uk and the us. in japan, translated versions of the questionnaires were distributed to contractors of the building contractors society (bcs). general contractors in the us were contacted by means of a large contracting body, the associated general contractors of america (agc). in the uk, companies listed in the kompass directory (reed business information, 1999) and members of the ciob (chartered institute of building, 2000) were targeted in the survey. detailed information about the distribution and response to the survey is shown in table 1. the relatively low response rate was not unexpected, considering the complexity and volume of the questionnaire. this, however, should not invalidate the outcome of the survey. rather, it does imply that the questionnaire had been taken seriously and the responses received were both valid and reliable. a cost model was subsequently developed to identify the relationships between construction cost (i.e., dependent variables) and contractors’ preferred practices and methods (i.e., independent variables) in the building process. the aim of the model was to facilitate investigation as to what factors are important for achieving outstanding cost performance. the model can also assist in determining the importance of these factors to contractor cost performance. here, data used for modelling was based on an identical hypothetical construction project to minimise disturbance from the differences in project characteristics. factors considered included both technical (such as construction methods and communication tools) and managerial (such as quality management and procurement methods) aspects. findings from the research can demonstrate how contractors from these three countries (and possibly others) can improve their cost performance on buildings of the type considered. multiple regression analysis multiple regression analysis is by far the most widely used multivariate technique used to analyse the relationship between a single dependent variable and several independent variables (hair, jr. et al., 1995). it is usually used to predict a single dependent value through independent variables whose values are known. in addition to its predictive power, multiple regression analysis can also be used objectively to help explain the degree and character of the relationship between dependent and independent variables (hair, jr. et al., 1995; johnson and wichern, 1998). the independent variables, in addition to their collective prediction of the dependent variable, may also be considered for their individual contribution to the variate and its predictions. interpretation of the variate may rely on any of three perspectives: the importance of the independent variables, the types of relationships found, or the interrelationships among the independent variables. table 1: questionnaire survey distributed received held back for validation used in analyses no. no. % no. % no. % japan 129 26 20.2 4 15.4 22 84.6 uk 417 34 8.2 2 5.9 32 94.1 us 113 38 33.6 6 15.8 32 84.2 total 659 98 14.9 12 12.2 86 87.8 an investigation into factors influencing construction costs based on japanese, uk and us contractor practice the australian journal of construction economics and building vol.2 no.2 29 in this research, the explanation function of multiple regression analysis was utilised. as the dependent variable is the unit price for a hypothetical project, it would be of little practical meaning to use the model to predict the unit price of the hypothetical project in other circumstances. but through multiple regression analysis, the factors influencing contractor performance can be identified, the relationships between dependent and independent variables can be established, and the relative importance of each independent variable can be determined. with such, contractors can identify areas in need of improvement. as multiple regression analysis is suitable only for modelling with metric variables, nominal variables need to be transformed by means of dummy variables. for questions with only ‘yes’ and ‘no’ answers (e.g., whether the component is precast), the dummy variable can be defined as: xi=1 for ‘yes’, and xi=0 for ‘no’. for questions with more than two optional choices (e.g., ‘often’, ‘occasionally’, and ‘none’ for the use of different procurement methods), in order to make the analysis simpler, the answers are merged into two categories (‘often or occasionally’ and ‘none’) so that only one dummy variable is needed for each such variable. the analysis was conducted with the aid of the statistical package for social sciences (spss 10). only those independent variables which were significantly related to the unit price were incorporated into the modelling process. the pearson correlation (r) test is the most commonly used correlation coefficient that measures the strength of a linear association and was thus selected. the significance level was 0.05 (2-tailed). multicollinearity among independent variables was assessed by means of the tolerance value with those less than 0.1 being omitted from the multiple regression analysis. as the aim of this research is to derive best practice among contractors internationally, their nationalities were not discriminated. that is, measurement of association and the modelling procedure were performed on the aggregated response. results to investigate what factors influence the construction cost of building projects, multiple regression analysis was applied to the dependent variable of construction cost in terms of unit price. unit price was chosen because it was considered suitable for the assessment of contractor cost performance (ireland, 1985; naoum and mustapha, 1995). given that the exchange rates do not usually reflect the relative purchasing powers of currencies and constantly fluctuate (kravis, 1984), the unit prices were adjusted by purchasing power parities (ppps) (xiao and proverbs, 2002). purchasing power parities (ppps) are key statistical tools for international comparisons. they represent the rates of currency conversion that eliminate differences in price levels between countries. ppps are a geometric average of price relatives of various products and services in a national economy including consumer goods and services, government services, equipment goods and construction projects. when prices of a product or service in different countries converted by ppps are compared, they are all being valued at a common set of prices and they are not affected by the relative prices of tradable goods and by factors such as interest rates, financial flows, etc. (oecd, 2001). pearson correlation (r) tests identified ten independent variables significantly related to unit price (refer to table 2). a stepwise multiple regression procedure was applied. under the selection criteria (to enter, f < =0.050; to move, f > =0.100), four independent variables were selected, namely the percentage of overhead in unit price, the prefabrication of inner walls, the amount of design variation in construction, and the prefabrication of columns. the resulting r 2 was 0.408, signifying that 41% of the total variation in the unit price could be explained by these four independent variables. the final regression model can be presented as: y (unit price in ppps) = 523.417 + 20.636 (overhead) + 267.891 (innerwa1) + 1.114 (dvariati) + 94.406 (columns1) here, overhead represents the percentage of overhead in unit price, dvariati represents the amount of design variations in construction, and innerwa1 and columns1 are dummy variables which equal one if the inner walls and columns are prefabricated and zero if otherwise. the six variables eliminated in the regression were (i) the percentage of materials in unit price, (ii) the percentage of plant in unit hong xiao and david proverbs 30 the australian journal of construction economics and building vol.2 no.2 price, (iii) the number of working days per week, (iv) whether the contractors possessed quality assurance certificates, (v) the use of management contracting procurement, and (vi) the use of design and management procurement. the regression analysis results are summarised in table 3. the bell shaped and symmetrical histogram of standardized residuals for unit price in ppps (refer to figure 1) and the normal probability (p-p) plot for unit price in ppps (refer to figure 2) with points closely clustered to the diagonal line demonstrate that the model does not violate the assumption of normality. the random pattern of the data points in the plot of studentised residuals versus predicted values for unit price in ppps (refer to figure 3) indicates that the assumption of constant variance is not violated (hair, jr. et al. 1995; norusis, 1995). as the data were collected simultaneously from different contractors in different countries, it can be assumed that all the observations are independent, and the durbin-watson test (1.672) also confirmed this (norusis, 1995). table 2: matrix of correlation for unit price in ppps 1 2 3 4 5 6 7 8 9 10 11 1 ppps 1.000 2 material -.236a 1.000 3 plant .223a -.476b 1.000 4 overhead .397b -.251a .342b 1.000 5 dvariati .298b -.043 -.112 -.030 1.000 6 wdays .257a -.163 .117 .220a .057 1.000 7 certifi2 .300b .043 .267a .239a .046 .407b 1.000 8 columns1 .252a .120 -.017 .111 .033 .023 -.089 1.000 9 innerwa1 .371b -.142 .487b .130 -.098 .249a .246a .085 1.000 10 manacon1 .246a -.047 .179 .002 .123 .151 .470b .060 .105 1.000 11 desiman1 .212a .054 .070 -.055 .027 .173 .368b .026 .159 .612a 1.000 a correlation is significant at the 0.05 level (2-tailed). b correlation is significant at the 0.01 level (2-tailed). table 3: regression analysis results of unit price in ppps multiple r 0.639 standard error 205.9904 r 2 0.408 adjusted r 2 0.379 durbin-watson 1.672 analysis of variance df sum of squares mean square regression 4 2369672.7 592418.177 residual 81 3436996.3 42432.053 f = 13.962, sig. f = 0.000 variables in the equation b seb beta t sig. tolerance vif (constant) 523.417 51.080 10.247 0.000 overhead 20.636 5.207 0.344 3.963 0.000 0.972 1.028 innerwa1 267.891 67.571 0.344 3.965 0.000 0.969 1.032 dvariati 1.114 0.285 0.336 3.913 0.000 0.988 1.012 columns1 94.406 47.062 0.173 2.006 0.048 0.981 1.020 an investigation into factors influencing construction costs based on japanese, uk and us contractor practice the australian journal of construction economics and building vol.2 no.2 31 observed cum prob 1.00.75.50.250.00 e x p e c te d c u m p ro b 1.00 .75 .50 .25 0.00 figure 1: histogram of standardized residuals for unit price in ppps figure 2: normal probability (p-p) plot for unit price in ppps figure 3: studentized residuals versus predicted values for unit price in ppps regression standardized 2.50 2.00 1.50 1.00 .50 0.00 -.50 1.00 1.50 2.00 2.50 f re q u e n c y 16 14 12 10 8 6 4 2 0 std. dev=.98 mean=0.00 n=86.00 regression standardized predicted value 43210-1-2 r e g re s s io n s tu d e n ti z e d r e s id u a l 3 2 1 0 -1 -2 -3 duc tran and martin skitmore the australian journal of construction economics and building vol.2 no.2 32 it is acknowledged that the resulting adjusted r2 of the model is just moderate. however, it is unrealistic to assume that the complex nature of any economic relationships can be described accurately by a simple linear form (newbold and bos, 1990). for example, when ball et al. (2000) used firm and industry characteristics to predict firm profitability, the adjusted r2s of regression were as low as 0.27 and 0.18. considering the international feature of this research, and the influence of differences in culture and values, the results of the modelling were deemed reasonable. discussion multiple regression analysis revealed that overheads in the unit price and the use of prefabricated inner walls had the most significant impact on unit price with a beta coefficient of 0.344, followed closely by design variations (0.336). the beta coefficient for prefabricated columns was 0.173. these results provide guidance to contractors on how to reduce the cost of their building projects. overheads in unit price the results of multiple regression analysis showed that the unit price of building projects (converted by ppps) increased with the percentage of overheads. overheads are the costs associated with the off-site expense of managing a company or facilitating the construction project, and include the costs of maintaining a head office, workshop and offsite storage compound for plant and materials (ashworth, 1996; brook, 1998). overheads are recovered from projects undertaken by contractors in terms of percentage of turnover and may vary from project to project under different market situations. there are not many differences in direct cost (labour, plant, materials and subcontractors) estimating methods between contractors nowadays because they normally have access to the same labour supply, use the same type of equipment and obtain supplies and materials from the same sources (tah et al., 1994). to make sufficient profit while maintaining a competitive position in the market, contractors need to reduce overheads in order to keep construction costs to an absolute minimum. contractors should improve the efficiency of their management teams and effectiveness of their management systems, and concentrate on activities that can improve productivity. for example, the just-in-time (jit) system, which means having the right items of the right quality and quantity in the right place and at the right time, can be implemented in construction projects to reduce overheads by eliminating non-valueadded activities, minimising inventory levels and improving productivity (akintoye, 1995; low and mok, 1999). use of prefabrication from this analysis, higher levels of prefabrication (specifically for inner walls and columns) will increase the cost of this type of building project (a six-storey concrete framed office building). this concurs with arditi et al. (2000) who found that almost half of the contractors investigated claimed not to achieve cost savings by using prefabrication. prefabrication removes the work from the site to the more controlled environment of the factory so that components and assemblies are manufactured off site or by the construction of temporary workshops or production units such as concrete precasting plant. prefabricated components have been mainly used in industrialised residential buildings and large mass production is needed to achieve the proclaimed economic benefits (ishai, 1989). however, delays in production can affect erection schedules and a lack of communication at the design stage can have negative effects on any cost saving. fluctuations in the market make the production of prefabricated components unstable, and the increased cost in the production process has to be passed down the chain to contractors and clients. furthermore, prefabricated concrete components are normally large, bulky and heavy and require the use of expensive cranes for hoisting, and the long delivery vehicles often pose problems to the traffic flow on site (low and choong, 2001). prefabrication also demands higher costs in terms of transportation and factory overheads (d’arcy, 1995). greater co-ordination between clients, designers, manufacturers and contractors is needed before prefabrication can fully demonstrate its potential. contractors need to carefully consider the use of prefabrication and plan this effectively into the production process if the desired results are to be achieved. an investigation into factors influencing construction costs based on japanese, uk and us contractor practice the australian journal of construction economics and building vol.2 no.2 33 design variations in construction the model indicated that design variations during construction increase the unit price of building projects, which is consistent with the findings of ireland (1985). variations were defined by wallace (1995) as works which are not expressly or impliedly included in the original contract and therefore are not included in the contract price, whether they represent a change or alteration of the original work or simply an addition to or omission from it. nearly all construction projects witness a number of design variations because of various problems such as the thoroughness of the predesign site investigation, the completeness of working drawings available at the time of estimate, and generally unpredictable circumstances during construction (kaming et al., 1997). these changes after construction has commenced are disruptive to the planned construction process, leading to cost and time overruns (ireland, 1985). with increasingly lower profitability under the current sluggish economic growth and highly competitive market conditions, the rate of make up is already low and cost overruns caused by design variations and other sources may lead to losses for contractors (akinci and fischer, 1998). therefore, it is crucial that design variations are kept to a minimum in order to reduce construction costs and improve contractor cost performance. a clear and thorough brief, quality contract documentation, and the use of a independent cost manager were perceived as the three most important strategies for reducing design variations by australian practitioners (chan and yeong, 1995) and may be considered effective in other countries. conclusion construction cost is a major concern to both clients and contractors due to its obvious economic impact on them. this research aimed to identify the factors influencing the construction cost of building projects. based on a hypothetical six-storey concrete framed building project, a questionnaire survey was conducted in the three leading construction industries, namely japan, the uk and the us, to collect contractor cost performance data and other relevant information. a construction cost model was developed based on the practices of contractors in the three countries, which identified the paramount factors found to influence contractor cost performance and to highlight possible ways for improvement. multiple regression analysis revealed that the percentage of overheads in the unit price, the number of design variations during construction, and the use of prefabrication for the hypothetical project were identified as being closely related to contractor cost performance. overheads are mainly indirect costs and can be reduced through more effective site management. the use of prefabrication may lead to increased construction cost due to difficulties caused by transportation, poor co-ordination among the participants, and delays to the construction process. design variations during construction bring more uncertainties and will unavoidably increase the construction cost to both clients and contractors. while these findings in themselves are not totally surprising, they will be of interest to practitioners and clients alike. constructers need to reduce their overheads and look at ways of improving their use of prefabrication. clients and designers need to reduce or at least minimise the number of design variations issued during construction. findings reported herein, suggested that these will lead to a significant reduction in construction cost. acknowledgements the authors acknowledge the support of mr kenichi matsui of the public works research institute of the ministry of construction of japan and also numerous project managers in japan, the uk and the us for their generous cooperation and contributions to this research. references adeli, h. and wu, m. 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(1996) model for assessing building contractors’ project performance. engineering, construction and architectural management, 3|3, 187–203. wallace, i.n.d. (1995) hudson’s building and engineering contracts (11th edition). sweet and maxwell, london. vermande, h. m. and van mulligen, p. (1999) construction costs in the netherlands in an international context. construction management and economics, 17, 269–83. xiao, h., proverbs, d., shaw, t. and holt, g. (2000) a new approach to comparing the performance of contractors internationally. arcom sixteenth annual conference 2000, glasgow caledonian university, pp. 117–25. xiao, h., proverbs, d., and holt, g. (2002) a new paradigm for international contractor performance assessment. journal of construction research (accepted). xiao, h. and proverbs, d.g. (2002) the performance of contractors in japan, the uk and the us: a comparative evaluation of construction cost. construction management and economics, (accepted). ajceb_vol2_no2_28-11-02_part33 ajceb_vol2_no2_28-11-02_part34 ajceb_vol2_no2_28-11-02_part35 ajceb_vol2_no2_28-11-02_part36 ajceb_vol2_no2_28-11-02_part37 ajceb_vol2_no2_28-11-02_part38 ajceb_vol2_no2_28-11-02_part39 ajceb_vol2_no2_28-11-02_part40 ajceb_vol2_no2_28-11-02_part41 an investigation into the learning climate of chartered quantity surveying practices the learning climate of chartered quantity surveying practices david lowe, (the university of manchester, uk) martin skitmore, (queensland university of technology, australia) abstract this paper reports on a fully structured interview survey investigating the relationship between the learning climate of chartered quantity surveying practices and individual learning styles, approaches to learning, ability, measures of length of service and the size of the quantity surveying organisation. the results indicate that the learning environment is generally supportive in terms of human support, but less supportive in terms of staff development systems; as individuals rise in the hierarchy of an organisation, their perception of its ability to provide an appropriate learning environment increases. likewise, perceptions of human support and working practices within organisations increase significantly with length of time in the profession; larger organisations have more advanced staff development systems but provide less human support; and the learning environment both overall and in terms of working practices correlates positively with learning styles and approaches to learning. keywords: learning organization, experiential learning, learning styles, practitioners, quantity surveying introduction professional practitioners, it is held, continually learn on the job, as their work necessitates involvement in a series of projects, problems or cases which are new to them. learning from experience, therefore, is extremely important in professional development, and requires an ability to conceptualise and an ability to evaluate. further, it is important for professionals to sustain a critical and evaluative attitude towards practice, so that they seek to improve it and do not lapse into complacency. learning also occurs within a social context and is a social phenomenon as well as an individualistic one (jarvis, 1987), while different learning environments require different skills of learners (kolb, 1976) and impose "... different strategies of learning; individuals try to adapt to the demands and opportunities presented by the content of what is to be learned and its institutional setting" (ramsden, 1988). several researchers have hypothesised that learning styles affect behaviour in the workplace (gish, 1980; manring, 1979; miller, 1978; sims, 1983). however, there is a lack of evidence concerning exactly what is learned and how professionals learn from experience (eraut, 1994). practitioners in the context of this paper are chartered quantity surveyors. quantity surveyors are appointed by construction clients to provide cost expertise, advise on the choice of materials, construction and procurement processes, deal with planning, building regulations and architects, and to provide contract expertise (thompson, 2004). learning through experience is well known in the profession and several recommendations have been made to facilitate this, especially in the form of feedback mechanisms (e.g., flanagan and norman 1983; morrison 1984; ogunlana 1989). previous empirical research also confirms that quantity surveyors rely to a significant extent on their work experience in activities such as cost estimating (lowe and skitmore, 1994) and has investigated the extent to which individual surveyors‟ learning styles affect the way such experiences are utilised (lowe and skitmore, 2001). australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 2 this paper reports on the results of a study investigating the extent to which learning by experience is applicable in quantity surveying organisations and the effect on their employees who provide early stage building price forecasts, in particular:  the practitioner's perceptions of the learning climate of their organisation  relationships between the learning climate and measures of: length of experience, ability and the size of the organisation/practice, and  relationships between the learning climate and individual learning styles of and approaches to learning. learning in the work place learning in the workplace takes place in many situations: formal, informal or incidental. informal learning within the workplace is predominantly experiential and non-institutional, including self-directed learning, networking, coaching, mentoring, performance planning and trial-and-error (marsick and watkins, 1990). incidental learning, however, is unintentional, a by-product of another activity, examples include: learning from mistakes, assumptions, beliefs, attributions and internalised meaning constructions about actions of others. much incidental learning is unintended, where learning opportunities are derived from everyday experiences or perceptions (rogers, 1986). for most employed individuals, 95% of learning is achieved „on the job‟ (lewis and margerison, 1979), with learning occurring naturally in the work environment rather than through structured learning activities (binsted, 1980; mumford, 1987). the most significant factors that have been found to influence learning within organisations comprise: relations with other people, degree of autonomy, and policies and commitment towards training and learning; with the factors hindering learning being: other people's characteristics, organisational structures, the environment and job characteristics (vandenput, 1973). opportunities for work-based learning are, therefore, crucially dependent on the way in which work is organised and allocated (eraut, 1994 p 168). the employees‟ capacity to recognise opportunities, know what they are learning and how they are learning, however, varies considerably (mumford, 1990), with learners often failing to draw upon the richness of the opportunities for learning offered (harri-augustein and thomas, 1991). this is due to individual-differences, job/job characteristics, context and environment factors (morrison and brantner, 1992). in particular, many practitioners work in an environment that does not encourage them to think about their practise and how it might be made more effective (mumford, 1981). fortunately, learners are most influenced by their peers (freedman, 1967), as the majority of managers are unlikely to be aware of the impact of learning style on their subordinates, and consequently on the ability of subordinates to learn from and with them. very rarely are the specific opportunities for particular learning identified in advance, reviewed beforehand with individuals, or subsequently reviewed and discussed (mumford, 1991). ideally, it is said that an organisational culture climate approach is needed, in which an organisation encourages learning by encouraging managers to identify their own learning needs and setting challenging learning goals; encouraging managers to experiment; providing opportunities for learning both on and off the job; giving on-the-spot feedback; allowing time for managers to review, conclude and plan learning activities, and tolerating some mistakes, provided managers try to learn from them (mumford, 1986). additionally the "ideal" working situation: "... has jobs that grow and expand; takes action to meet development needs;... allows people to decide how to meet their objectives; has collaborative processes for setting objectives; diagnoses the causes of problems; encourages people to be open about their problems;... welcomes new ideas; constantly changes; has top management who are actively involved in training and development australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 3 activities;... provides opportunities to use new skills;... constantly strives to improve quality; encourages people to aim high; uses task forces and project teams; encourages people to experiment with new ways of doing things; actively supports people's plans to implement something learned on a course" (honey and mumford, 1989 p 8). several studies have been made of the learning climate of professions such as medicine (e.g., schultz et al 2004), teaching (e.g., chou and lui 2005), nursing (e.g., chun-heung 1997, myrick and yonge 2001), personnel administration (e.g., mikkelsen 1998), management (e.g., ortenblad 2002; chou et al 2005) and social work (e.g., barron 2004). the only study to date concerning the learning climate of quantity surveyors examines the effects on performance (lowe and skitmore 2007). to date, nothing is known of the details or typology of the learning climate in this context however. empirical study sample the population for the investigation was experienced quantity surveyors based within greater manchester, central lancashire and south lakeland. the area of study was selected as representative of north west england. it was believed that the area represented a relatively homogeneous group. ultimately, 84 practitioners from 77 organisations took part, representing 45% of the estimated population of such organisations in the region. all the respondents have experience in providing early stage building price forecasts. questionnaire the interviewees were required to complete a multi-part questionnaire comprising  an experience profile of the subjects, which provided information concerning their position within their organisation, length of experience and the size of the organisation.  a learning climate questionnaire (lcq), an inventory designed to elicit information on whether the subjects considered their organisation provided an appropriate climate  a revised randomised version of kolb's (1985) learning style inventory (lsi 1985), and  an approach to learning at work questionnaire (alq) the lcq required the subjects to rate fifteen pairs of statements on a five-point semantic differential scale. the chosen statements were derived from pedler et al's (1991) measuring the quality of your learning climate; honey and mumford's (1989) work situation items and mumford's (1980) ways in which supervisors can improve the learning climate. the original scoring method of kolb's lsi 1985 was replaced by a four-point agreement scale. the rationale for this was to remove the ipsative nature of the inventory. the choice of a fourpoint scale was dictated by a desire to force a choice between agreement/disagreement with each item. the alq required the subjects to rate the strength of their agreement to twentyfour statements on a five-point agreement scale. the statements were derived from kolb et al's guide for analysis of personal problem solving processes (kolb et al. 1979); kolb's adaptive competencies and work abilities (kolb 1984); mumford's skills involved in effective learning behaviour and the rational approach to learning (mumford 1980); honey and mumford's knowledge and skills items and abilities of the ideal learner (honey and mumford 1989); richardson‟s approaches to studying questionnaire (richardson 1990); smith's post project analysis form (smith 1982) and gibbs' abilities associated with each stage of the learning cycle (gibbs 1988). analysis descriptive statistics were calculated for the measures of time in the profession, position in the organisation and size of the organisation. likewise, descriptive statistics were calculated australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 4 for each item of the lcq, which were then ranked based on the mean score. a three ("k") factor analysis was performed for the lcq and factor scores generated. each item of the lcq, a summary variable and the three factor scores were analysed for differences, by means of 't' tests and its comparable non-parametric test, between subgroups based on position within the organisation, size of practice and the total size of organisation. they were also analysed for differences between 4 subgroups based on time/size of practice interaction using one-way analysis of variance (anova) and its comparable non-parametric test. the mean, standard deviation, and internal consistency coefficients (using cronbach's alpha and the spearman-brown split-half reliability test) were calculated for each subscale of kolb's revised lsi 1985. a six ("k") factor analysis was performed for the alq and factor scores generated. each item of the lcq and the four summary variables were correlated with measures of length of experience, the size of the organisation, the quantity surveyors‟ ability, the subscales of kolb's lsi 1985 and the alq factor scores. partial correlation coefficients were calculated between the four lcq summary variables and measures of the length of experience, controlling for size of the practice and then again controlling for the size of the organisation. similarly partial correlation coefficients were also calculated between the four lcq summary variables and measures of the size of the practice/organisation, controlling for time in the profession. separate multiple regression analyses were undertaken with the lcq summary variable and the three factor scores as the dependent variable. findings perceptions of the learning climate lcq summary variables initially, principal components extraction with varimax rotation was used to determine the underlying dimensions of the 15 items of the lcq. the number of factors extracted dictated by kaiser's criterion. this produced a three-factor solution, while a scree plot indicated that the true number of factors lay between two and four factors. two, three and four factor solutions were carried out, and after inspecting the factor loadings matrices the three-factor solution was computed. the initial eigenvalues ranged from 5.71 for factor one to 1.13 for factor three and the solution accounted for 55.36% of the variance. the final solution was generated using principal factor extraction with an oblique (oblimin) rotation. the threefactor solution accounts for 45.1% of the total variance in the lcq. the internal consistencies of the three factors were measured by the squared multiple correlations and found to be internally consistent. variables were ordered and grouped by size and interpretive labels suggested. factor one „human support‟ is associated with items the 8, 10, 4, 11, 5, 7, 6, and 9: „people are very willing and supportive; pleasure is taken in the success of others‟; „the organisation is an open and friendly place‟; „people are usually ready to give their views and pass on information‟; „discussion of problems is actively encouraged‟; „people are recognised for good work and rewarded for effort and learning‟; „if people develop a new skill or technique there is plenty of opportunity to use it‟; „people manage themselves and their work; there is great emphasis on taking personal responsibility‟; „constructive feedback is often provided about your performance‟. factor two „staff development systems‟ is associated with the items 3, 1 and 2: „there is a systematic process for identifying individual development needs‟; „there are lots of resources; development facilities are very good‟; „people are encouraged to learn at all times and to extend themselves and their knowledge‟. factor three „working practices‟ is associated with the items 14, 15, 13, and 12: „accepts that some estimates will prove to be inadequate‟; „explicitly deals with risk and uncertainty‟; „working practices and structures are constantly under review‟; „high standards are a goal to be achieved‟. three factor scores were generated using the regression method. the validity of these dimensions is supported by vandenput (1973), as discussed earlier. australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 5 additionally, a weighted average lcq summary variable (lcq) was created. descriptive statistics the alpha reliability estimate for the total scale was 0.86, while the split-half reliability estimate was 0.82. this suggests the inventory is internally consistent. frequencies and summary statistics for the fifteen statements used in the lcq are presented in table 1, ranked by their mean scores. q 4 3 2 1 0 med -ian mean sd 10 the organisation is an open and friendly place 38 31 8 6 1 there is little openness and support; the organisation is cold and insular 3 3.18 0.96 6 people manage themselves and their work; there is great emphasis on taking personal responsibility 32 38 12 1 1 people conform to rules and standards at all times no personal responsibility is taken or given 3 3.18 0.81 11 discussion of problems is actively encouraged 34 30 12 7 1 'people don't have problems' 3 3.06 1.00 12 high standards are a goal to be achieved 33 22 22 6 1 high standards are compulsory 3 2.95 1.03 4 people are usually ready to give their views and pass on information 19 46 15 4 0 people tend to keep their feelings to themselves; are secretive and information is hoarded 3 2.95 0.77 2 people are encouraged to learn at all times and to extend themselves and their knowledge 20 38 20 5 1 there is little encouragement to learn; there are low expectations of people in terms of new skills and abilities 3 2.85 0.90 8 people are very willing and supportive; pleasure is taken in the success of others 21 35 21 6 1 people don't support each other; there is an unwillingness to pool or share information 3 2.82 0.93 5 people are recognised for good work and rewarded for effort and learning 18 33 22 7 4 people's successes are ignored but blame is readily attributed 3 2.64 1.06 7 if people develop a new skill or technique there is plenty of opportunity to use it 15 30 32 6 1 if people develop a new skill or technique there are few opportunities to use it 3 2.62 0.90 13 working practices and structures are constantly under review 18 28 25 11 2 working practices and structures are static 3 2.58 1.04 14 accepts that some estimates will prove to be inadequate 10 38 26 8 2 does not accept inadequate estimates 3 2.55 0.91 15 explicitly deals with risk and uncertainty 14 32 27 7 4 avoids risk and uncertainty 3 2.54 1.02 9 constructive feedback is often provided about your performance 7 27 33 15 2 constructive feedback is rarely provided about your performance 2 2.26 0.93 3 there is a systematic process for identifying individual development needs 7 20 24 26 7 the identification of development needs is left to the individual 2 1.93 1.11 1 there are lots of resources; development facilities are very good 4 21 29 22 8 training packages, resources and equipment are limited 2 1.89 1.04 table 1 frequencies, means and standard deviations of individual items of the learning climate questionnaire (lcq) [n = 84] australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 6 this indicates that the working environment within quantity surveying organisations is perceived to be supportive in terms of human support. those statements given a high rating included: "the organisation is an open and friendly place"; "people manage themselves and their work; there is great emphasis on taking personal responsibility"; “discussion of problems is actively encouraged”; "high standards are a goal to be achieved" and "people are usually ready to give their views and pass on information". this finding is important as learning within an environment requires a human communications network or society (rogers, 1986 pp 54-55), relates to the social context within which learning takes place (lovell, 1980 p 13), while snell (1992) considers the main source of 'pain' in learning to be the prevailing organisational ethos of competitive individualism. further, freedman (1967) states that learners are more influenced by their peers than by any other factor within their learning environment. the results also suggested that the working environment was considered to be less supportive in terms of staff development systems. ogunlana (1991) has suggested that design offices should set up a formal system for self-evaluation that promotes learning through constructive use of process and outcome feedback. the low ratings given to a systematic process for identifying individual development needs within organisations and the provision of constructive feedback suggest that surveying organisations either know that this is not necessary or still have to finds ways to effectively implement this. differences in perceptions of the learning climate based on the practitioner's position in the organisation descriptive statistics 40 of the respondents were partners or director of their organisation (47.6%), 20 were associates (23.8%), 20 were principal or senior quantity surveyors (23.8%) and 4 were quantity surveyors (4.8%) indicating a preponderance of subjects holding senior positions within their organisation. all the practitioners were of an appropriate level of experience and seniority, thus, producing a homogenous sample (rosenthal and rosnow, 1991) sufficiently large enough to allow statistical analysis. tests for differences the items of the lcq and the four summary variables were tested for differences between subgroups based on the position of the practitioner within their organisation: quantity surveying practitioners (pos. 1; n = 44) and partners or directors (pos. 2; n = 40). the results of this analysis are presented in table 2. very highly significant differences (at the 0.1% level) were established between the two subgroups for the human support and working practices factor scores and the lcq summary variable. additionally, significant differences exist for seven of the eight lcq items associated with human support and three of the four items associated with working practices. for all the significant items, the partners/directors' mean scores were higher than those of the employees. the findings suggest that as individuals rise in the hierarchy of an organisation their perception of its ability to provide an appropriate learning climate increases. the reasons for this could be due to: a sense of loyalty to the organisation (the organisation has enabled them to rise to the top); an increased expectation by employees for the organisation to provide an appropriate learning environment; because the 'older' practitioners have progressed beyond the major learning events of their career development and are, therefore, less likely to be critical of the organisation's learning environment; or simply that the climate, being „designed‟ by the more established staff, is just better suited to their needs. however, there appears to be agreement between both subgroups concerning the australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 7 provision of staff development systems, particularly relating to the identification of needs and the provision of learning resources. item position in organisation size of practice total size of organisation time/size of practice interaction 10. organisation (hs) t -4.636*** 2.461* 3.244** f 3.164* z -4.187*** 2.891** 3.060** x 2 11.316** 6. personal responsibility (hs) t -2.485* 2.654** 2.062* f 3.023* z -2.430* 3.296*** 2.519* x 2 14.608** 11. problems (hs) t -4.934*** 0.544 1.657 f 1.071 z -4.456*** 0.899 1.783 x 2 5.214 12. high standards (wp) t -4.446*** 0.634 1.062 f 1.067 z -4.217*** 0.824 1.341 x 2 3.204 4. people information (hs) t -1.681 2.312* 2.944** f 2.865* z -1.673 2.521* 2.917** x 2 9.111* 2. encouragement to learn (sds) t -2.043* 0.362 0.605 f 0.800 z -1.857 0.539 0.658 x 2 2.027 8. support (hs) t -3.841*** 2.533* 2.797** f 2.706* z -3.581*** 2.689** 2.953** x 2 9.708* 5. recognition of work (hs) t -4.172*** 2.323* 1.811 f 1.760 z -3.847*** 2.165* 1.978* x 2 4.847 7. new skills (hs) t -3.119** 0.481 0.000 f 0.605 z -2.895** 0.573 0.066 x 2 2.925 13. working practices (wp) t -1.854 -1.152 0.104 f 0.843 z -1.742 -1.065 -0.270 x 2 2.611 14. estimates (wp) t -3.942*** 0.717 0.477 f 0.499 z -3.657*** 0.841 0.602 x 2 1.696 15. risk & uncertainty (wp) t -2.328* 0.531 0.959 f 0.832 z -2.324* 0.691 0.949 x 2 2.394 9. feedback (hs) t -2.537* 0.466 1.900 f 0.919 z -2.341* 0.288 1.872 x 2 2.400 3. identification of needs (sds) t -0.763 -2.656** -3.585*** f 5.195** z -0.635 -2.608** -3.372*** x 2 13.023** 1. resources (sds) t 1.221 -3.455*** -3.203** f 4.832** z -1.285 -3.117** -2.973** x 2 11.683** lcq summary variable (lcq) t -4.260*** -0.164 0.224 f 1.213 z -3.735*** -0.076 -0.358 x 2 5.686 human support (hs) t -5.203*** 2.758** 3.381*** f 3.775* z -4.532*** 3.024** 3.364*** x 2 12.729** working practices (wp) t -5.621*** 1.017 1.377 f 0.952 z -5.150*** -1.279 -1.744 x 2 6.036 staff development systems (sds) t -0.793 -2.899** -2.901** f 4.513** z -0.421 -2.791** -2.872** x 2 13.167** table 2 anova and tests for differences for learning climate questions (n = 84) *** = p 0.001 ** = p 0.01 *= p 0.05 't' = t-test for independent samples, 'z' = mann-whitney u – wilcoxon rank sum w test, f = f ratio one-way analysis of variance, x2 = chi-square kruskal-wallis 1-way anova australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 8 relationships between the learning climate and measures of the length of experience descriptive statistics the length of time the practitioners had been providing general cost advice was a mean of 17.8 years (sd 6.9). this is comparable with the length of corporate membership of the royal institution of chartered surveyors (rics). the results (table 3) suggest that quantity surveyors specialise after approximately 4 years general estimating experience. this is illustrated by a median difference of 4 years and a mean difference of 3.64 years experience respectively. mode median mean sd kurtosis skewness generally 20 16 16.67 7.79 -0.07 0.45 area(s) of specialism 20 12 13.03 7.20 -0.65 0.49 rics membership 8 16 16.69 9.02 -1.04 0.25 table 3 modes, medians, means and standard deviations for the length of experience (n = 84) and rics membership (n = 73) correlations the items of the lcq and the four summary variables were correlated with three measures of the length of experience of the practitioners: the number of years as an estimator, the number of years of specialism within estimating and the number of years as a corporate member of the rics. pearson's 'r' and spearman's 'rs' correlation matrices are presented in table 4. the results indicate that the practitioners' perception of their organisation‟s ability to provide an appropriate learning climate, in terms of human support (the factor score and the lcq items associated with personal responsibility, the introduction of new skills, and the discussion of problems) and to a lesser extent for working practices (the factor score and the item related to high standards) increase significantly with measures of time in the profession. however, there appears to be no indication of a relationship between time in the profession and the provision of staff development systems. relationships between the learning climate and measures of the size of the practice descriptive statistics to investigate the relationship between the learning climate of an organisation and its size, both the size of the practitioner's practice and the size of their total organisation in terms of the number of professional/technical staff were obtained. the results are presented in table 5. correlations the items of the lcq and the four summary variables were also correlated with two measures of the size of the practice (the practitioners‟ office) and the size of the practitioner‟s organisation as a whole. pearson's 'r' and spearman's 'rs' correlation matrices are presented in table 4. the results indicate that the staff development systems factor score (and the lcq items associated with the provision of learning resources and the identification of needs) australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 9 correlated significantly and positively with both measures of size. however, the human support factor score (and the items linked to the friendliness of the organisation, personal responsibility, people sharing information, support from colleagues, discussion of problems, and recognition of work) were found to correlate significantly and negatively with measures of size. no years generally no years specialism no years in rics size of practice size of total organisati -on n = 84 n = 84 n = 73 n = 84 n = 74 10. organisation (hs) p 'rs' 0.130 0.216* 0.091 -0.274* -0.287* s 'rs' 0.112 0.161 0.053 -0.290** -0.308** 6. personal responsibility (hs) p 'rs' 0.252* 0.237* 0.259* -0.168 -0.085 s 'rs' 0.296** 0.272* 0.285* -0.348*** -0.153 11. problems (hs) p 'rs' 0.206 0.198 0.184 -0.253* -0.190 s 'rs' 0.235* 0.232* 0.172 -0.112 -0.181 12. high standards (wp) p 'rs' 0.151 0.299** 0.111 -0.149 -0.075 s 'rs' 0.196 0.281** 0.116 -0.163 -0.119 4. people information (hs) p 'rs' 0.177 0.195 0.154 -0.050 -0.239* s 'rs' 0.168 0.186 0.136 -0.208 -0.336** 2. encouragement to learn (sds) p 'rs' 0.049 0.081 0.052 -0.047 -0.011 s 'rs' 0.031 0.089 0.049 0.028 0.016 8. support (hs) p 'rs' 0.172 0.164 0.176 -0.139 -0.121 s 'rs' 0.166 0.163 0.193 -0.242* -0.230* 5. recognition of work (hs) p 'rs' 0.153 0.147 0.104 -0.176 -0.062 s 'rs' 0.098 0.093 0.065 -0.228* -0.161 7. new skills (hs) p 'rs' 0.253* 0.225* 0.157 -0.089 -0.077 s 'rs' 0.236* 0.216* 0.156 -0.032 0.022 13. working practices (wp) p 'rs' 0.179 0.147 0.051 -0.035 0.012 s 'rs' 0.168 0.144 0.059 0.016 -0.063 14. estimates (wp) p 'rs' 0.109 0.088 0.069 -0.006 0.018 s 'rs' 0.134 0.109 0.078 -0.056 -0.107 15. risk & uncertainty (wp) p 'rs' 0.021 0.017 -0.072 -0.115 0.078 s 'rs' 0.055 0.070 -0.067 -0.139 -0.017 9. feedback (hs) p 'rs' 0.040 0.065 -0.021 -0.188 -0.163 s 'rs' 0.033 0.054 -0.033 -0.011 -0.145 3. identification of needs (sds) p 'rs' -0.017 -0.035 -0.046 0.010 0.358** s 'rs' -0.026 -0.059 -0.049 0.248* 0.324** 1. resources (sds) p 'rs' -0.175 -0.186 -0.140 0.225* 0.351** s 'rs' -0.176 -0.180 -0.154 0.406*** 0.396*** lcq summary variable (lcq) p 'rs' 0.133 0.151 0.071 -0.102 0.080 s 'rs' 0.119 0.165 0.044 -0.000 0.029 human support (hs) p 'rs' 0.234* 0.257* 0.205 -0.233* -0.252* s 'rs' 0.213 0.234* 0.183 -0.288** -0.319** working practices (wp) p 'rs' 0.219* 0.216* 0.136 -0.175 -0.049 s 'rs' 0.247* 0.259* 0.139 -0.178 -0.183 staff development systems (sds) p 'rs' -0.038 -0.047 -0.070 0.068 0.312** s 'rs' -0.104 -0.088 -0.134 0.316** 0.350** table 4 correlations between learning climate questions and number of years experience and size of organisation australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 10 mode median mean sd kurtosis skewness size of practice 3 7.5 23.77 52.81 18.50 4.26 size of organisation 3 15.5 153.50 274.50 7.92 2.56 table 5 modes, medians, means and standard deviations for size of practice (n = 84) and total size of organisation (n = 74) tests for differences to investigate this further, the items of the lcq and the four summary variables were also tested for differences between subgroups based on the size of the practice (s1 = small size practices, s2 = large size practices) and the size of the organisation (o1 = small organisation, o2 = large organisation). the results of this analysis are presented in table 2. highly significant differences (at the 1% level) were established between the two subgroups for the staff development systems factor score and the lcq items associated with the provision of learning resources and the identification of needs. for all the significant items, the mean scores for practitioners in the larger practices (and larger organisations) were significantly higher than those of practitioners in the smaller practices (and smaller organisations). highly significant differences (at the 0.1% and 1% levels) were established between the two subgroups for the human support factor score. additionally, there were significant differences for the lcq items linked to the friendliness of the organisation, personal responsibility, people sharing information, support from colleagues, and recognition of work. for all the significant items, the mean scores for practitioners in the smaller practices (and smaller organisations) were significantly higher than those of practitioners in the larger practices (and larger organisations). both these analyses suggest that as the size of the organisation increases the individual's perception of its ability to provide an appropriate learning environment in terms of staff development systems also increases. however, the practitioners' assessment of their organisation in terms of human support decrease as its size increases. further, the results indicate no relationship between their perception of working practices and the size of their organisation. relationships between the learning climate and individual learning styles descriptive statistics the mean and standard deviations for the lsi 1985 subscales for the practitioner sample are presented in table 6. the alpha reliability estimates for the total sample were similar to those obtained by geiger et al. (1993), ranging from 0.74 to 0.88, while the split-half reliability estimates range from 0.80 to 0.92 for the four main subscales scores. this suggests the inventory is internally consistent. ce ro ac ae ac ce ae ro mean 32.43 32.86 36.82 40.49 4.39 7.63 sd 4.61 6.57 4.85 4.40 5.21 6.85 r1 0.74 0.88 0.83 0.81 0.84 0.86 r2 0.80 0.92 0.89 0.87 0.85 0.91 table 6 means, standard deviations and reliabilities for kolb's learning style inventory 1985 revised subscales (n = 84) r1 = cronbach's alpha, r2 = spearman-brown split half australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 11 correlations the items of the lcq and the four summary variables scores were correlated with the lsi 1985 subscale scores. pearson's 'r' and spearman's 'rs' correlation matrices are presented in table 7. concrete experience reflective observati -on abstract conceptuali -sation active experimen tation ac_ce ae_ro 10. organisation (hs) p 'rs' 0.250* -0.009 0.100 -0.075 -0.128 -0.039 s 'rs' 0.236* -0.055 0.094 0.013 -0.054 0.029 6. personal responsibility (hs) p 'rs' -0.018 -0.201 -0.035 -0.015 -0.017 0.184 s 'rs' 0.074 -0.220* -0.029 0.076 -0.016 0.225* 11. problems (hs) p 'rs' 0.091 -0.065 0.097 -0.103 0.009 -0.004 s 'rs' 0.128 -0.107 0.123 -0.035 0.032 0.052 12. high standards (wp) p 'rs' 0.192 0.004 0.295** 0.304** 0.105 0.191 s 'rs' 0.198 0.041 0.266* 0.284** 0.090 0.172 4. people information (hs) p 'rs' 0.161 -0.079 -0.025 -0.067 -0.166 0.033 s 'rs' 0.197 -0.121 -0.012 -0.036 -0.134 0.052 2. encouragement to learn (sds) p 'rs' 0.060 -0.043 0.085 -0.081 0.026 -0.011 s 'rs' 0.118 -0.031 0.142 -0.063 0.061 -0.031 8. support (hs) p 'rs' 0.080 -0.114 -0.074 -0.058 -0.139 0.073 s 'rs' 0.144 -0.152 -0.032 -0.020 -0.123 0.099 5. recognition of work (hs) p 'rs' 0.140 0.055 0.058 -0.055 -0.070 -0.088 s 'rs' 0.186 0.036 0.088 -0.001 -0.014 -0.079 7. new skills (hs) p 'rs' 0.045 0.011 0.113 -0.004 0.065 -0.013 s 'rs' 0.081 0.002 0.162 0.004 0.071 -0.022 13. working practices (wp) p 'rs' 0.210 0.163 0.168 0.045 -0.029 -0.128 s 'rs' 0.256* 0.159 0.170 0.078 -0.052 -0.128 14. estimates (wp) p 'rs' 0.225* 0.122 0.085 0.185 -0.120 0.002 s 'rs' 0.262* 0.120 0.096 0.231* -0.180 0.001 15. risk & uncertainty (wp) p 'rs' -0.057 0.038 0.005 0.038 0.055 -0.013 s 'rs' -0.036 0.010 0.028 0.024 0.105 -0.019 9. feedback (hs) p 'rs' -0.130 0.108 0.088 -0.070 0.197 -0.149 s 'rs' -0.065 0.116 0.042 -0.070 0.196 -0.172 3. identification of needs (sds) p 'rs' 0.058 0.159 0.130 0.121 0.070 -0.075 s 'rs' 0.011 0.125 0.149 0.100 0.056 -0.089 1. resources (sds) p 'rs' 0.190 0.128 -0.047 -0.057 -0.212 -0.159 s 'rs' 0.173 0.138 -0.001 -0.057 -0.201 -0.189 lcq summary variable (lcq) p 'rs' 0.193 0.086 0.143 0.054 -0.037 -0.048 s 'rs' 0.256* 0.089 0.207 0.148 -0.026 -0.029 human support (hs) p 'rs' 0.137 -0.082 0.046 -0.084 -0.078 0.024 s 'rs' 0.195 -0.123 0.060 -0.021 -0.040 0.070 working practices (wp) p 'rs' 0.145 0.068 0.149 0.109 0.011 0.005 s 'rs' 0.249* 0.028 0.199 0.204 -0.005 0.072 staff development systems (sds) p 'rs' 0.135 0.166 0.113 0.021 -0.015 -0.146 s 'rs' 0.118 0.175 0.162 0.054 -0.003 -0.164 table 7 correlations between learning climate questions and kolb's learning style inventory 1985 revised subscales (n = 84) p 'r' = pearson's correlation coefficients , s 'rs' = spearman's correlation coefficients the results establish a positive relationship between concrete experience and the lcq summary variable, the working practices factor score and the lcq items associated with australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 12 the acceptance of errors in estimates, the friendliness of the organisation, and working practices. likewise, a positive relationship is established between abstract conceptualisation and the item related to high standards; and active experimentation and the items related to high standards and the acceptance of errors in estimates. also, a significant but weak negative relationship was found between reflective observation and the item related to personal responsibility. the results suggest a positive relationship between learning styles and the working environment especially those items relating to working practices. an explanation for this could be: the more support, 'freedom to learn', an individual receives from their organisation, the more likely they will be to participate in experiential learning. this is especially true for the more active dimensions (concrete experience and active experimentation), which are apparent to their peers and employers. overall, however, the lack of significant relationships between many of the lcq items/factor scores and learning style subscales appears to support ruble and stout‟s (1991) argument that learning styles should be considered as relatively stable personal dispositions, especially when the learning environment remains relatively stable over time. relationships between the learning climate and approaches to learning factor analysis initially, principal components extraction with varimax rotation was used to determine the underlying dimensions of the 24 items of the alq. the number of factors extracted dictated by kaiser's criterion. this produced an eight-factor solution that did not meet the criteria of a simple structure as many variables were complex. a scree plot indicated that the true number of factors lay between five and seven factors. seven, six and five factor solutions were carried out, and after inspecting the factor loadings matrices the six-factor solution was computed. the initial eigenvalues ranged from 4.91 for factor one to 1.28 for factor six and the solution accounted for 56.8% of the variance. the final solution was generated using principal factor extraction with an oblique (oblimin) rotation. the six-factor solution accounts for 43.7% of the total variance in the alq. the internal consistencies of the six factors were measured by the squared multiple correlations. at 0.84 for factor one, 0.78 for factor two, 0.83 for factor three, 0.68 for factor four, 0.77 for factor five and 0.77 for factor six they were internally consistent. variables were ordered and grouped by size and interpretive labels suggested. factor one 'risk-taking' is associated with the ability to take risks, see connections, adjust quickly, and convert ideas into action and openness. factor two 'self-management' is associated with the ability to assess one‟s own development needs, analyse, and formulate action plans and review performance. factor three 'proactivity' or proactive experiential learner is associated with making a conscious effort to learn from experience, question things or investigate new concepts. factor four 'insecurity' is associated with the ability to analyse the success of others, share experiences, adjusting quickly but not converting criticism into constructive suggestions for improvement. factor five 'passivity' or passive experiential learner is associated with making a conscious effort to learn from experience, listening and adjusting quickly, but not questioning things. finally, factor six 'self-confidence' is associated with recognising and adjusting to errors, accepting help or asking questioning. six factor scores were generated using the regression method. correlations the items of the lcq and four summary variables were correlated with the alq factor scores. pearson's 'r' and spearman's 'rs' correlation matrices are presented in table 8. the lcq summary variable correlated significantly and positively with the alq factor scores labelled self-management (at the 0.1% level) and self-confidence (at the 5% level). the australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 13 working practices factor score correlated significantly and positively with the alq factor scores self-management (at the 1% level), risk-taking (at the 1% level) and self-confidence (at the 5% level). also, the staff development systems factor score correlated significantly and positively with the self-management factor score (at the 5% level), although none of the lcq items associated with this dimension correlated significantly with self-management. risk taking self management proactively insecurity passivity self confidence 10. organisation (hs) p 'rs' 0.185 0.166 -0.062 -0.048 0.122 0.002 s 'rs' 0.131 0.177 -0.018 -0.070 0.065 0.061 6. personal responsibility (hs) p 'rs' 0.210 -0.012 0.017 0.016 0.007 0.266* s 'rs' 0.277* 0.029 0.106 -0.023 0.025 0.313** 11. problems (hs) p 'rs' 0.118 0.064 -0.157 0.034 0.105 0.060 s 'rs' 0.165 0.082 -0.122 0.031 0.127 0.146 12. high standards (wp) p 'rs' 0.260* 0.221* 0.078 0.020 -0.052 0.322** s 'rs' 0.277* 0.232* 0.122 -0.024 -0.036 0.318** 4. people information (hs) p 'rs' 0.053 0.066 -0.027 0.226* 0.025 0.036 s 'rs' 0.082 0.131 0.026 0.165 0.061 0.079 2. encouragement to learn (sds) p 'rs' 0.022 0.183 0.062 0.106 0.055 0.168 s 'rs' 0.053 0.209 0.111 0.064 0.158 0.234* 8. support (hs) p 'rs' -0.064 0.032 -0.197 0.151 0.202 0.250* s 'rs' -0.006 0.065 -0.153 0.140 0.240* 0.272* 5. recognition of work (hs) p 'rs' 0.085 0.133 -0.125 0.037 0.205 0.028 s 'rs' 0.072 0.204 -0.086 0.056 0.175 0.065 7. new skills (hs) p 'rs' 0.094 0.188 -0.086 0.015 0.019 0.118 s 'rs' 0.132 0.227* -0.014 0.014 0.052 0.132 13. working practices (wp) p 'rs' 0.050 0.326** -0.073 0.086 -0.026 -0.002 s 'rs' 0.074 0.316** -0.030 0.082 0.017 0.012 14. estimates (wp) p 'rs' 0.120 0.179 -0.129 0.027 0.219* 0.241* s 'rs' 0.167 0.162 -0.111 0.033 0.214* 0.295** 15. risk & uncertainty (wp) p 'rs' 0.135 0.245* -0.049 0.034 0.193 0.118 s 'rs' 0.207 0.217* 0.018 0.003 0.190 0.111 9. feedback (hs) p 'rs' -0.062 0.310** 0.075 0.089 -0.034 0.062 s 'rs' -0.065 0.311** 0.111 0.106 0.034 0.060 3. identification of needs (sds) p 'rs' -0.079 0.080 -0.158 0.009 0.015 -0.032 s 'rs' -0.093 0.064 -0.160 0.011 -0.015 -0.039 1. resources (sds) p 'rs' -0.190 0.104 -0.108 0.172 0.068 -0.027 s 'rs' -0.138 0.109 -0.094 0.188 0.131 -0.001 lcq summary variable (lcq) p 'rs' 0.074 0.288** -0.112 0.117 0.123 0.173 s 'rs' 0.149 0.363*** -0.016 0.115 0.133 0.250* human support (hs) p 'rs' 0.103 0.147 -0.104 0.101 0.141 0.170 s 'rs' 0.117 0.150 -0.019 0.055 0.149 0.206 working practices (wp) p 'rs' 0.190 0.279** -0.110 0.039 0.157 0.227* s 'rs' 0.295** 0.299** -0.037 0.006 0.136 0.261* staff development systems (sds) p 'rs' -0.108 0.203 -0.111 0.106 0.036 0.000 s 'rs' -0.074 0.222* -0.092 0.127 0.077 0.032 table 8 correlations between learning climate questions and approaches to learning at work questionnaire factor scores (n = 84) p 'r' = pearson's correlation coefficients , s 'rs' = spearman's correlation coefficients australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 14 while neither the human support factor score nor three out of the eight items linked to human support correlated significantly with any alq factor score, the lcq item related to obtaining feedback on one‟s performance correlated significantly and positively with the selfmanagement factor score, and the item linked to taking personal responsibility correlated significantly and positively with the self-confidence factor score (both at the 1% level) the findings indicate that the practitioners rated their ability to:  self-manage their approach to learning more highly when they perceived the overall learning environment and specifically the working practices of the organisation to be supportive, and where they obtained feedback on their performance;  be self-confident in their approach to learning more highly when they perceived the overall learning environment and specifically the working practices of the organisation to be supportive, and where they were given personal responsibility and received support from their colleagues;  take risks in their approach to learning more highly when they perceived the working practices (standards) of the organisation to be supportive and where they were given personal responsibility. the significance of the learner's environment to learning is established within the existing literature. ogunlana (1989), quoting from feldman (1986), had suggested that surveying organisations should create a social environment that requires learning to improve learning from experience and, therefore, their estimating performance. these findings establish the relationship between an individual's approach to learning and the learning climate. investigation of the time/size interaction to investigate further the interaction between time in the profession and size of the organisation on the practitioner‟s perception of the learning climate of their organisation, the following tests were performed: tests for differences the items of the lcq and four summary variables were tested for differences between 4 subgroups based on time in the profession/size of the practice interaction: small size/low experience (s1:t1, n = 22), small size/high experience (s1:t2, n = 20), large size/low experience (s2:t1, n = 20) and large size/high experience (s2:t2, n = 22). the results are presented in table 2. closer examination using bonferroni‟s post hoc multiple comparison test revealed that the human support factor score and the lcq items linked to the friendliness of the organisation, personal responsibility, and people sharing information were rated significantly higher by practitioners in small size practices with high experience (s1:t2) than practitioners in large size practices with low experience (s2:t1). also, the staff development systems factor score and the lcq items associated with the identification of needs, and the provision of resources were rated significantly higher by practitioners in large size practices with low experience (s2:t1) than practitioners in small size practices with low experience (s1:t1). additionally, practitioners in large size practices with low experience (s2:t1) rated the item associated with the provision of resources significantly higher than practitioners in small size practices with high experience. interestingly, there were no significant differences for the working practices factor score, any lcq item associated with working practices or the lcq summary variable. partial correlation partial correlation coefficients were calculated between the four lcq summary variables and the three measures of the length of experience of the practitioners (the number of years as australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 15 an estimator, the number of years of specialism within estimating and the number of years as a corporate member of the rics) controlling for size of the practice and then again controlling for the size of the organisation. partial correlation coefficients were also calculated between the four lcq summary variables and the two measures of the size of the practice (the practitioner‟s office) and the size of the practitioner‟s organisation as a whole, controlling for time in the profession. time: human support was found to correlate significantly and positively with the number of years of specialism as an estimator at the 5% level, when controlling for size of practice. further, no other significant relationships were established when controlling for size of the organisation. size: staff development systems correlates significantly and positively with the size of the organisation at the 1% level, when controlling for time in the profession. regression analysis to investigate the time/size interaction further, multiple regression analysis was carried out with the human support, working practices, staff development systems, and lcq summary variables as dependent variables. the independent variables were position, time, log-sizep (size of practice), log-sizet (size of organisation), size-timep interaction, sizetimet interaction, 6 learning styles, and 6 approaches to learning factor scores. for the human support summary variable both forward and backward regression analysis confirmed the significance of position as the sole significant predictor. for the working practices summary variable both forward and backward regression analysis found position and self-confidence to be significant predictors, while backward regression analysis also found self-management to be a significant predictor. for the staff development systems summary variable both forward and backward regression analysis confirmed the significance of log-sizet, self-management and position as predictor variables. for the lcq summary variable regression analysis both forward and backward regression analysis confirms the significance of position, self-management and log-sizet as important predictors. summary human support the learning environment within quantity surveying organisations is perceived to be supportive in terms of human support. this was particularly the case for senior managers who rated the provision of human support significantly higher than the employee respondents. further, the significance of position was confirmed by the results of the regression analysis. the practitioners' perception of human support increases significantly with measures of time in the profession, but also decreases significantly as the size of the organisation increases. the relationship between human support and time in the profession was confirmed by the results of partial correlation when controlling for size. further, practitioners in small size practices with high experience rated the provision of human support significantly higher than practitioners in large size practices with low experience. working practices the partners/directors perceived the learning environment within quantity surveying organisations to be more supportive in terms of working practices than the employee australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 16 respondents. the significance of position was confirmed by the results of the regression analysis. the practitioners' perception of working practices was found to increase significantly with measures of time in the profession; however, this relationship was not confirmed by the results of partial correlation when controlling for size. a positive relationship was established between working practices and the learning style concrete experience, while individual lcq items related to working practices were linked to abstract conceptualization and active experimentation. the significance of these relationships, however, was not confirmed by the results of the regression analysis. also, working practices are linked positively with the approaches to learning self-management, risk-taking and self-confidence. the significance of self-management and self-confidence was confirmed by the results of the regression analysis. staff development systems the learning environment was perceived to be less supportive in terms of staff development systems, particularly relating to the identification of needs and the provision of learning resources, both overall and by the partner/director and employee subgroups. the practitioners' perception of staff development systems increases significantly as the size of the organisation increases. this relationship was confirmed by the results of partial correlation when controlling for time in the profession and by the results of the regression analysis. further, practitioners in large size practices with low experience rated the provision of staff development systems significantly higher than practitioners in small size practices with low experience. additionally, practitioners in large size practices with low experience also rated the item related to the provision of resources significantly higher than practitioners in small size practices with high experience. the overall learning environment (summary variable) the partners/directors perceived the overall learning environment within quantity surveying organisations (as measured by the lcq summary variable) to be more supportive than the employee respondents. the significance of position was confirmed by the regression results. a positive relationship was established between the overall learning environment and the learning style concrete experience. also, the lcq summary variable is linked positively with self-management and self-confidence: the higher a practitioner rates an organisation in terms of its overall learning climate the higher they rate their ability to self-manage and be more self-confident in their approach to learning. the significance of self-management was confirmed by the results of the regression analysis. conclusions the following conclusions have been drawn from the investigation.  the learning environment within quantity surveying organisations is perceived to be supportive in terms of human support but less supportive in terms of staff development systems.  as an individual rises in the hierarchy of an organisation, their perception of its ability to provide an appropriate learning environment increases. senior managers (partners/directors) considered the overall learning environment within quantity surveying organisations, the provision of human support and working practices to be more supportive than the employee respondents. further, the practitioners' perception of human support and working practices increases significantly with measures of time in the profession. australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 17  the practitioners' perception of their organisation's ability to provide appropriate staff development systems increases, while their perception of its ability to provide human support decreases, as the size of the organisation increases.  the provision of human support was rated significantly higher by practitioners in small size practices with high experience than practitioners in large size practices with low experience; while, practitioners in large size practices with low experience rated the provision of staff development systems significantly higher than practitioners in small size practices with low experience. additionally, practitioners in large size practices with low experience also rated the item related to the provision of resources significantly higher than practitioners in small size practices with high experience.  a positive relationship was established between the learning style concrete experience the overall learning environment and working practices, while individual lcq items related to working practices were linked to abstract conceptualization and active experimentation. this suggests that the more support for 'freedom to learn' an individual receives from their organisation the more likely they will be to participate in experiential learning. this is especially true for the active dimensions (concrete experience and active experimentation), which are apparent to their peers and employers.  the higher a practitioner rates an organisation‟s overall learning climate and specifically its working practices the higher they rate their ability to self-manage and be more self-confident in their approach to learning. additionally, the higher a practitioner rates an organisation‟s working practices the higher they rate their ability to be risk-taking in their approach to learning. despite the recommendations of flanagan and norman (1983), morrison (1984) and ogunlana (1989) many quantity surveying organisations appear to have weak formal feedback systems. this is likely to be particularly important insofar as early stage building price forecasting is concerned, as current knowledge of market conditions, local contractors‟ workloads, etc., is likely to be a major determinant of how well the surveyors can perform this task. practitioners gave a low rating to the provision of constructive feedback by the organisation on their performance. surveying organisations should consider introducing effective feedback mechanisms that require both the individual to critically reflect on their own performance and the organisation to provide effective constructive feedback on an individual's performance. while surveying organisations are perceived to be supportive in terms of human support, especially by senior managers in small size organisations, they are perceived to be less supportive in terms of staff development systems. further, the significant differences between the perceptions of the partner/directors and their employees could suggest that they are not in tune with the organisations learning climate. those practitioners who are in a position to most influence the organisational culture, therefore, perceived the organisation to be significantly better in providing an appropriate environment than their employees. surveying organisations are dependent, to a large extent, on the skills and abilities of individual and groups of surveying staff. therefore, as mumford (1991) has argued, it is only by the effective deployment and use of learning opportunities that organisations will enable themselves to change and continue to function effectively in a turbulent environment. the implication of this is that surveying organisations may need to more accurately assess their ability to provide an effective learning environment and to address any deficiencies, especially in the provision of staff development systems, to maintain performance and thereby possibly increase their quality of service and competitive advantage. as with most empirical studies of this nature, the results provide more questions than answers. why are larger organisations perceived to have better staff development systems australasian journal of construction economics and building lowe, d and skitmore, m (2011) ‘the learning climate of chartered quantity surveying practices’, australasian journal of construction economics and building, 11 (4) 1-20 18 but worse human support than smaller organisations? is this a faulty or accurate impression of the staff involved? if the impressions are correct, then is this situation optimal for these organisations or not? if it is optimal, what are the reasons? if not, then what is preventing organisations from doing this better? likewise, why do the more senior and more experienced practitioners perceive their learning climate to be better than the other practitioners? are the perceptions of one or both of the groups faulty and, if so, why are they faulty and to what extent does that matter? and again, if they are correct, to what extent is the situation optimal or suboptimal and why? these issues seem to be worthy of more study. also, at a more general level, there is the question of whether these findings are applicable to north west england quantity surveying practices only? we don‟t yet know if the same situation exists for other building professions and/or in other parts of uk or the world in general. in addition, much of the results of this survey resonate loudly or those of us who now work in the educational/research industry – suggesting an even broader study could be quite revealing. finally, it should be mentioned that a recurring theme of surveys in the project and construction management field concerns the significant differences in perceptions between the younger and more experienced practitioners involved – suggesting the existence of a “generation-gap” of consequence. of course, it is easy for those more established personnel to decry the perceptions and opinions of the new order as being ill-informed and impractical, but there is a lingering suspicion that change may be needed and necessary after all. times have changed considerable since the “old-days”. no longer do practitioners mature gradually over a lengthy period of learning almost entirely on-the-job. instead, they emerge full-qualified from the 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(1973) „the transfer of training: some organisational variables‟, journal of european training, 2 (3), 251–262 factors contributing to the fluctuation in residential construction in iran hassan gholipour fereidouni, (universiti sains malaysia, malaysia) abstract residential construction is one of the most important pillars of iran‟s economy. although this sector had an increasing trend over the past two decades, the growth rate of residential construction has been very volatile. the purpose of this paper is to empirically investigate those factors contributing to this fluctuation over the 1991:q2-2008:q4. by applying cointegration approach, the empirical results show that housing prices, construction costs, gdp and gold prices are important factors to predict changes in the level of residential construction in iran. keywords: housing, construction costs, residential construction, cointegration approach, iran introduction the last two decades have witnessed a strong growth in construction activity in iran. the private sector investment in new buildings in urban areas has recorded impressive growth during the 1992-2008 period, with the annual growth rate of 33% (see figure 1). similarly, building activities can also be traced through the number of construction permits issued by municipalities in urban areas. during the period 1991-2008, the average annual construction permits was 140,286 items and reached the highest peak in 2007 (208,922 items). it is a matter of fact that the investment in construction sector has been a major driver of economic growth (lopes, 1998), by stimulating the demand for many other industries such as electronics, machinery, steel, architecture, and chemical products. a recent statistics provided by global market information databases (gmid, 2011) indicates that construction and real estate sector contributed about 17 percent of iranian gdp over the period of 1995-2009. .0 10 20 30 50 60 70 80 .% 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 year 40 figure 1 annual growth rates of private investment in new buildings in urban areas (source: central bank of iran) australasian journal of construction economics and building fereidouni, h g (2011) ‘factors contributing to the fluctuation in residential construction in iran’, australasian journal of construction economics and building, 11 (4) 77-86 78 one of the important components of the total construction investment in iran is residential construction. during the period 1992-2007, construction permits for residential building represents around 88 percent of total construction permits (see figure 2). the share of residential housing sector of total capital formation was around 25-30% in 2007 (mhud, 2007). furthermore, around 25% of iran economy‟s liquidity is allocated to the housing sector and also 14.6% of the employed male population is active in this sector (abbasinezhad and yari, 2009). figure 2 the share of construction permits for residential out of total number of construction permits (source: statistical center of iran) however, as can be seen from figure 1, the growth rate of residential investment was very volatile during the period 1992-2008. in more detail, during this period, the standard deviation of growth rate of residential investment was 20%. moreover, the highest and lowest growth rate was related to 2007 (80%) and 1998 (0.9%) respectively. in this paper we aim to empirically investigate those factors contributing to the fluctuation in residential construction in iran over the period 1991:q2-2008:q4. this paper contributes to the construction investment literature and provides some implications for policymakers and real estate developers. firstly, although previous studies have examined the determinants of investment in housing, to the best of our knowledge, there is no recent work on the housing market of iran. most studies in this area cover united states (u.s.) and european real estate markets. findings for developed countries might not be directly transferable to emerging economies such as iran, therefore, more work is necessary to obtain a clearer picture of residential construction in emerging economies. secondly, from previous literature it is apparent that relatively few researchers have studied the effects of gold prices on construction investment. we add this variable to our model because (culturally) gold is a valuable asset for iranian families and whose price changes may influence household‟s residential construction decisions. in particular, it is a case in small cities. thirdly, investment in residential dwelling has been one of the main components of iranian non-oil gdp. therefore, housing construction can lead recoveries and recessions in the economy of iran. finally, changes in new housing supply affect the price of existing housing units, with implications for the wealth position of homeowners and housing affordability (mayer and somerville, 2000). given the significant role of the housing sector in the economy of iran, identifying those factors contributing to the swings of residential construction is important to policymakers because australasian journal of construction economics and building fereidouni, h g (2011) ‘factors contributing to the fluctuation in residential construction in iran’, australasian journal of construction economics and building, 11 (4) 77-86 79 fluctuations in residential construction have a large impact on gdp. furthermore, our results help real estate developers to have a better understanding of the long run determinants of residential construction. the paper is structured as follows: in the next section are presented some facts regarding the residential construction in iran. section 3 reviews the relevant literature. in section 4 the most significant hypothesis about the determinants for residential construction are exposed. section 5 describes the methodology used in this paper. section 6 reports the empirical results and section 7 makes some concluding remarks. some facts about residential construction in iran this section provides some facts about residential construction in iran. housing production has been almost entirely carried out by the private sector in iran. the state participation in housing market has been less than 10 percent. however, the role of government in the housing market has increased through mehr housing scheme in past three years. under this scheme real estate developers are offered free lands in return for building cheap residential units for firsttime buyers on 99-year lease contracts. only one bank in iran, maskan bank (or housing bank) provides loans for building, purchasing and repairing houses. in 2009, the maximum loan offered by this bank was irr180 million which equals almost 20 percent of the cost of a sixty square meter flat in a major city such as tehran (gmid, 2011). worldwide, iran is ranked 143 overall for dealing with construction permits and other formal requirements among 183 economies. according to the world bank‟s doing business report 1 (2011), it requires 17 procedures, takes 322 days, and costs 382.35 % income per capita to construct a building in iran. table 1 shows dealing with construction permits data for iran compared to good practice and comparator economies. indicators iran comparable economies (middle east & north africa) good practice economies (oecd) procedures (number) 17 18.7 15.8 time (days) 322 151.9 166.3 cost (% of income per capita) 382.3 409.7 62.1 table 1 dealing with construction permits and other formal requirements (source: the world bank and the international finance corporation) literature review a number of researchers have studied the determinants of construction investment. this section of paper intends to survey some of the previous researches which are more relevant to our study. by applying the vector error correction (vec) and time series multiple regression models ng et al. (2011) forecasted private construction investment in hong kong. their results showed that the real gdp, unemployment and public sector construction output are the factors influencing 1 see http://www.doingbusiness.org/methodology/dealing-with-construction-permits for a complete description of the dealing with construction permits portion of the doing business database. australasian journal of construction economics and building fereidouni, h g (2011) ‘factors contributing to the fluctuation in residential construction in iran’, australasian journal of construction economics and building, 11 (4) 77-86 80 private construction investment. in his study on determinants of house prices and construction activities in switzerland, borowiecki (2009), by applying a var model, found that construction activities and house prices are very sensitive to changes in population and construction prices. al-abdulrazag (2003) employed a regression approaches to model jordanian private construction investment. his results indicated that gdp growth, flow of remittances, bank credit, real interest rate and population growth are relevant factors explaining construction sector investment in jordan. furthermore, he found that government expenditures have a net positive impact on construction investment. by using quarterly data over the period 1974 to 1988, akintoye and skitmore (1994) analyzed the determinants of private sector construction demand in three sub-sectors (including housing, commercial and industrial construction). regarding the housing sector, they found that demand is negatively correlated with price level of construction and positively correlated with gross national product (gnp) and real interest rate. moreover, their time-series regression results showed that there are no significant relationships between unemployment and manufacturing profitability and private sector construction demand in housing. similarly, tang et al. (1990) used regression analysis to estimate demand functions for three types of construction (residential, non-residential and public projects). their empirical results for residential construction indicated that the ratio of consumer price index to the construction cost index, rising per capita income, and population are the main determinants of demand for residential construction. he et al. (2009) investigated the determinants of foreign direct investment in china‟s real estate development. applying a panel data regression model, their statistical results indicated that foreign real estate investors and developers avoid provinces with high labor and financing costs but significantly favor provinces with higher housing prices, developed land and housing commercialization, good governance, strong law enforcement and developed services. applying unit root tests and granger causality tests, tse and ganesan (1997) analyzed the causal and short-tem relationship between construction flows and gdp in hong kong. their findings indicated that gdp leads construction flows, and not vice versa. likewise, wigren and wilhelmsson (2007) found that gdp granger cause total construction in the short run in western europe. yiu et al. (2004) provided evidences that there is a casual linkage between the real growth rate of construction output and the real growth rate of gdp in hong kong. mayer and somerville (2000), based on urban growth theory, developed an empirical model of new single-family housing supply. their empirical estimates showed that housing starts are affected by changes in existing and lagged house prices and costs. by focusing on u.s. housing market, coulson (1999) examined the sources of fluctuations in housing completions and inventory for the period 1968 through 1995. coulson found that the housing completion rate is not affected by shocks to income, interest rates, materials price, and housing price and appeared to be more or less constant over the time. in addition, he found that the number of completions depends more on the extent of unfinished inventory and the technology of finishing work. donatos (1995) examined the effects of income, demographic factors, building costs, finance and saving on investment in housing for the period 1958-1989 in greece. by applying ordinary least squares (ols) estimation, he found that income and population influence significantly investment decisions. moreover, his findings showed that financial variables were not significant determinants of housing investment. mcgarvey and meador (1991) examined the relationship between housing starts and the availability of mortgage credit in the u.s. their results indicated that mortgage credit availability australasian journal of construction economics and building fereidouni, h g (2011) ‘factors contributing to the fluctuation in residential construction in iran’, australasian journal of construction economics and building, 11 (4) 77-86 81 contributed significantly to short-run cycles in housing starts. similarly, by using u.s. monthly data over 1967-1984, thom (1985) found that housing starts are significantly influenced by both interest rates and mortgage availability. topel and rosen (1988) found that housing investment responds elastically to changes in asset prices in the u.s. by using spectral analysis on u.s. data, tan (1988) found that future expectation, business profits and interest rate influence construction investment decisions. factors contributing to the fluctuation in residential construction in iran2 in this section we select the variables to test for our empirical analysis. this choice is guided by three considerations: the relevance of the variables in question from the perspective of the iranian economy, the availability of data and the need for a parsimonious specification imposed by the relatively small size of the sample. the following variables were chosen for econometric investigation: dependent variable is residential construction and explanatory variables are construction costs, housing prices, gdp, credit to construction and housing sector and gold prices. the remaining part of this section will discuss this selection. dependent variable in order to measure residential construction, we use construction permits issued by municipalities in urban areas. during the period 1991-2008, the average annual construction permits was 140,286 items and reached a peak in 2007 with 208,922 items. however, as mentioned earlier, the number of construction permits had high fluctuation during the 1992-2008 period, with the maximum and minimum annual growth rate of 0.28 (28%) and -0.16 (-16%) respectively (see figure 3). the data for this variable is obtained from central bank of iran. figure 3 annual growth rates of construction permits in urban areas (source: central bank of iran) explanatory variables construction costs: the first hypothesis to be tested is the relationship between residential construction and construction costs. it is expected that the construction costs variable has a negative and long-run relation with residential construction. this is motivated by the findings of borowiecki (2009) and akintoye and skitmore (1994) who showed that construction price appeared to be an important influence in housing investment. we employ construction service index provided by central bank of iran to measure construction costs. 2 it should be noted that the interest rate was dropped from our empirical model because interest rate for construction and housing loans was almost constant over the period of this study. australasian journal of construction economics and building fereidouni, h g (2011) ‘factors contributing to the fluctuation in residential construction in iran’, australasian journal of construction economics and building, 11 (4) 77-86 82 housing prices: previous studies and economic theory suggest that an increase in house prices leads to a rise in the housing construction. for example, baffoe-bonnie (1998) argues that the depression of real housing prices would retard new investment in housing, and the volume of new housing starts would fall. similarly, he et al. (2010) found that heightening housing prices significantly stimulated the inflow of foreign investment in china‟ real estate development. so we hypothesize a positive relationship between housing prices and residential construction. since the data for housing price is not available for the period of the study the rental value index which has a very high correlation with housing prices in recent years (r = 0.98) – was used as a proxy for housing prices. this data is obtained from central bank of iran. gross domestic products (gdp): a positive relationship has generally been found between gdp and investment in residential construction (e.g., ng et al., 2011; tse and ganesan, 1997). in other words, it is argued that construction investments occur more during an economic boom. it is because higher gdp would create more demand for real estate properties, therefore attracting more investment into the real estate industry. given past empirical research on the effects of gdp on construction investment, a positive coefficient is expected for the gdp variable in the present study. this data is obtained from central bank of iran. credit to construction and housing sector: another hypothesis to be tested is the relationship between credit to construction and housing sector and residential construction. it is expected that swings in credit to construction and housing sector has a direct effect on fluctuation in residential construction. it is because higher value of banking loans to construction and housing sector can lower financing costs for investment (he et al., 2010). according to statistics provided by the central bank of iran, outstanding facilities by banks and credit institutions to construction and housing sector accounted, on average, for around 32% of total credit to the non-public sectors over the period 1979 to 2008. due to unavailability of quarterly data for this variable, quarterly data on claims on the private sector 3 , provided by imf, were used. this figure was divided by three to obtain an approximation to the credit to construction and housing. gold prices: gold has traditionally been important in iran for cultural reasons. it is common for iranian families to allocate a (considerable) proportion of their assets to various forms of gold (such as gold coins, gold necklaces etc.). residential construction is expected to have either a negative or a positive relationship with gold prices. some observers argue that when returns from the gold market fall, there are more incentives for households and investors to invest in the housing sector (e.g. iran economics, 2004; masron and gholipour, 2010). on the other hands, some believe that when returns from the gold market rise, the wealth effect encourages some households to start building new houses, particularly in small cities the gold coin price, used to measure this variable, is provided by the central bank of iran. in summary, the model for residential construction in iran can be expressed as: lnpermitt = c + β1 lnccost t + β2 lnrent t + β3 lngdp t + β4 lncch t + β5 lngold t + ut (1) where permit is the construction permits issued by municipalities in urban areas; ccost is construction costs; rent is the rental index, proxy for housing prices; gdp is the gross domestic product; cch is the credit to construction and housing sector; gold is the gold coin 3 according to imf, claims on private sector include gross credit from the financial system to individuals, enterprises, nonfinancial public entities not included under net domestic credit, and financial institutions not included elsewhere. australasian journal of construction economics and building fereidouni, h g (2011) ‘factors contributing to the fluctuation in residential construction in iran’, australasian journal of construction economics and building, 11 (4) 77-86 83 price and u is an error term. it should be noted that the logarithm for the dependent and the independent variables is used. time series data is used to run the model put forward in equation (1). the time span we used is the period 1991: quarter 2 2008: quarter 4. description and sources of variables can be found in table 2. variables description proxy for/ actual measure sources permit construction permits issued by municipalities in urban areas proxy for residential construction investment central bank of iran ccost construction cost index actual measure central bank of iran rent rental index proxy for housing prices central bank of iran gdp gross domestic product actual measure central bank of iran cch claims on private sector proxy for credit to construction and housing international monetary fund gold gold price actual measure central bank of iran table 2 variables, description and sources method this section presents the method used in this paper for the treatment of time series data. in order to avoid spurious results when data are non-stationary, cointegration is the most widely used technique. given the attractiveness of cointegration technique to model the long run relationships among variables (crˆotte et al. 2010; brissimis and vlassopoulos, 2009), we apply this method to estimate the long run relationships among explanatory variables (construction costs, housing prices, gdp, credit to construction and housing sector and gold prices) and residential construction. as a preliminary step, standard unit root tests augmented dickey-fuller (adf) tests, (dickey and fuller 1981) are applied to the variables included in the model to determine whether they are stationary or not. second, the long run elasticities are estimated through a cointegrating regression if the residuals are stationary. in other words, we estimate the cointegrating equation, and the obtained parameters can be considered the best method to measure long-run relationships. then, the residuals from the equation must be examined to determine if they are stationary variables. if so, the model can be used to infer conclusions about the long run relationships among the variables (rodríguez and bustillo, 2010). given the difficulties with obtaining the long run parameters through a cointegrating regression based on a traditional ordinary least square (ols) static 4 model, we used the fully modified ols (fmols) estimator that “applies semi-parametric adjustments to the ols estimator to correct for possible endogeneity and serial correlation in the errors” (crˆotte et al. 2010, pp. 4452). finally, the stability of the parameters were tested by hansen‟s instability test. hansen (1992) outlines a test of the null hypothesis of cointegration against the alternative of no cointegration. results this section presents the results of the time series cointegration approach. first, the stationarity of the logarithmic form of each series was tested with the adf unit root test. the results suggest 4 possible dynamics are not considered in ols model (maddala and kim, 2004). australasian journal of construction economics and building fereidouni, h g (2011) ‘factors contributing to the fluctuation in residential construction in iran’, australasian journal of construction economics and building, 11 (4) 77-86 84 that all variables are integrated of order one, i.e. that the variables were transformed into stationarity by differencing once. variables levels 1st differences lnpermit -2.71** -2.99** lnccost -0.39 -3.35** lnrent -1.09 -2.64** lngdp 3.37 -4.09*** lncch -0.01 -2.82** lngold -1.41 -3.37*** table 3 adf t-test for stationarity note: ***, **, and * denote significance at the 1%, 5%, and 10% levels, respectively the residual unit root tests indicate that there is conintegration because the residuals are stationary. the long run coefficients (estimated by fmols) are reported in table 4. construction cost is negatively related to residential construction (permit). it means that higher construction costs reduce residential construction in iran. this result is in agreement with borowiecki (2009) and mayer and somerville (2000). the estimated housing prices (proxied by rental index) coefficient carries the expected positive sign. this result suggests that increasing house prices (rent) stimulate residential construction. this is consistent with baffoe-bonnie (1998) and mayer and somerville (2000). furthermore, the analysis finds that gdp has a positive and statistically significant (at the 1 percent level) effect on residential construction, concurring with other similar studies (ng et al., 2011; tse and ganesan, 1997). the results also indicate that there is not a significant and long run relationship between credit to construction and housing sector (cch) and permit. this finding is consistent with donatos (1995) who argues that financial variables are not the significant determinants of housing investment. it should be noted that cch (lagged one period) had a positive and significant relationship between with permit. finally, the gold parameter is statistically significant and positive, suggesting that an increase in contemporaneous gold prices exerts a direct effect on permit. this is consistent with previous studies that argue that heightening gold prices can increase housing investment through wealth effect. dependent variable: lnpermit explanatory variables coefficient ccost -0.90 (-4.77)*** rent 0.68 (3.40)*** gdp 0.46 (4.30)*** cch 0.49 (1.06) gold 1.13 (4.59)*** adjusted r-squared 0.33 n 70 dw 1.73 table 4 cointegrating regression (fmols method) note: ***, **, and * denote significance at the1%, 5%, and 10% levels, respectively. t-statistics are reported in brackets. australasian journal of construction economics and building fereidouni, h g (2011) ‘factors contributing to the fluctuation in residential construction in iran’, australasian journal of construction economics and building, 11 (4) 77-86 85 the stability of the parameters was tested by using hansen‟s instability test. the lc test statistic value of 0.654 indicates that the series are cointegrated at conventional levels i.e. the parameters are stable. conclusion over the last two decades, residential construction has been one of the most important pillars of economy of iran. however, residential construction is ranked among the most volatile industries. the purpose of this study has been to investigate the factors contributing to the fluctuation in residential construction in iran over the period 1991:q2-2008:q4. the empirical results show that construction costs, gdp, housing prices and gold prices are all relevant factors explaining fluctuation in residential construction. furthermore, one-period lagged credit to the construction and housing sector is a significant determinant of residential construction. ultimately, the results of the study should be considered in light of its limitations. given the data constraints, results should be viewed with caution and data from a longer period is needed to fully investigate the relationships between explanatory variables and residential construction. furthermore, we could not include some important explanatory variables (e.g., infrastructure development and public savings) due to difficulty to obtain quarterly data for them. acknowledgement the author would like to thank the institute of postgraduate studies (ips), universiti sains malaysia (usm) for providing a fellowship to support this research. references abbasinezhad, h. and yari, h. 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(2004) „a longitudinal analysis on the relationship between construction output and gdp in hong kong‟, construction management and economics, 22 (4), 339-45 http://www.iraneconomics.net/fa/printarticle.asp?id=212 barriers to the development of sme’s in the australian construction industry the australian journal of construction economics and building vol.2 no.2 71 barriers to the development of sme’s in the australian construction industry anthony mills and jim smith, university of melbourne associate professor peter love, edith cowan university introduction the aim of this research is to identify the barriers to the development of small to medium enterprises (sme’s) in the australian construction industry, including means for reducing and overcoming them. preliminary research (mills et al., 2002) shows that sme’s in non-metropolitan areas often find it difficult to compete effectively with metropolitan-based organisations for projects in regional victoria. this has resulted in a depletion of regional jobs and skills leading to reduced business activity and investment in regional areas. in addition, research undertaken by smith et al. (2000) has found that non-metropolitan based building contractors (in particular) face difficulties in being considered, or preselected, for medium to large sized government and private sector projects in regional areas of victoria. even when included on selected lists of tenderers for projects in their region, many were unable to compete against their metropolitan-based rivals. this research compares the operational characteristics of construction firms in both metopolitan and regional areas. the information is used to examine the effect of the market on the operation of sme’s in construction in order to identify barriers to their development. the conclusion of this research suggests that a range of initiatives are needed to raise the performance and capabilities of sme’s in regional areas, so that they are as adept as metropolitan counterparts in winning tenders in their own regions; it also identifies some potential policy initiatives. this research was supported by the university of melbourne and the building commission of victoria. background many non-metropolitan areas are facing economic and social problems due to a decline in population, and withdrawal of many services. many regional areas are looking for an economic and social response to support and maintain their existing community fabric. the alternative is long-term decline and de-population. many observers including disney (1993) and steinke (1977) agree that this decline should be arrested and the needs of these communities should be given closer attention. one response to supporting regions is to provide facilities and infrastructure to allow these communities to enjoy the same range of services as those in metropolitan areas. this often means the construction of new facilities or renovation of buildings. the additional employment activity (albeit temporary) these projects inject into an area can provide an economic boost to firms and businesses in the locality. the boost in investment that building provides is a longerterm expression of self-reliance and confidence. thus, this research suggests that construction in regional areas does have a significant role to play in underpinning the social and economic life of regional communities. the construction industry is a relatively large employer of labour, either directly as employees, suppliers and subcontractors, or indirectly, in the large number of small businesses that make up the sector. many of these small businesses are found in regional areas, forming a significant part of business activity, and for these reasons governments take an active interest in the health of the construction industry. the australian government has also recognised new economic research that highlights the importance of innovation to industrial sectors and the overall national economy. it is particularly aware that strategies to be developed should enmesh the (construction) industry into what the oecd calls the learning economy: one that is knowledge intensive, innovative, flexible and adaptive and characterised by the fast and effective diffusion of information, characteristics which, in the past, have not been anthony mills, jim smith and peter love 72 the australian journal of construction economics and building vol.2 no.2 evident in the building and construction industry (disr, 1999, p. 36). regional construction companies have much to gain from linking into expanded networks of it, tender information, supply chains, education, training and ecommerce. such an approach could mitigate the effects of the “tyranny of distance” felt most keenly by regional australia. regional building companies along with other regional industry must be given the opportunity to participate in the stated fourpronged national strategy specified in the action agenda (disr, 1999) including; increase awareness of the benefits of it support the development of industry standards and shared databases encourage and focus on added value from the use of it support restructuring of the industry supply chain to leverage benefits from it. this research gives a regional focus to these defined national objectives by developing practical and workable strategies for their implementation using an it strategy that may enable regional sme’s to acquire skills and play their full part in the local, state and national economy. linking regional areas and contractors into the more economically active metropolitan areas by the use of information technology is obvious, but to date has not been used to overcome disadvantage. such a development opens up a whole range of policy, training and project opportunities for regional contractors to participate in more easily than they could in the past. the main objectives of this research are to: 1. identify the range of problems encountered by regional and metropolitan firms tendering for state and local government building projects in regional areas 2. determine the significance of these problems to the various stakeholders in regional areas 3. design and develop an e-commerce strategy to improve the capabilities of regional construction contractors so they can compete or work effectively with their metropolitan-based rivals as independent regional contractors. this research is primarily concerned with developing a framework for identifying the critical factors that militate against regional contractors succeeding in winning tenders in their own regional areas of victoria. economic markets for construction the important aspects of the structure of the australian building and construction industry are well documented in the five yearly surveys undertaken by the australian bureau of statistics (abs, 1999). there were some 194,000 firms in the industry in 199697, this figure covers several non-competing sectors of the industry such as, residential building (31,000), non-residential building (2,100), non-building construction (3,100) and special trades (158,000). in addition, 93.8% of firms have four or less employees, 5.7% have from five to thirteen employees, and the remaining 0.5% have more than 13 employees. research by runeson (2000) confirms that a very large number of small firms operate in the construction industry. runeson further demonstrates that other measures can be used to show that the construction industry has a very low concentration ratio (i.e., a few firms dominate the industry) and that profit levels are generally poor (less than 4% of turnover), indicating that the industry is governed by the rules of “perfect competition”. perfect competition is defined as a market where the action of individual firms has no effect on the market price for goods or services (runeson, 2000). thus, according to the author “there is also a strong feeling that the individual builder has no influence over prices and output. certainly, the participants feel that way due to the absence of any real market power.” (runeson, 2000, p 170). the construction industry is highly competitive, and it seems improbable that any one firm is able to control the behaviour of the market. this leads to the conclusion that the market conditions are outside the control of firms, consequently there is likely to be a narrow range of projects for which any individual firm is going to be effectively competitive. the effect of contract size and type research by drew and skitmore (1997) supports the work by runeson. they comment that “the construction industry is highly fragmented with the dominant firm being barriers to the development of sme’s in the australian construction industry the australian journal of construction economics and building vol.2 no.2 73 the small contractor. low entry and exit barriers characterise construction markets, especially for small firms.” the conclusion of drew and skitmore’s research was that the most competitive contractors appear to be those with a preferred contract value range, and they suggest that this approach in future may be used by contractors as a basis for assessing bid performance this indicates that the best clustering of contractors may be based on typical project size ranges; the effect of project type may also be significant. this indicates that contractors may have preferences towards certain projects and values, to which they have become accustomed (drew and skitmore, 1997, p 470). in research by briscoe (1988) the character of contracting markets is set by the type and nature of the work, the geographical location and the nature of the client the exact type of competition experienced by the contracting firm depends on all these factors. other research suggests that the industry is best described as project-based with vertical integration defining the segmentation of contractors (langford and male, 1991). they consider construction in terms of geographically dispersed project-based vertical markets that operate world wide from local to international arenas. the results of the above past research suggest that costruction competitivness is best obtained when firms specialise in small sub-markets; this is generally accepted to mean particular geographical areas, project types and value ranges. conversly, firms are likely to become less competitive if they attempt to cover too many sub-markets. firms that are not is a position to specialise, due to the natuure of their market, are likely to become less competitive over time. regional construction markets the study by smith et al. (2000) looked at the demand and supply factors that influence regional construction markets. the aim was to establish whether an effective market exists, and whether there are barriers to the participation of firms in that market. the report provides insights into the nature of regional tendering markets in the southwest region of victoria. according to smith et al. there is considerable uncertainty about the health of nonmetropolitan construction markets. regional construction firms operate from nonmetropolitan centres in what has been presumed to be a homogeneous subset of the national construction market. however, the reality is more complex, as many regional construction firms are small and face many difficulties not experienced by metropolitanbased contractors. smith et al. identified that non-metropolitan based building contractors faced difficulties in being considered, or prequalified, for medium to large sized projects in their own regional areas of victoria. they reported that even when included on lists of prequalified tenderers for projects in their region, the locally based contractors face serious problems of winning tenders against their metropolitan-based rivals. problems identified included: excessive competition from metropolitan based firms cost disadvantage due to distance little vertical integration. these projects include government and non-government projects such as schools, libraries, hospitals, police stations, industrial plants, civic buildings and the like. the report speculated as to whether any government regional initiatives could be pursued to redress the balance. alternatively, changes in market dimensions may mean that regional construction markets are no longer viable. this research suggests that the role of construction in the regional or nonmetropolitan areas of australia does have a significant role to play in underpinning the social and economic life of regional communities. the specific objective of the research is to identify the barriers encountered by firms tendering for building projects in non-metropolitan areas throughout australia. this is achieved by comparing the operational characteristics of construction firms from both metopolitan and non-metropolitan areas. the aim is to provide a detailed picture of regional tendering markets by identifying the problems or factors that may inhibit competitive bidding in regional areas. anthony mills, jim smith and peter love 74 the australian journal of construction economics and building vol.2 no.2 research questions and methodology as previously mentioned preliminary research undertaken by the authors (smith et al. 2000) for the state government of victoria identified that non-metropolitan based building contractors face difficulties in being considered for medium to large sized projects in non-metropolitan areas of victoria. therefore a survey was developed which was designed to explore the following research question: what operational factors impact on the ability of regional contractors to bid competitively against metropolitan-based contractors? these operational factors are considered under the headings of finance, labour, staff development, market, travel, and information technology. this research presents a analysis of a survey of the operational characteristics of both regional and metropolitan contractors in victoria, australia. the questionnaire comprised 38 factors that were perceived to impact on the ability of construction firms to effectively operate their businesses. each respondent was asked to indicate the significances of each of the factors on a likert scale from one (low impact) to five (high impact). the mean scores were calculated and presented in the results below. a database of 550 contractors was compiled from various sources, including the victorian building commission, department of infrastructure pre-qualification lists and the yellow pages. a balance of numbers between regional and metropolitan contractors was attempted and the final locations of contractors based on postcodes indicated 46.2% were regional and 53.8% were metropolitan contractors. after removing the ‘return to sender’ firms (52) from the total (550) left 498 delivered surveys. out of this total, 172 survey returns were made giving a response rate of 34.5%. in construction research this is a good return rate (chan and fung, 1996). within the 172 surveys received, 56.4% were from metropolitan melbourne firms, compared with 43.6% from regional victoria. in terms of the analysis of the survey data it was necessary to identify the comparative difficulties encountered by regional and metropolitan contractors of a similar size. this characteristic was considered to provide the most reliable basis for a valid comparison. average company turnover emerged as the best variable to group companies by size. figure 1 indicates the profile of the respondent companies in the two groups. companies with a turnover of between a$1.1 and a$5.0 million were close to the mean and most frequent in both groups and thus chosen as the comparison group. ‘ for these reasons this attribute was chosen to compare the two groups and all the 73 contractors in this category were selected for analysis. from this total of 73 contractors, 43 (58.9%) were based in melbourne and 30 (41.1%) were from regional areas. the authors consider this is a large enough sample to validate a comparison between the groups and all the data analysis is based upon these 73 respondents. results and discussions overall results compare the likert scores between regional and metropolitan contractors for the characteristics measured in the survey as summarised below: size of firms, financial operational difficulties, labour difficulties, staff development/learning, market difficulties, distances travelled to site, and information technology. the significant comparisons are now presented for information and discussion. size of firms metro-based contractors of this size employ slightly more directly employed people with an average of 7.58 as against 6.18 in regional contractors. for sub-contracted employees the numbers show a larger variation. this is probably due to the larger metro-based projects that require more sub-contractors and management staff. the relatively large standard deviations (over 20 for the metropolitan firms) reflect the flexible, temporary organisations that are found in the modern construction industry. barriers to the development of sme’s in the australian construction industry the australian journal of construction economics and building vol.2 no.2 75 figure 1: size by average company turnover contractor location regional victoriametro melbourne c o u n t 50 40 30 20 10 0 average company turnover under $0.5 m $0.6-1.0m $1.1-5m $5.1-20m $20.1-100m over $100 table 1: employee numbers contractor location direct employee numbers sub-contracted employee numbers mean std dev. mean std dev. metropolitan 7.58 7.11 9.40 20.16 regional 6.18 3.54 5.27 7.09 table 2: mean likert values for operational characteristics contractor location working capital credit for suppliers high interest rates late payments paye to payg(a) gst(b) admin burden metropolitan 2.21 1.46 2.40 3.16 2.51 3.49 regional 1.77 1.33 1.73 2.87 2.00 3.13 (a) paye = pay as you earn; payg = pay as you go (b) gst = goods and services tax financial operational difficulties six operational characteristics were compared and the average likert1 scale mean values are shown in table 2. in general the lower the likert score the less respondents perceived the impact. in all cases the regional contractors experienced fewer 1 likert scale conversion: 1 = not at all, 2 = no guiding comment, 3 = to some extent, 4 = no guiding comment, 5 = to a large extent. problems in these operational areas as their average scores were lower under each heading. these interesting results undermine some assumptions often made about management in small to medium enterprises (sme’s) in regional-based areas. the chosen comparative groups anthony mills, jim smith and peter love 76 the australian journal of construction economics and building vol.2 no.2 table 4: mean likert values for staff development/learning difficulty experienced metropolitan regional total internal training 2.20 2.40 2.28 self learning 3.58 3.50 3.54 r & d 1.88 2.30 2.06 company benchmarking of performance 2.22 2.43 2.31 project reviews 3.05 3.13 3.08 external training programs for staff 2.83 2.50 2.69 difficulty obtaining training for site workers 1.83 2.33 2.04 difficulty obtaining training for managers 1.95 2.21 2.06 importance of distance traveled to training 1.93 3.47 2.58 table 3: mean likert values for labour difficulties contractor location poor morale ineffective supervision excessive stress workforce conflict absenteeism metropolitan 1.90 2.00 2.18 1.79 1.71 regional 1.66 1.90 1.87 1.57 1.77 labour difficulties this section of the survey indicated similar results over the two groups. again, except for the last characteristic, ‘absenteeism’, the regional builders’ scores were lower than their metropolitan counterparts. the regional builders also perceive that there is less stress (1.87 compared with 2.18) in supervising and organising the labour in their jobs than those in metropolitan firms. staff development/learning a significant difference is found between regional and metropolitan contractors in the issue of the importance of distance traveled to training facilities where the likert scale average was 3.47 compared to 1.93 (table 4). there is a important difference between these figures. this sentiment is consistent with the average response to internal training (higher) and their use of external training programs (lower) indicating a more independent approach to these issues. regional contractors also indicated they experienced more difficulties in getting training for site workers and managers when compared to the average response levels of metro-based contractors. research and development, company benchmarking and project reviews were perceived to be a bigger problem by regional contractors and this possibly points to their companies being more isolated from the body of knowledge and opportunities that the larger metropolitan (melbourne) market has created. table 4 summarises the nine characteristics measured under staff development and training. it appears from these responses that regional builders are not using the regionally based technical and further education (tafe) institutions to access training programs. alternatively, these tafe colleges are not providing the type of training programs and courses that regional builders want for staff in their businesses. the results from this section of the survey indicate a need to follow-up the reasons for these responses. self learning opportunities need to be urgently investigated as both groups indicated difficulties in this area (3.50 and 3.58). in terms of the accessibility, respondents were also asked to indicate the average distance they travelled to training facilities. naturally, regional contractors were involved in longer journeys with nearly 45% travelling an average round-trip distance of more than 100 km. one regional firm was involved in travelling in excess of 500 kms (round trip). the results are summarised in table 5. again, the role of regional tafes as vocational education must be explored to discover why this sector of the market appears to be travelling to the metropolitan area to gain suitable training programs. barriers to the development of sme’s in the australian construction industry the australian journal of construction economics and building vol.2 no.2 77 table 5: average distance travelled to training facilities contractor location 1-15 km 16-50 km 51-100 km 101200 km 201 – 500 km > 500km total count 14 19 4 4 37 metropolitan % 37.8% 51.4% 10.8% 10.8% 100% count 7 4 5 5 5 1 29 regional % 24.1% 13.8% 17.2% 24.1% 17.2% 3.4% 100% table 6: mean likert values for market difficulties difficulty experienced metropolitan regional total difficulty of obtaining sufficient work in area 2.17 2.20 2.18 excessive competition for work in area 2.60 3.13 2.82 difficulty establishing long term relationships with clients 1.98 2.03 2.00 difficulty obtaining consistent work of most preferred type 2.48 2.53 2.50 difficulty obtaining work of a sufficiently large value 2.49 2.53 2.51 difficulty obtaining sub-contractors in structural trades 2.40 2.83 2.58 difficulty obtaining sub-contractors in finishing trades 2.40 2.83 2.58 difficulty obtaining sub-contractors in services trades 2.24 2.60 2.39 table 7: distances travelled contractor location average distance in kms travelled to site average distance in kms materials are sourced from and to site metropolitan 27.21 28.19 regional 55.60 86.25 market difficulties of the eight variables surveyed, one of the biggest problems for both groups was excessive competition for work in area and the regional contractors felt this more keenly with an average score of 3.13. in fact, across all the variables, the regional contractors indicated that they had more difficulties in gaining work and competing than their metropolitan counterparts. the results shown in table 6 are a reflection that the size of the regional market is smaller than the metropolitan market and that it experiences greater competition. the fact that these contractors are in the largest size group (a$1.1 – a$5.0 million) naturally means there will be more competition from the greater number of builders. further analysis of other size groups may provide an interesting comparison. distances travelled to site both groups noted that transportation costs of materials were not considered a major problem on most contracts. in fact, inspection and analysis of the australian construction handbook (rawlinsons, various editions) over the last twenty years shows a steady fall in locality allowances (mainly due to reducing transportation costs of materials). however, as could be expected the (higher) cost of fuel had a bigger impact on regional contractors (30%) than the metropolitan group (12.2%). the mean distance travelled to sites was slightly more than double for the regional contractors at 55.6 km compared to 27.2 for the metropolitan contractors. the sourcing of materials showed a similar trend and these results are shown in table 7. information technology the survey attempted to investigate the impact of information technology on builders and to identify and quantify the use of the internet. the results are interesting and are summarised in tables 8. anthony mills, jim smith and peter love 78 the australian journal of construction economics and building vol.2 no.2 table 8: connections to the internet contractor location no yes total count 8 35 43 metropolitan % 18.6% 81.4% 100% count 4 26 30 regional % 13.3% 86.7% 100% the surprising figure of 86.7% of internet connections for the regional contractors exceeded that of the metropolitan group of 81.4%. the regional builders are connected and it would be now useful to discover whether the full potential of the internet is being realised. the next stage of the research will identify whether e-business and other capabilities can be integrated into the regional builders’ businesses—that is, can the high level of internet connection be usefully exploited? conclusions all australian state governments have expressed a desire to maintain the viability of their regional economies. it is in the interests of the regional communities themselves that this essential part of the cultural, social and economic fabric of national life is given renewed vigor (storper, 1997). it is important that regional construction economy is not ignored in the government's national quest to improve the economic performance of the construction industry. regional building and construction companies have much to gain from linking into expanded networks of it and e-commerce. the impressive internet connection of regional contractors (86.7%) indicates that a strategy of upgrading and increasing awareness of it has a sound basis for a number of e-commerce and training developments. regional building companies must be given the opportunity to participate in the strategy specified in the federal government’s action agenda (disr, 1999), by: fostering the use of alliancing between metropolitan and regional based contractors increasing awareness of the benefits of it supporting the development of industry standards and shared databases encouraging and focusing on added value from the use of it supporting restructuring of the industry supply chain to leverage benefits from it. this research indicates that such policies may succeed with suitable support in some key areas. if the regional tendering situation is not addressed, metropolitan-based building contractors will continue to win the medium to large construction projects in regional areas ahead of the local competition. this has the effect of further reducing the capacity of regional-based builders who cannot grow to add to the competitive environment that creates an innovative and efficient construction industry. the problems in regional australia are probably common to many countries. these problems, opportunities and initiatives found in construction firms in regional areas around the world need to be shared to find solutions to the common problems, especially when better communications can bring the regions closer to the dominant metropolitan areas. references abs (1999) private sector construction industry, australian bureau of statistics, commonwealth of australia. briscoe, g. (1988) the economics of the construction industry. mitchell press. chan, a. p. c. and fung, c. y. (1996) procurement systems in australia. proceeding of cib w-89, 21-24 october. beijing, china. disney, j. (1993) regional development and australia's future, australian council of social services, office of local government. disr (1999) building for growth: the building and construction action agenda, department of industry science and resources, commonwealth of australia. drew, d. and skitmore, r. m. (1997) the effect of contract type and size on competitiveness in bidding. construction management and economics 15, 469-489. barriers to the development of sme’s in the australian construction industry the australian journal of construction economics and building vol.2 no.2 79 langford, d. and male, s. (1991) strategic management in construction: conceptual foundations. heinemann. rawlinson (1994) rawlinson's australian construction handbook 1994, 12 edn. rawhouse publishing pty ltd. runeson, g. (2000) building economics. deakin university press. smith, j., love, p. and jackson, n. (2000) regional tendering markets: improving the capability of regional tenderers, deakin university, prepared for the department of infrastructure, building policy, government of victoria., 36. steinke, j. c. (1977. australian regional policy and regional population trends 1947-1971, department of decentralisation and development, nsw. storper, m. (1997) the regional world: territorial development in a global economy. guildford press. ajceb_vol2_no2_28-11-02_part77 ajceb_vol2_no2_28-11-02_part78 ajceb_vol2_no2_28-11-02_part79 ajceb_vol2_no2_28-11-02_part80 ajceb_vol2_no2_28-11-02_part81 ajceb_vol2_no2_28-11-02_part82 ajceb_vol2_no2_28-11-02_part83 ajceb_vol2_no2_28-11-02_part84 ajceb_vol2_no2_28-11-02_part85 the crisis management practices of australian construction companies the australian journal of construction economics and building vol.2 no.2 15 the crisis management practices of australian construction companies m. loosemore, university of new south wales m. m. m. teo, building construction authority, singapore introduction events such as september 11th, high-profile corporate collapses such as hih, the subsequent turmoil in our insurance industry and the recent financial reporting debacle in the usa, have acted as a stark and sudden reminder of the unpredictability of the world around us and of the construction industry’s vulnerability to it. those companies that have over relied on insurance to manage uncertainty are now counting the costs and are being forced to review their risk management practices by financers and insurance companies that are reconsidering their risk coverage, reducing claim payments and increasing their fees (lawson, 2002). while risk management is increasingly practised in the construction industry, albeit in an unsophisticated way, knowledge of crisis management practices is less widespread (loosemore, 2000). given the current security concerns surrounding major buildings and infrastructure in australia, this is an aspect of risk management which justifies special attention at the moment. however, even in “normal” times, it is an area of practice to which construction companies should give more attention. organisational crises are a special type of risk which manifest themselves into decisive periods of acute difficulty that threaten the viability of an organisation, its business units or key products and even the lives of people (fink, 1986; aguilera and messick, 1986). they are low probability, high impact events which create the need for critical and rapid analytical decision-making skills, the results of which are likely to fall under extensive public, media and/or government scrutiny (perrow, 1984; pauchant and mitroff, 1992; irving, 1997; pearson and clair, 1998). consequently, crises are characterised by an extreme sense of urgency which hyper-extend an organisation’s coping capabilities, producing stress and anxiety among organisational actors and stakeholders (allen, 1990; pearson et al., 1997). although most companies would prefer to avoid a crisis, there is an increasing realisation that crises are becoming an inevitable and healthy part of organisational life, which have to be planned for (frazer and hippel, 1984; pascale, 1993; furze and gale, 1996; lerbinger, 1997). this planning should be part of an integrated and thoroughly implemented risk management process but evidence suggests that many organisations exist in a low state of crisis preparedness, having an inadequate understanding of their risk exposure, of how to mitigate those risks and of the internal systems needed to cope with and learn and recover from their eventuality. while crises can destroy unprepared organisations they can strengthen those that are well prepared since a well conceived crisis management plan should harness potential opportunities as well as ensure survival (pascale, 1993; furze and gale, 1996). it is within this context that an investigation of the crisis preparedness of construction companies was undertaken in sydney. the objectives were to gauge attitudes towards crisis management and the adequacy of systems used to plan for and manage them. the signs of crisis proneness all construction companies are prone to crisis but to different extents, depending upon the nature of work they are engaged in. for example, a company involved in large complex inner city projects is likely to be more prone to crises than a company involved in house building. however, this is largely dependent upon the way an organisation is managed and pauchant and mitroff (1992), mitroff and pearson (1993) and person et al. (1997) have found that crisis-prone organisations have certain characteristics in common. in particular, they tend to be sceptical about risk management and characterised by a culture of managerial invincibility and fatalism. such organisations also tend to have task-orientated cultures which consistently stress the importance of profits m. loosemore and m. m. m. teo 16 the australian journal of construction economics and building vol.2 no.2 over other corporate goals. the mind-set that is nurtured is that crises are essentially negative in nature, that company size and past successes provide protection from future crises, that crises happen to others, that good management and hard work prevents crises and that desirable business ends justify the taking of high-risk business means. people in crisis-prone organisations also believe that crisis management is someone else’s responsibility and that they have the power to offload risks onto other parties, thereby insulating themselves from their environment. for these organisations, crisis management plans are considered a sign of weakness because crises are seen as a sign of managerial failure. to a crisisprone organisation, there is little justification for the re-examination of existing organisational practices in the aftermath of a crisis, and rather than learning lessons for the future the priority is to maintain the organisation’s public image and to ensure that internal operations remain intact. in essence, crisis-prone organisations have an inappropriate structure and culture in relation to their risks and do not dedicate sufficient resources to proactive crisis management planning. consequently, crisis management plans represent little more than a managerial façade and have minimal impact upon day-to-day organisational practices and attitudes. as mitroff and pearson (1993, xvii) point out, “in such organisations, cm (crisis management sic) activities may be designed to fool everyone, but ultimately they fool no one at all”. crisis-prepared organisations in contrast to crisis-prone organisations, those which are prepared have a culture of openness, awareness and sensitivity to organisational risks and of their social and financial responsibilities to stakeholders and the wider environment (ginn, 1989; lerbinger, 1997; pearson et al., 1997). proactive risk management is systematically incorporated into strategic planning processes and championed by senior executives so that it is an integral part of organisational life at all levels (more, 1995). in this sense, senior executives provide the drive and support for crisis management by providing sufficient resources and clear statements of fundamentally held core beliefs and attitudes relating to organisational priorities. for example, crisis-prepared organisations often have a permanent crisis management team, charged with the responsibility of creating a comprehensive crisis management plan and to continuously communicate, coordinate and review crisis management efforts. as osborne (1991) argues, centrally co-ordinated guidance is critical in creating corporate attitudes and managerial inclinations that are able to unite an organisation in a decisive and immediate crisis response at a time of strong divisive and procrastinating forces. another characteristic of crisis-prepared organisations is their flexibility and willingness to “let go” of formal, standardised systems and procedures which serve them well in normal times but which become restrictive and counter-productive during a crisis (mintzberg, 1976; sagan, 1991). however, total flexibility may result in a loss of managerial control and a disjointed crisis response, meaning that a delicate balance between formality and informality is necessary. such a balance facilitates effective horizontal and vertical communications with external and internal stakeholders at a time when existing information systems are stressed to the limit. during a crisis, effective communication is essential but difficult and companies with a track record of effective communication as an intrinsic part of their day-to-day life are most likely to survive (mindszenthy et al., 1988; aspery and woodhouse, 1992; sikich, 1993). effective communication systems are particularly important in dealing with external stakeholders such as emergency services, the public, the media and existing and potential customers. the media, in particular, play an important role in constructing the public’s image of events, and poor communications can result in distortions of the truth, unjustified mistrust, suspicion and irrevocable damage to customer relations. in essence, a crisis-prepared organisation has well developed and widely understood crisis management plans which keep them in constant touch with what type of crisis it faces, when they begin, why they occur and who they affect (mitroff and pearson, 1993). it is the state of knowledge in these areas which represents the fundamental difference between crisis-prone and crisis-prepared organisations. the crisis management practices of australian construction companies the australian journal of construction economics and building vol.2 no.2 17 crisis management planning the importance of a well-conceived crisis management plan cannot be overstated and it represents one of the defining characteristics of a crisis-prepared organisation. this has been illustrated many times, such as in the occidental piper alpha disaster where appropriate operating manuals on how to interrupt a potentially catastrophic sequence of events were almost totally lacking (bea, 1994). having a preconceived plan that can be automatically implemented takes away some of the initial pressure and shock associated with the early phases of a crisis. this creates a valuable “breathingspace” within which people can calmly investigate the problem and agree on an appropriate response. the importance of a good start in crisis management cannot be over-stated. during a crisis, every second counts and the first few hours are particularly critical. this is especially true if external constituencies are involved because initial impressions play a disproportionately large role in shaping their judgments of competence and blame. if initial impressions are bad then an organisation will be judged guilty until proven innocent and in many instances this can intensify a crisis and accelerate its escalation (loosemore, 2000). many organisations in high-risk industries have a permanent disaster committee that is responsible for championing the need for crisis management, identifying current preparedness and vulnerabilities, devising disaster plans, and coordinating people during a crisis (kutner, 1996). the membership of such committees is an important factor in determining their ability to do this, and they should consist of senior managers, managers from all functional departments, and external professionals who have experience of crisis management, public relations, the law, and physical and mental health issues. in particular, commitment from the top of an organisation is essential if the activities of a disaster committee are to be taken seriously and if they are to have a chance of success. the various aspects of these activities are discussed below. conducting crisis audits and creating crisis portfolios a crisis audit assesses an organisation’s crisis capabilities and identifies the inherent risk factors in its environment, internal activities, technology, infrastructure, and culture that need to be addressed to improve its crisis preparedness (mitroff and pearson, 1993). the first stage in this process should be to develop a working definition of a crisis from the organisation’s viewpoint and to then identify and rank, in probability and consequence terms, the types of crises the organisation is vulnerable to. this involves learning from past events, looking into the future and exploring unusual combinations of events that may seem unlikely, but could combine to produce a serious crisis. ranking allows appropriate judgments to be made about the relative costs and benefits of constructing a crisis management plan in each case because planning for every possible crisis is not economically rational. establishing monitoring systems and standard operating procedures one aspect of the disaster committee’s job is to establish monitoring systems to detect potential crises. the disaster committee should also develop standard procedures that define precisely who should be involved in a crisis response, what they should be doing, when they should be doing it, and how they should be doing it. these procedures, in effect, establish a pre-defined emergency communication network that needs to be followed during a crisis’ early but critical phases, when people are disorientated by events. the intention is to “buy” the organisation some time to come to terms with events, to allow people to re-orientate themselves, and to ensure that appropriate resources are mobilised quickly and that they are commensurate with a crisis’ scale. to do this, the procedures should be achievable, simple, flexible, and understandable by all internal and external stakeholders. for example, in australia and singapore, construction sites have many migrant workers and this may require the production of manuals in a range of different languages. creating a command centre during a crisis, information is constantly being generated from a multitude of sources and it is critical that it is supplied “live” to the correct place, at the correct time, and in an understandable format (davis, 1995). in this sense, a key aspect of a disaster committee’s job during a crisis is to identify a clear command centre that represents a single point of responsibility for m. loosemore and m. m. m. teo 18 the australian journal of construction economics and building vol.2 no.2 decision-making and information management. such centres are a critical coordination mechanism that helps facilitate a unified crisis management effort since one of the greatest problems that can emerge during a crisis is the tendency for people to act independently. for example, in the case of a fire emergency, the command centre should have the sole responsibility for contacting emergency services and to coordinate individual supervisors who are charged with clearing certain areas of the site. in the case of an economic crisis, such as the bankruptcy of a major subcontractor, the command centre should be responsible for re-organizing work and employing another sub-contractor. in addition to being of practical importance during a crisis, command centres also play an important symbolic role. nicodemus (1997) provides an example of a company that faced a crisis and named their command centre “the war room,” where they declared war on the problem. security security is another important issue for a disaster committee to consider since interference from unwanted elements can exacerbate a crisis or, at the very least, interfere with its management. this involves identifying external constituencies who feel that they have a stake in a crisis’ outcome but who cannot contribute to its solution. while all stakeholders must be managed and kept informed, those involved in crisis management efforts should be insulated from these disruptive elements so they can develop a strong focus on the problem. in some situations, it is also important that the site of a crisis is physically cut off from these elements, particularly when it continues to represent a danger to the public. in such situations, evacuation procedures may need implementing and it is essential that they are clearly communicated to everyone on a project and reinforced by regular training and mock drills. for example, public address systems, sirens and horns can be used to notify people of an incident if they are placed at strategic locations so everyone can hear them. whatever signal is used, it must be as simple and as unequivocal as possible. responsibilities for using them must be clear, as should appropriate back up if, as murphy’s law dictates, key people are away on the day of an incident or if essential equipment malfunctions. an important part of evacuation is the clear labelling of exit routes from all parts of the site. in particular, people should know that mechanical hoists cannot not be used in an evacuation and that all potentially dangerous machinery in the vicinity of escape routes must be switched off. since a construction site is a constantly changing physical environment, the positions of notices and their maintenance needs constant monitoring. furthermore, all evacuation routes should follow the shortest possible route to checkpoints where roll calls can be taken in safety. they should also be wide enough to facilitate an orderly evacuation of the building. on inner city sites this may be the street, and the hazards to the public, to traffic, and to site workers must be assessed in association with public services such as the police. the potential danger of not having adequately thought out evacuation plans and well-marked evacuation routes was demonstrated in the beverly hills supper club fire in may 1977 which killed 164 people. the official investigation report reveals that the club had no evacuation plan and that employees were not schooled or drilled in the duties they were to perform in the case of fire. furthermore, means of egress were not marked and the escape route itself was too narrow to take the number of people who were in the building at that particular point in time (best, 1977). developing a culture of collective responsibility the need to insulate a disaster response team from unwanted elements does not mean it should be allowed to become introverted. consideration also needs to be given to the re-organisation of non-crisis management activities so the remainder of an organisation can function as normally as possible. crises inevitably drain a considerable amount of energy from other functional areas within an organisation, demanding special efforts from the people who operate there. clearly, without a considerable degree of peripheral goodwill and a sense of collective responsibility, the impact of a crisis can spread to other parts of an organisation. such goodwill cannot be expected if it did not exist before a crisis, and in this sense the crisis management process needs to be continuous. the crisis management practices of australian construction companies the australian journal of construction economics and building vol.2 no.2 19 one way of developing a culture of collective responsibility is to communicate everyone’s interdependency during a crisis and to clarify and, ideally, share project risks as much as possible. most crises demand an injection of extra resources into a project and if the disaster committee does not identify their source in advance, then a crisis will stimulate negotiations and potential conflicts that will delay a response. decisions concerning risk distribution are particularly relevant to economic crises, and earlier we provided evidence to suggest that they have been a major cause of conflict within construction projects. we also identified a series of principles to guide risk decision-making. these principles apply at all points along the contractual chain, and to consultants as well as contractors. it is also important to realise that the client’s initial risk management practices are inevitably transferred along the contractual chain. for example, if a contractor is employed under a high-risk contract and has not been given the opportunity to price for those risks, then it is likely that they will attempt to transfer those risks along the chain by using backto-back contracts and similar employment practices with their sub-contractors. indeed, sub-contractors may do the same and so on, until all project risks have been dissipated to the end of the contractual chain. unfortunately, it is here that the most vulnerable, crisis-prone organisations exist, and when problems begin to occur that demand extra resources, the end result of this risk-cascade is inevitably a backlash of conflict up the contractual chain as parties deny any responsibility for them. public relations public relations are an essential aspect of crisis management since most types of crises have implications beyond an organisation’s boundaries. in essence, the three “publics” that need to be involved in a crisis are employees not directly affected by it, external and quasi-external interest groups and the general public. we have already discussed the first two publics and it would be foolish to ignore the third. as aspery (1993, p. 18) argues, “crisis communications built on well-established relationships with key audiences stand a better chance of protecting, even enhancing your reputation during difficult times. a company which decides to start communicating during a crisis will have little credibility”. unfortunately, construction companies tend to attach little importance to the building of sound relationships with the media, seeing it as a non value-adding activity and perceiving most journalists as dangerous, untrustworthy, and irresponsible (moodely and preece, 1996). this rejection of the media tends to be particularly strong during a crisis when organisations look inward and consciously hide from the public, seeing them as an unnecessary distraction to rescue efforts. however, this is precisely the time when it is most dangerous to ignore the media, since in the aftermath of a crisis, the public has a tendency to embark on a process of ritual damnation. this is particularly true of high-profile, publicly financed projects in which people may feel a greater right to recrimination as a result of having paid their taxes to finance it. as horlickjones (1996, p. 61) notes, “since the abolition of capital punishment, the british public has turned to those in charge during lurid disasters to satisfy its lust for retribution. find someone to blame, cries the mob, and off runs whitehall to offer up someone for lynching”. poor public relations have been the downfall of many organisations that have underestimated the power of the media in shaping public opinion of how a crisis is being handled. the media the construction industry is particularly vulnerable to poor media coverage because of its very negative public image. furthermore, there is increasing scrutiny of the industry as a result of the ever-greater appreciation of its impact on the built and natural environment (moodley and preece, 1996). this, coupled with growing sympathies with the environmental movement amongst the general population, has resulted in increasing numbers of confrontations with the public, particularly on large infrastructure, mining and housing projects. notably, in many of these increasingly common and public confrontations, the media has portrayed construction companies in a heavy-handed and unsympathetic way and there is little doubt that the future viability of many projects will have been affected by this coverage. in this sense, media relations is an area of traditional neglect to which companies operating in the construction industry must turn their attention. construction managers cannot rely upon the media to put their case and a continued reluctance to communicate with m. loosemore and m. m. m. teo 20 the australian journal of construction economics and building vol.2 no.2 the media will almost certainly lead to negative reporting of the industry’s activities. in contrast, open relationships with the press and more sensitivity to environmental issues will enable managers to better shape the public’s attitudes and thereby obtain a more balanced presentation of the facts from the media during a crisis. one way of ensuring open communication with the press during a crisis is to establish a 24-hour-a-day press office, which has the responsibility of providing factual and up-todate information to the media and to employees. if managed well, such an office should be able to turn media inquiries into opportunities rather than problems by initiating, rather than reacting to, press, radio, and tv coverage. public relations are best handled by one trained person who is named as an official spokesperson and who has skills in dealing with the media. tv interviews with untrained staff who appear uncaring, flustered and unsure of the facts are damaging to the public’s perception of competence whereas a trained person with experience of such events can portray a positive image. the importance of identifying such a person was illustrated during the aftermath of the twa flight 800 crash when the rush of distraught families, an eager press, and an interested public were left to the management of one chief ticket agent who, through no fault of his own, released inaccurate information which fuelled uncertainty, anxiety and false speculation about the handling of the affair (bobo, 1997). this was a primary reason for twa being widely criticised afterward by public relations counsellors, crash victims’ families and the media for having an uncaring attitude. post-crisis management after a crisis, a disaster committee should organise follow-up meetings so lessons can be learned and fed into subsequent crisis management efforts. everyone affected by a crisis must be involved in this process. in addition to managing the learning process, the disaster committee should also turn its attention to the recovery. this can be a lengthy and sensitive process that is likely to be influenced by how well a crisis was managed. for example, it may involve delicate challenges such as conducting investigations into causes, mending damaged relationships, re-organizing the project program, settling on-going disputes and reassessing project requirements. at the same time, attention must be given to the long-term consequences of a crisis such as rectifying damage to the environment, or dealing with government or legal investigations. clearly, the less effectively a crisis is managed, the more arduous is the recovery process. research method mitroff and pearson (1993) provided a conceptual framework for investigating crisisproneness and understanding the major factors which contribute to effective crisis management. essentially, they argued that effective crisis management is determined by: attitudes towards crisis management and the extent to which an organisation understands the types of crises which it should prepare for, given its mission and its industry. the extent to which an organisation resources crisis management activities and effectively manages the five distinct phases through which all crises pass, namely, signal detection, preparation and prevention, damage containment, recovery and learning. the extent to which priorities and interactions between the technological, the individual/human and the organisational/cultural systems are understood and managed. the relative perceptions of organisational responsibilities to external and internal stakeholders. on the basis of these factors, mitroff and pearson produced a diagnostic model which identified the factors in an ideal crisis management program (see table 1): the crisis management practices of australian construction companies the australian journal of construction economics and building vol.2 no.2 21 table 1: factors in an ideal crisis management (cm) program (adapted from mitroff and pearson 1993, p.114) elements of an integrated crisis management program key questions to ask in an integrated crisis management program strategic actions is crisis management integrated into corporate philosophy, mission statements, strategic planning and notions of corporate excellence? is there a dedicated cm unit or team? are outsiders included on the board and/or cm unit team? is training conducted in cm? are there regular crisis simulations? are there any diversification and portfolio strategies? technical and structural actions has a dedicated budget for cm been created? are steps taken to continually develop and change emergency policies and manuals? are there computerised inventories of plant, employees, products and capabilities? is there a strategic emergency room or facility? are steps taken to reduce hazardous products, services and production processes? are steps taken to improve overall design and safety of products and production? is there technological redundancy (such as computer backup)? are outside experts and services in cm used? evaluation and diagnostic actions are legal and financial audits of threats and liabilities conducted? are there continuous reviews and modifications of insurance policies and coverage? are environmental impact audits conducted? is there ranking of the most critical activities necessary for daily operations? is there any early warning signal detection, scanning and issues management system in place? is there dedicated research on potential hidden dangers? is there critical follow-up and learning from past crises? communication actions is there media training for cm? are there major efforts in public relations? is there extensive information on local communities? are there good relationships with intervening stakeholder groups? is there extensive collaboration and lobbying among stakeholders? are new communication technologies and channels used? psychological and cultural actions is there strong top management commitment to cm? are there good relationships with activist groups? are whistleblowers accepted? is there access to knowledge of potential criminal behaviour? is the human and emotional impact of crises recognised? is there psychological support for employees? is there stress management and management of anxiety? is there a corporate memory of past crises and dangers? m. loosemore and m. m. m. teo 22 the australian journal of construction economics and building vol.2 no.2 table 2: sample company profiles company workforce annual turnover (au$mill) company age (years) a 112 60 80 b 300 250 72 c 600 900 47 d 400 300 42 e 1000 1500 40 on the basis of mitroff and pearson’s diagnostic model and key questions, semistructured interviews were conducted with fourteen senior managers, in five large and well-established international construction companies based in sydney, australia. company documents relating to crisis management systems were also inspected. those interviewed were selected because of their seniority and specific responsibility for risk management in their company. this targeted sampling strategy ensured that respondents had a good understanding of their organisation’s crisis management systems. the purpose of the interviews was to investigate attitudes towards crisis management activities and the adequacy of any existing crisis management systems. the company profiles are provided in table 2 and were selected because their risk exposures would justify crisis management policies of a sophistication equivalent to those advocated in mitroff and pearson’s model. smaller companies involved in relatively low risk projects would not justify systems of the type advocated by mitroff and pearson. discussion of results what follows is a general discussion of the strengths and deficiencies which emerged in the crisis management planning of the sampled companies. these are organised around attitudes towards crisis management, resources dedicated to crisis management activities and learning processes instigated during the aftermath of crises. attitudes towards crisis management 56% of respondents believed that crises were inevitable and 65% believed it possible and worthwhile to plan for their eventuality. although this indicates reasonably low levels of managerial complacency, 28% had considerable sympathy with the idea that crises could be eliminated and 21% considered it difficult to plan for their eventuality. their attitude was that it was best to respond to crises as they arose and that crisis plans were best developed on an ad hoc basis in response to the peculiar problems which each crisis presented. these respondents also felt that insurance provisions were adequate to cover the costs of a crisis, an attitude which is all too typical in the construction industry. this reliance upon insurance is worrying given recent world events and research which indicates that the average insurance payout only covers approximately 60% of the costs of an insured event (odeyinka, 2000). even more worrying was the belief that crisis management was a specialised activity that was the province of very large companies in higher risk industries and that policies of not overcommitting to excessive workloads or single contracts, above a certain proportion of turnover, insulated them from the occurrence of serious crises. the respondents were working in the largest 5% of companies in one of australia’s most high-risk industries. resources for crisis management there was no evidence in any company of permanent crisis management teams and little evidence of any corporate crisis management planning. rather, crisis management was treated as a reactive activity and the assumption was made that in the event of a crisis, the organisation would be able to respond adequately with existing resources and that plans could be created “on-thespot”. crisis management planning was at best rudimentary, crisis plans taking the form of general informal procedures and “unwritten policies” incorporated into the mainstream operating procedures of each company. the vast majority of managerial effort had been invested in the formulation of “company policies” for health and safety problems (46%) industrial relations disputes (40%) and it failure (14%), rather than in detailed contingency plans. the crisis management practices of australian construction companies the australian journal of construction economics and building vol.2 no.2 23 although there was little evidence of thorough crisis management planning, two companies had attempted to create workimprovement teams to facilitate communication between different functional areas, and with union delegates, and to enable employees to highlight potential problems with, and solutions and improvements for working practices. however, respondents felt that company cultures were unsympathetic to the communication of “bad news” and that this largely mitigated the benefits of such activities. to avoid this problem, one company had developed plans through a consultative team that permitted workers to voice their concerns with impunity so that issues could be raised before they became a potential threat. crisis management training was also rare, although in one company chief executives had undergone extensive media and worstcase scenario training and had experienced simulations of potential crises. similarly, another company held risk-awareness workshops every six months for chief executives. however, in all cases such training was insular, being confined to the most senior levels, thereby limiting its potential value and impact. only one company had an integrated communications policy, which involved issuing strict guidelines to all organisational levels about dealing with the media. this company also provided lists of emergency phone numbers for contact during a crisis, and specialised training at all organisational levels, particularly in the areas of industrial relations and health and safety but not specifically in crisis management. none of the companies maintained regular and planned contact with external stakeholder groups, all confining policy communications with personnel employed on a consistent basis in their normal day-today activities. in this sense, little account seemed to be taken of a company’s potential impact upon and responsibilities to the emergency services, general community, minority groups and the environment. learning from past crises 93% of respondents were aware of past crises, causes being classified as accidents (46%), economic conditions (38%), disputes (industrial and others) (8%) and financial management (8%). those with direct experience of these past crisis indicated that the problems of crisis management had been in damage containment rather than in detection, because they had been largely anticipated in existence but not in impact. however, two companies had tackled this problem in the area of industrial disputes by developing plans to prevent them spreading between sites. in terms of learning and recovering from crises, the general perception was that this was a natural long-term process which necessitated little assistance. however, there was considerable evidence to indicate that learning had become a problem in many of the companies. despite there being widespread confidence in being less vulnerable to similar future crises (58%), few of the interviewees had direct experience of past crises and had only become aware of them through company “folklore” and informal communication networks. furthermore, although there was a widespread (65%) and encouraging perception that the uniqueness of crises does not preclude lessons being learnt for the future, only 8% of respondents had any knowledge or experience of an organised learning process in the aftermath of a past crisis or were able to provide details of consequent changes to company procedures. as one respondent said, learning from a crisis “is the biggest job that we don’t do” and those changes that were highlighted by respondents were considered to be relatively minor and part of an ongoing process of evolutionary development. other evidence of crisis vulnerability exists in comments which directly reflect the rationalisations discovered by mitroff and pearson (1993) that hinder effective crisis management. for example, 65% of respondents considered that their company’s size afforded protection against crises. only one respondent saw a crisis as “a unique learning process” which provided a test of its plans and “an opportunity to improve its plans”. finally, most respondents considered that most crises were caused by the actions of an individual who may, for unknown reasons, have uncharacteristically made an error in performing a task. this reflected a widespread belief that past crises had been “freak” events which were beyond managerial control and that existing systems had, and would, continue to avert many other crises. conclusion the study reported within this paper explored the crisis preparedness of five large, international construction companies operating within australia. due to the limited m. loosemore and m. m. m. teo 24 the australian journal of construction economics and building vol.2 no.2 sample, the extent to which the mindsets and systems that were discovered predominate within the construction industry is unclear. however, considering the relatively high levels of risk to which these types of companies are exposed, the investigation suggests that their state of crisis preparedness is inadequate and unlikely to improve without external intervention. corporate philosophies evidenced in this study do not seem to support crisis management and there exists a predominant attitude that a long-standing record of continued survival is sufficient justification for maintaining the status quo. furthermore, there appears to be a general belief that effective risk management practices can and should eliminate crises. the contemporary and alternative belief that crises are an inevitable and healthy part of organisational life is not widely espoused. essentially, crisis management does not appear to be taken seriously and is undertaken in an informal, fragmented fashion with few resources and little strategic guidance and support. the limited activities that are undertaken are preventative in focus and give little consideration to coping with the eventuality of a crisis. furthermore, they are insular and non-integrative in their development, being confined to senior management and are limited in scope to issues such as safety, industrial relations and, to a lesser extent, cost control. they also appear to be limited to a narrow range of stakeholders and to largely ignore the impact of a crisis upon the wider community. in essence, there appears to be relatively little effort invested in exploring the full range of risks which face companies at their various hierarchical levels, little understanding of the interdependency between these risks and little attempt to plan for their eventuality. mitroff and pearson’s (1993) work suggests, that in the construction companies investigated in this research, a crisis would be likely to stimulate a period of reactionary chaos, social dislocation and disjointedness, at least in the short term. during this period, which would prevent any rational and coordinated response, costs would escalate and people would be guided by unwritten rules and procedures and information provided through informal communication networks. the managerial challenge during this period would be to re-establish an element of control and co-ordination in people’s activities by attempting to communicate policies which may have been developed in isolation at a senior managerial level, if at all. however, in the dynamic environment of a construction firm, communication is difficult, but particularly so during the pressures and high stakes of a crisis. indeed, if the source of a crisis is at site level, then these problems would be further exacerbated by the obscurity of relationships between crisis planning at site and company level and by the need to coordinate the activities of sub-contracted organisations with a wide range of conflicting interests. while many construction companies may have survived and indeed prospered for some time with the above mindset, continued success in an increasingly changeable and competitive world will demand the elimination of potential resource wastage and the maximisation of potential opportunities. highly successful companies are able to turn problems to their advantage and fully exploit any opportunities they encounter. crisis management capabilities are important in this respect because crises present both threats and opportunities and mismanagement can impart a heavy monetary and psychological toll upon an organisation and in extreme cases, destroy its viability. complacency is dangerous and it is evident that construction companies could benefit from systematically incorporating crisis management activity as a part of their strategic planning process so that it is an integral and continuous part of organisational life at all levels. such a change needs to be driven by senior management, supported by appropriate resources and guided by clearly explicated mission statements of central core beliefs, attitudes and organisational priorities and well conceived, fully integrated crisis management strategies, systems and procedures. there is also a role for research in bringing about this change. in particular, research is needed into how to make the construction industry’s culture more optimistic, less inwardly and short-term orientated, and less cost-driven. such research would have to be broad-ranging and cover issues such as employment and contractual practices, methods of organisation and procurement systems, attitudes towards risk and risk management practices, training, education, the nature of construction markets and corporate strategy. the crisis management practices of australian construction companies the australian journal of construction economics and building vol.2 no.2 25 references aguilera, d. c. and messick, j. m. 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(1988) from collapses to corruption: managing company crises. enr, 11 (1), february, 28–37. seymour, d. and rooke, j. (1995) the culture of the industry and the culture of research. construction management and economics, 13 (4), 511–523. sikich, g. w. (1993) it can’t happen here: all hazards crisis management planning. pennwell publishing company, oklahoma, usa. ajceb_vol2_no2_28-11-02_part21 ajceb_vol2_no2_28-11-02_part22 ajceb_vol2_no2_28-11-02_part23 ajceb_vol2_no2_28-11-02_part24 ajceb_vol2_no2_28-11-02_part25 ajceb_vol2_no2_28-11-02_part26 ajceb_vol2_no2_28-11-02_part27 ajceb_vol2_no2_28-11-02_part28 ajceb_vol2_no2_28-11-02_part29 ajceb_vol2_no2_28-11-02_part30 ajceb_vol2_no2_28-11-02_part31 ajceb_vol2_no2_28-11-02_part32 using purchasing power parity to assess construction productivity rick best, (bond university, australia) abstract for many reasons comparing construction productivity between countries is a difficult task. one key problem is that of converting construction costs to a common currency. this problem can be overcome relatively simply by using a basket of construction materials and labour, termed a bloc (basket of locally obtained commodities), as a unit of construction cost. average bloc costs in each location are calculated from data obtained from a number of sources (quantity surveyors, estimators). typical building costs obtained from published construction cost data are expressed in bloc equivalents. lower bloc equivalents represent higher productivity as other inputs (largely materials) are constant. the method provides a relatively simple and direct method for comparing productivity between different locations. keywords: international construction, industry comparisons, purchasing power parity, construction productivity introduction assessing the relative productivity of the construction industries of different countries is a difficult task (oecd/eurostat, 2001; loosemore and mcgeorge, 2002; bernstein, 2003), however, the importance of the construction sector in most national economies means that various stakeholders, and governments in particular, are interested in such comparisons. in australia in 2007-08 all construction accounted for just over 16% of gdp and 57% of gross capital formation (table 1: abs, 2008). table 1 gdp, contribution of construction to gdp and gross capital formation in australia for 2007-8 (source: abs, 2008) given the amount that construction contributes to gdp, even modest improvements in efficiency can translate into significant increases in growth, and growth is a common measure of the health of modern economies. comparative studies have been attempted since at least the late 1940s (anglo-american council on productivity, 1950) and many different methodologies have been used, with varying degrees of success and notable inconsistency in the results obtained. the difficulty is always in devising readily applicable and reliable metrics to allow measurements and subsequent comparisons to be made. in construction the difficulties of formulating the required measuring tools are increased for a variety of reasons including the heterogeneous nature of construction output (un, 1992; vermande and van mulligen, 1999), which makes measuring and comparing output problematic, and the highly subjective nature of quality in construction (flanagan et al. 1986; rittenau, 2002), relating as it does not only to workmanship, finish and incidence of defects, but also to quality of design (primarily in terms of functionality and aesthetics). highly specialised metrics are required if useful comparisons are to be made possible. gdp (aud x 10 6) 2007-08 prices all construction as % of gdp construction as % of gross capital formation 1,132,172 16.2% 57% australasian journal of construction economics and building best, r (2010) ‘using purchasing power parity to access construction productivity’, australasian journal of construction economics and building, 10 (4) 1 10 2 at a macroeconomic level total industry output may be aggregated but there is only one available unit of measure and that is money; it is impossible to aggregate output in any other way when the built facilities that comprise that output are of myriad types and sizes, each with its own set of unique characteristics relating to function, site, materials, climate, quality and so on. even at a micro level, when comparing onsite tasks such as the placement of ready-mixed concrete or the application of plaster or render, there are differences between projects. factors such as climate affect building operations: concrete placement, for example, is a different task in an australian summer to that in a canadian winter. similarly requirements and regulations pertaining to the safety of workers on building sites vary from place to place: the use of bamboo scaffolding, commonplace in hong kong, would be impossible in new york or london. the purpose here is to describe a method for measuring relative productivity that may eliminate some of the problems associated with assessing construction productivity. measuring construction productivity productivity measurement can be approached in many ways, from broad macroeconomic measures (e.g. croce et al., 1999) to onsite measurements of specific construction activities (e.g. oglesby et al., 1989). the simple definition of productivity, output over input, is not particularly useful in the construction context. there are many reasons why making such a calculation is difficult and they include:  the products of the construction industry are rarely exactly the same (oecd/eurostat, 2001:24)  inputs need to be expressed in a common unit, usually money, but factors such as management, organisation and ingenuity (english and marchione, 1983:58) are difficult to express in dollars.  completed buildings (output) tend to be neither produced nor sold by a single contractor (oecd/eurostat, 2001:10). since 1980 a number of partial productivity studies have been reported in which the authors have used macroeconomic data, gathered by national statistics offices or international groups such as the oecd. such studies have been criticised for a variety of reasons including:  failure to provide data on quality (kaglioglou et al., 2001:86; goodrum et al., 2002:416)  too simple to be an adequate measure of overall productivity in an economic sector as large and complex as construction (bernstein, 2003:47)  cost effective but with suspect reliability and comparability of data (xiao et al., 2000)  too lacking in detail to be of use below the whole-of-industry level (proverbs and faniran, 2001:385)  an unsatisfactory measure of efficiency of utilisation of resources (chau and walker, 1988:209) australasian journal of construction economics and building best, r (2010) ‘using purchasing power parity to access construction productivity’, australasian journal of construction economics and building, 10 (4) 1 10 3  failure to reflect differences in capital intensity in measures such as output per hour worked or per person employed (de valence, 2001:695) edkins and winch (1999:19) suggest that they are a “crude” measure, particularly of output, and voice a number of concerns including the use of methodology that can be criticised as invalid as they use data from disparate sources. more recently bwa (2006:75) suggest that all methods for “international construction cost efficiency comparisons” that use macroeconomic statistics are invalid or at least unreliable. a purchasing power approach the great majority of international industry comparisons require that costs expressed in various national currencies be brought to a common base, typically us dollars (usd). it is generally acknowledged that money market or “nominal” exchange rates do not provide a reliable method for doing this (e.g. vermande and van mulligen, 1999; goodchild and griffiths, 2004; blake et al., 2004). it has been suggested that purchasing power parity (ppp) provides a more robust basis for such currency conversions (walsh and sawhney, 2002; langston and best, 2005; best and langston, 2006) and that industry specific ppps are required if reliable comparisons are to be made (schreyer and koechlin, 2002; stapel, 2004). the idea of purchasing power parity (ppp) can be traced as far back as the 16th century (dornbusch, 1987). it is based on what rogoff (1996:647) describes as “the disarmingly simple empirical proposition” that the cost of a good or service (or a basket of goods and services), once prices are converted to a common currency, should cost the same in different countries this is the so-called law of one price (pakko and pollard, 1996; lafrance and schembri, 2002; ubs, 2003). the theory is that if an item can be bought more cheaply in country a than in country b then traders can profit by buying in country a and selling in country b. this is known as arbitrage. the theory suggests that over time international trade will see the price of the item in both countries level out. dubner and mckenzie (2002) examined a number of options for producing constructionspecific ppps (cppps) including the standard projects approach currently used by eurostat to gather construction sector data for its gdp level ppp program and the basket of goods approach (similar to a typical consumer price index method) tested by stapel (2002) and meikle (2003). walsh and sawhney (2002, 2004, 2005) developed a basket of construction components for the world bank. best (2008) developed and tested a fixed weight basket of construction materials and labour for use in comparing the construction costs of hotel buildings. it was similar in some respects to meikle‟s but with some significant differences. the most significant difference was in the selection and weighting of the items in the basket; where meikle selected the items in his basket on an ad hoc basis and used input-output tables to establish weights, best populated his basket by identifying the most cost significant items in the contractor‟s priced bill of quantities for a completed hotel project and established weights based on the relative quantities of various components in the same project. the basket is referred to as a bloc, derived from basket of locally obtained commodities. the reference project was a single building type of a defined standard (3-4 star hotel) constructed in 2003, located just outside sydney‟s cbd. hotels of medium to high standard are generally similar in terms of size, layout and finish regardless of location, with hotels that belong to international chains such as marriott, hilton and sofitel displaying very similar characteristics wherever they are located. this is particularly true if the properties are located in major cities in developed countries. medium standard hotels were selected for this study as a building type that could be easily identified and described, and that respondents in the various locations could easily recognise based on their own experience even though australasian journal of construction economics and building best, r (2010) ‘using purchasing power parity to access construction productivity’, australasian journal of construction economics and building, 10 (4) 1 10 4 there is no internationally agreed rating system for hotels. pricing rounds were conducted only in major cities in developed countries, where such buildings are common. in each major trade section one item was selected and assumed to represent all similar items in the bq, e.g. in the masonry trade concrete blocks were identified as the most cost significant item. from the bq analysis it was determined that aud$117,638 (out of a trade total of $229,759) was in “hollow block” items. published data (cordell, 2007) suggests a labour/materials ratio of 64:36 for hollow blockwork so block supply cost was calculated as 0.36 x $117,638 = $42,350. from the bq 140 hollow blocks were determined as the most commonly occurring type of block and these were then assumed to represent blocks of all types, i.e. 140 blocks then became the material item representing the masonry trade, and thus the masonry item included in the basket. to derive quantities for each material item in the basket the total cost (supply only) for each item was divided by the unit supply cost for each item (cordell, 2003). these quantities set the scale of the quantities for the materials in the basket, based on the size of the reference project. it is suggested that the derived quantities indicate only the scale of the quantities of the particular type of material in the sample project, e.g. 140 hollow blocks as the material representing all blocks in the project. labour required for installation of the material items in the basket was identified (e.g. block laying as 80% tradesman and 20% semi-skilled labourer) and weights calculated based on the relative weights of labour and materials for each item. for example, as noted above, for hollow blocks the labour/materials split is 64:36 and the derived supply cost $42,350. the labour cost associated with that quantity of blocks is then: 0.641 0.64 x $42,350  = $75,289 and of that amount 80% ($60,231) is for tradesmen and 20% ($15,058) is semi-skilled labour. a similar method was used for each item in the basket and a total labour cost as well as a separate figure for each relevant class of labour was calculated. using published hourly labour rates for sydney for 2003 (cordell, 2003) the total number of hours of each class of labour required for the installation of given quantities of the various materials in the basket was then determined. the bloc was priced by varying numbers of quantity surveyors and construction estimators in six cities: three in australia (sydney, melbourne, brisbane) plus auckland, singapore and phoenix. percentage allowances for preliminaries and contractors‟ mark-ups were added based on data gathered as part of the pricing survey. costs excluded value added tax in order to align bloc costs with the superficial project costs used in the productivity comparison. bloc costs were also adjusted to reflect prevailing market conditions in each city as input costs, particularly for labour, and profit margins can be expected to vary in response to the amount work available in the market at any given time. it is a feature of the bloc method that basic input costs can be used as a basis for comparisons but equally these base costs can be adjusted to account for overheads, profit, taxation and market conditions depending on the specific comparison that is being undertaken. the cost data obtained contained some apparent anomalies, particularly in the costs given for materials. respondents were asked for “supply only” rates for materials but many were noted as “supply and fix” while others appeared to be too high to be supply only rates but were not qualified by any comment from the respondents. supply and fix rates were australasian journal of construction economics and building best, r (2010) ‘using purchasing power parity to access construction productivity’, australasian journal of construction economics and building, 10 (4) 1 10 5 discarded as labour and materials were specifically separated in the bloc. rates which simply appeared to be incorrect presented a much more difficult problem as it was deemed inappropriate to discard data simply because it looked or felt wrong. where possible respondents were asked for clarification; where this was not possible or queries went unanswered published cost information was used (e.g. rsmeans, 2008) for comparison. potential anomalies were identified by looking at the spread of material cost data for each bloc item. the coefficient of variation (cov) for dataset was calculated and items with a cov exceeding 40% were revisited with suspect rates being investigated in more detail, often by contacting suppliers directly or asking personal contacts in the various cities to seek more detailed data. the average cost of the bloc in each city was the used to produce cppps that could be used to convert construction costs in different currencies to a common base with price differences removed, thus producing “real” rather than “nominal” exchange rates. apart from its use for the compilation of cppps the results allowed simple and direct comparisons of construction productivity between cities. using the basket to assess productivity in this section two comparisons are used to illustrate how the method may be used. in each case the results from two cities are used; in the first example productivity is compared between two australian cities, sydney and brisbane, with raw cost data all in aud. in the second sydney and phoenix are the subjects and raw costs are in aud and usd respectively. cost data for the bloc were obtained from 19 respondents in sydney and seven in both brisbane and phoenix. following the validation exercise outlined above average rates for each bloc item in each location were calculated. total bloc costs were then derived for the various locations. based on the notion of ppp the costs of the bloc in australian dollars (aud) in sydney and brisbane represents the same value as the cost of the bloc in usd in phoenix, thus the ratio of the bloc cost in one location to that in another location produces a simple cppp. in each case bloc costs are expressed in national currencies and these do not need to be converted to a common currency as, in effect, a new “currency” has been created, that of bloc equivalents. this idea of bloc equivalents is discussed further below. the sydney-brisbane comparison the average cost of the basic bloc (excluding tax) in sydney was aud 11,592,455 (january 2008 prices) and in brisbane aud 11,621,932. the ratio of the cost of the bloc in the two cities is close to unity. this is not surprising given that the cities are reasonably similar in most ways and many of the same construction companies operate in both cities. labour is mobile and relocation between the two cities is common so labour rates do not vary significantly and materials supply is similar. the average bloc costs were used to assess relative construction productivity between the two cities by using the bloc as a unit of construction costs. this method parallels the method employed by langston and de valence (1999) who used the big mac index (bmi) to express building costs in various national currencies in hamburgers/m 2 by dividing project costs in each local currency by the local cost of a big mac. the same can be done by using construction costs at the project level expressed as the number of blocs that equal the cost of a project, calculated by dividing the cost for a project by the cost of the bloc with both costs expressed in the same local currency. using published cost/m 2 rates (rlb, 2008a) the cost of a hypothetical hotel building was calculated in terms of the equivalent number of blocs in the two cities. table 2 shows the australasian journal of construction economics and building best, r (2010) ‘using purchasing power parity to access construction productivity’, australasian journal of construction economics and building, 10 (4) 1 10 6 outcomes and indicates the relative cost in bloc equivalents of a 10,000m 2 hotel in the two locations, with sydney as the base (bi = 100). project costs are based on median rates for three star hotels from rlb (rider levett bucknall). city project cost (local currencies millions) bloc equivalent bloc index sydney 23.85 2.057 100.00 brisbane 32.25 2.775 134.90 table 2 project costs for sydney and brisbane expressed in local currencies and bloc equivalents, and bloc index values derived from those bloc equivalents the comparison between sydney and brisbane summarised in table 2 shows that a typical 10,000m 2 hotel building in sydney would cost aud23.85m and the same type and size hotel building in brisbane would cost aud32.25m. even allowing for variations in cost/m2 rates and variations in bloc pricing sydney is shown to be a more productive location in terms of the ratio of labour input to construction output. as the quantity of materials in the bloc is constant differing bloc equivalents (i.e. construction cost divided by bloc cost) can only mean that different amounts of labour were required in order to install the materials in the bloc. as the cost of the hypothetical hotel expressed as the number of bloc equivalents is considerably lower in sydney it follows that that the industry in sydney is more productive than in brisbane. the sydney-phoenix comparison the average cost of the bloc in phoenix was usd 7,729,634; in sydney it was aud 11,592,455. at the time of the study (early 2008) the cppp for comparing construction costs between the two cities was therefore: i.e. one usd would buy the same amount of construction in phoenix as aud1.500 would in sydney. at the same time the nominal exchange rate was 1usd = 1.104aud; this highlights the disparity between nominal exchange rates and ppps. as in the previous comparison the t average bloc costs were used to assess relative construction productivity between the two cities by using the bloc as a unit of construction costs. using published cost/m2 rates (rlb, 2008a; 2008b) the cost of a similar hypothetical hotel building was calculated in terms of the equivalent number of blocs in the two cities. table 3 shows the outcomes. note that nominal exchange rates play no part in this comparison as bloc costs for both locations were compiled in local currencies and building costs are similarly expressed in local currencies. city project cost (local currencies millions) bloc equivalent bloc index sydney 23.85 2.057 100.00 phoenix 18.29 2.366 115.02 table 3 project costs for sydney and phoenix expressed in local currencies and bloc equivalents, and bloc index values derived from those bloc equivalents. australasian journal of construction economics and building best, r (2010) ‘using purchasing power parity to access construction productivity’, australasian journal of construction economics and building, 10 (4) 1 10 7 the comparison between sydney and phoenix in table 3 shows that a typical 10,000m2 hotel building in sydney would cost aud23.85m and the same type and size hotel building in phoenix would cost usd18.29m (based on cost/m2 rates from rlb, 2008a and 2008b). as in the previous example sydney is shown to be a more productive location in terms of the ratio of labour input to construction output. discussion it should be noted that to produce valid purchasing power parities the items in the bloc must have the same fixed weights for all locations. pakko and pollard (1996:5) say that the law of one price only leads to purchasing power parity under certain conditions. they suggest that as a ppp index is built up from a number of weighted average prices for various items then the law of one price will only produce ppps if the same items and their respective weights are the same for all locations. this means that the same single standard basket of items is used to gather prices in all locations. this is an essential element of the ppp approach and it assumes that productivity is the same in each location. differences in bloc equivalents between locations, however, indicate that productivity varies as if we are comparing identical buildings then the quantities of materials must be identical – hence differences in bloc equivalent cost must indicate differing productivity. as in any modelling exercise certain assumptions are made that are unlikely to hold perfectly in practice; in this case the assumption of equal productivity between locations is a key assumption but differing bloc equivalent project costs indicate that it cannot be correct. it is clear that while it is not possible to construct identical projects with different quantities of materials it is possible to do so with different quantities of labour. thus, if bloc equivalents for identical projects differ it can only be due to differences in the quantity of labour required to install a fixed quantity of materials, and more labour for the same result must imply lower productivity. the assumption behind the use of fixed quantities of all inputs is that the buildings and the technology of construction are identical. the assumption of identical technologies is common in economic theory, e.g. implicitly in perfect competition in micro-economic theory and explicitly in comparative advantage in international trade theory (see for instance grubel, 1977). if this assumption is satisfied, it means that the ppp reflects differences in the costs of inputs only. therefore, the bloc will also function as a measure of relative productivity between various locations. assume two locations, a and b, in the same country. they share the same currency and tax regime but construction costs may vary between the two locations. if a standard basket of construction goods (the bloc) is priced in each location, and overall input costs (labour and/or materials) are cheaper in a than in b then naturally the cost of the bloc will be less in a. assume two identical buildings are built in the two locations and the construction costs in both cases are the same. the cost of the building can be expressed in blocs by dividing the cost of the building by the cost of the bloc in each location. as the cost of the bloc in a is lower than the cost of the bloc in b, the building cost in a, expressed in blocs, will be higher than in b although the dollar cost is the same. alternatively it can be said that construction price levels in b are higher than in a. if the buildings are identical the quantities of materials used must be identical. the variable factor is labour. if the building cost in a is represented by a greater number of blocs the amount of labour required in a to install the materials in the bloc (measured in hours, not dollars) must be greater. differences in costs expressed in the number of blocs required do not originate in materials that are the same in both buildings – they must be the result of australasian journal of construction economics and building best, r (2010) ‘using purchasing power parity to access construction productivity’, australasian journal of construction economics and building, 10 (4) 1 10 8 more or less labour being required. in the example, given that more labour is required to install the fixed quantities of materials in the bloc, the labour in a must be less productive. the same logic applies even if the building cost varies between a and b, as the building cost is being measured using the bloc as a common unit of construction cost or resources required. it applies equally where the two locations do not share the same currency as in any given location both building cost and bloc cost are initially measured in the same local currency. building costs per m 2 expressed in bloc equivalents are directly comparable as they are expressed in the same units. as materials quantities in the bloc are constant, fewer bloc equivalents indicate higher labour productivity. conclusions this study shows describes a relatively straightforward method for assessing relative construction productivity between locations, even where construction output, measured in money, is expressed in different currencies. if robust sets of basket (input) costs are collected from each location then many of the problems associated with other productivity comparison are avoided. these include the problems associated with macroeconomic data that is often not collected in the same way in different countries and are therefore not necessarily comparable, and the problems associated with the use of money market exchange rates to bring costs to a common currency base. the method described does not provide absolute productivity comparisons; it is based on a model that is a simplification of the real world situation and as such can only provide indicative outcomes, not perfect relativities. references abs (2008) australian system of national accounts, 2007-08. australian bureau of statistics http://www.abs.gov.au/ausstats/abs@.nsf/detailspage/5204.02007-08?opendocument anglo-american council on productivity 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(2000) a new approach to comparing the performance of contractors internationally. proceedings of 16th arcom conference, glasgow caledonian university explaining the increase in the australian average house completion time: activity-based versus workflow-based planning ehsan gharaie, ron wakefield and nick blismas (school of property, construction and project management, rmit university, australia) abstract the australian house building industry has been facing an increase in the average house completion time in the last decade. this increase in some states is quite dramatic. for instance, western australia has faced a 70 percent increase in the average house completion time during this period. this paper uses two planning approaches to explain this; i) the activity-based planning methods and ii) the workflow-based planning methods. in addition, this research investigates the strengths and weaknesses of these two planning approaches in explaining the behaviour of the house building industry. for this purpose, a national case study and five state case studies including victoria, western australia, new south wales, queensland and south australia have been used. the data related to the key parameters have been collected and their correlation with the average house completion time has been investigated. these key parameters include the average house floor area, the number of house completions and the number of houses under construction. the reasons for the increasing trend of the average house completion time have been postulated in all case studies. according to this research, the increase in the average house completion time cannot be explained using activity-based planning methods. in contrast, by using workflowbased planning methods, it has been shown that the average house completion time is correlated with the number of houses under construction. this paper shows that the average completion time is influenced directly by the workflow in the house building industry and that workflow planning should be the basis for the house building industry planning. keywords: average house completion time, australian house building industry, activity-based planning, work-flow-based planning introduction completion time of a construction project is always a major concern for all stakeholders. for the australian house building industry, completion time has serious investment implications. simultaneously housing customers remain financially and emotionally engaged in the process while waiting for their home to be delivered. in this situation, any increase in completion time results in further capital investment, more management effort, and reduced customer satisfaction. according to the australian bureau of statistics (abs) (2008) the house building industry in australia has experienced an increase in the average completion time of houses since 2000. the average completion time for new houses at the beginning of 2000 was 1.8 quarters, australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 35 reaching 2.4 quarters by the end of 2008. these figures show that house buyers had to wait 35 percent longer in 2008 than in 2000. the increase in some states is more dramatic. for instance, western australia has faced a 70 percent increase during the same period. considering that houses are the dominant type of dwelling in australia, these figures show the criticality of the situation. finding solutions for this critical situation needs a proper understanding of the house building industry and the major factors affecting house completion time. this paper investigates these factors using different theories of planning. two main planning approaches have been considered; namely activity-based planning and work-flow-based planning. the former is the basis for the most of the conventional planning methods used in construction, and the latter forming the foundation for production planning methods common in manufacturing. this research will use both of these approaches to explain the reasons for the increase in the average house completion time. the case studies in this research comprise five cases at the state level and a case at the national level. the national case mentioned in the title is the australian house building industry. the state cases are australia’s states namely victoria, new south wales, queensland, western australia and south australia. these states contain about 95 percent of the population of australia. therefore, the outcome of this research is robust for the australian house building industry. firstly, the related literature will be reviewed. then each of the planning approaches will be explained and their recommended effective factors on the completion time will be investigated. literature review literature related to this research is divided to two areas. these two areas are the housing and construction management. generally, housing literature is more focused on housing market demand (glaeser, 2004). however, since dipasquale’s review (1999) attention towards market supply has increased (murphy, 2008). the elasticity of supply and the effective factors on supply are the issues covered in these researches. the australian national housing supply council (2010) in its state of supply report described the factors affecting supply of new dwellings as the construction cost, infrastructure costs, land availability, land release and development processes. in this approach, the quality of supply and the circumstances within the house building industry are ignored. one of the supply issues which has remained unexplored in the housing literature is the time for the completion of the houses. however, time is one of the focus points in construction management literature. time is a critical factor for project success and many planning methods have been developed to address this issue. these methods can generally be categorized into activitybased planning and workflow-based planning methods (sawhney et al., 2009). the australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 36 application of activity-based planning methods such as critical path method (cpm) and project evaluation and reviewing technique (pert) have been extensively criticized (harris and ioannou, 1998, koskela, 1992, reda, 1990). the workflow planning method, also known as production planning method, was more popularly introduced to the construction industry by koskela (1992). more specifically, willenbrock (1998) and o’brien et al. (2000) suggest that the production planning can be usefully adopted in the residential construction industry. according to workflow planning methods in manufacturing, work in process and the throughput of the system are the factors that affect the cycle time of a product (hopp and spearman, 2008, koskela, 1999). in construction industry, sacks and partouche (2009) has shown that the completion time of the tall buildings similarly can be affected by the work in process. bashford et al. (2005) have taken this issue to the housing industry. they conducted research to find reasons for the large variations in the house completion times in the chandler, arizona area. they showed that the completion time of the houses in this area was significantly affected by the production system loading. this is a factor neglected by current management tools. building on bashford et al.’s (2005) work, this research seeks reasons behind the increase of the average house completion time in australia. for this purpose activity-based and workflow-based planning approaches were considered and their respective weaknesses and strengths demonstrated. activity-based approach the main focus of most of conventional construction planning methods is on the activities. network planning (cpm, pert) and line of balance are two examples of the planning techniques, which are based on activities. with this focus, project planning leads to activity planning and the duration of the project relies directly on the duration of activities. consequently, any change in activity durations would result in a change to project duration. in activity based planning methods, the duration of the activities are indicated by the activity’s scope of work and the production rate of resources. using this approach, any loss of production rate or extension of the scope can result in an extension in the activity duration, and therefore project duration. therefore, the reasons for the increase in the project duration are the loss of production rate or the extension of the scope of work according to activity based planning methods. in house building industry, there is no single project but many concurrent projects. however the same principle can be applied. the loss of production rate in the industry can lead to longer completion times and the extension of the scope of work in construction of the houses can increase the completion time. these two parameters can be traced by the quarterly number of house completions as a proxy of the industry’s production rate and the average house floor area as a proxy of the scope of work. australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 37 next two sections will investigate the correlation between these two parameters and average house completion time in the australian house building industry. quarterly number of house completions as mentioned above, the activity-based planning methods suggest that the increase of completion time might be because of loss of production rate. the trend of production rate can be found by quarterly number of house completions. therefore, the increase of the average house completion time is expected to be concurrent with decrease in the number of completions. the trend of the average house completion time and quarterly number of house completions can be derived from the actual data reported by the abs (2009). drawing of these trends on the common graph shows the existence of any correlation. this research has been undertaken on six cases. five of these cases are australia’s larger states. the final case will be at the national level and will cover the whole australian house building industry victoria: victoria is the first case in this study. the comparison between the production rate trend and the average house completion time trend is best illustrated on a common graph (figure 1). the graph shows that the minimum average house completion time in this state was in 2002 where it reached 1.9 quarters. after 2002, the completion time has increased to 2.5 quarters in 2008. however, the production rate of the industry remains constant during this period. the average number of completions (illustrated in figure 1) is around 8,000 houses per quarter. figure 1 also illustrates that the trend of production rate does not match the trend of completion time. in other words, the construction industry has maintained a more-or-less constant production rate while the completion time has been increasing dramatically. this refutes the proposition suggested by activity-based planning methods, which suggests that the increase of the average house completion time can be the result of the loss in the industry’s production rate. the trend of the completion time and number of completions (vic) 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time c o m p le ti o n t im e ( q u a rt e rs ) 0 5,000 10,000 15,000 20,000 25,000 30,000 q u a rt e rl y n u m b e r o f c o m p le ti o n s completion time number of completions figure 1: average house completion time and quarterly number of completions in victoria australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 38 western australia: as mentioned in the introduction, the increase in the average house completion time in western australia has been about 70 percent since 2000. this change is the result of the comparison between the average completion time in 2000 and 2008. however, the main growth in this state did not start until the end of 2001. the average house completion time in the fourth quarter of 2001 was 1.6 quarters. this duration reached 3.2 quarters at the end of 2008, showing an almost 100 percent increase in 7 years. figure 2 clearly shows this dramatic increase. the trend of the completion time and quarterly number of completions (wa) 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time c o m p le ti o n t im e ( q u a rt e rs ) 0 5,000 10,000 15,000 20,000 25,000 30,000 q u a rt e rl y n u m b e r o f c o m p le ti o n s completion time number of completions figure 2: average house completion time and quarterly number of completions in western australia in the same period, the production rate of the industry was around 4,000 houses per quarter. the industry even had a slight growth in production rate in 2006 and 2007. but this increase could not help the industry finish houses in a shorter time. therefore, the growth of the average house completion time cannot be the result of production rate loss. western australia is the second case whose behavior cannot be explained by activity based planning methods. queensland: the average house completion time in queensland has a similar trend to the first two cases. this state has been facing an increase in completion time since the end of 2001 and reached 2 quarters at the end of 2008. this increase has taken place whilst the production rate has remained constant. figure 3 shows that the number of completions in queensland has remained around 7,000 houses per quarter. beside the existence of different trends for the completion time and production rate in this state, it can be seen in figure 3 that there were peaks and dips in the completion time in this period but these extremum can not be seen in the production rate. therefore, it can be concluded that the increase in the completion time in queensland is not correlated with the loss of production rate. hence, queensland will be the third case in which the activity based planning method could not explain the increase in the completion time. australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 39 the trend of the completion time and number of completions (qld) 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time c o m p le ti o n t im e ( q u a rt e rs ) 0 5,000 10,000 15,000 20,000 25,000 30,000 q u a rt e rl y n u m b e r o f c o m p le ti o n s completion time number of completions figure 3: average house completion time and quarterly number of completions in queensland new south wales: the average house completion time in new south wales follows the same trend as previous cases. however, this state has a different production rate trend compared to other states. in this state, the production rate has been declining since 2000. the production rate has become half in this period and the completion time has been affected by this reduction. the trends in nsw can be explained by activity-based planning methods, the decline being the reason for the increase in completion time. new south wales is the only case that supports this theory, and provides a valuable comparative case (yin, 1994). south australia: south australia is the last case at the state level. this state has also been facing an increasing average house completion time since 2000. the production rate in south australia has been almost constant. there is no loss in the production rate that can be considered as a reason for the increase in the completion time. further, there are variations in the completion time that cannot be seen in the production rate. so far four of five cases at the state level rejected the idea suggested by the activity-bases planning methods. the final case will be the whole australian house building industry. australia: the australian average house completion time has gone up from 1.8 quarters at the beginning of 2000 to 2.44 quarters at the end of 2008. the linear regression on the quarterly number of completions shows that the production rate in the australian house building industry has been swinging around 27,000 houses. this regression is almost horizontal in this period, which shows the consistency in the production rate between 2000 and 2008. it means that while the industry has maintained its production, the average house completion time has grown. once more, the production rate trend does not match the completion time trend. activity-based planning methods do not adequately explain the increase in completion time. australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 40 the trend of the completion time and quarterly number of completions (aus) 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time c o m p le ti o n t im e ( q u a rt e rs ) 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 q u a rt e rl y n u m b e r o f c o m p le ti o n s completion time number of completions linear (number of completions) figure 4: average house completion time trend and quarterly number of completions in australia summary: this part of the research investigated the reason for the increase in the australian average house completion time using a suggestion theorized by activity based planning methods. based on this suggestion the loss of production rate lengthens the activities and consequently the project’s duration. therefore, the increase in the average house completion time might be because of a loss in production rate. this suggestion has been investigated in six case studies. in five of the cases, no production loss was observed in last decade. it has been argued that according to the trend of the industry’s production rate and the average completion time, the increase in the completion time of the houses cannot be the result of the production loss and the suggestion has not been supported. in the next section another suggestion proposed by activity based planning methods is examined, namely the effect of scope of work on the completion time. average house floor area activity-based planning methods suggest that a reason for the extension in the completion time is a change in project scope. to investigate this hypothesis in the australian house building industry, the average house floor area was analysed and compared with the trend of the average house completion time. average house floor area was derived from abs (2010) data. since the focus is on the australian house building industry, the same six cases were utilized; one case at the national level and five at the state level. following shows the result of the investigation on the effect of the average house floor area on the average house completion time in these cases. victoria: victoria shows inconsistency between the trend of the average house floor area and the average house completion time (figure 5). the completion time in this state experienced a 35 percent increase between 2002 and 2007, yet the average house floor area grew by only 10 percent. australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 41 the trend of both parameters in this state is increasing but these increases do not match each other. for example, the completion time in victoria fluctuates even though the average floor size does not show any fluctuation. based on activity-based planning suggestion of the correlation between the completion time and the scope of work, an increase in the scope should cause the completion time increase; and its decrease should have the opposite effect. in the case of victoria however, the completion time both increases and decreases without apparent correlation to the increasing average floor area. subsequent cases on the other states further emphasises this. the trend of the completion time and average floor area (vic) 217.3 216.7 225 229.3 238.8 241.9 237.8 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time c o m p le ti o n t im e ( q u a rt e rs ) 0 50 100 150 200 250 300 a v e ra g e f lo o r a re a ( s q u a re m e te r) completion time average floor area figure 5: average floor area and completion time in victoria western australia: the same phenomenon can be seen in western australia (figure 6). in this state, the average house completion time also increased dramatically without any dramatic increase in the average house floor area. in fact, the completion time doubled between 2002 and 2007 with houses having only grown by 5 percent in area. this is the third case that demonstrates the activity-based planning weakness in the explanation of the increase in the completion time. the trend of the completion time and average floor area (wa) 226 224.5 229.5 240.4 234.2 237.5 237.5 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 3.5 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time c o m p le ti o n t im e ( q u a rt e rs ) 0 50 100 150 200 250 300 a v e ra g e f lo o r a re a ( s q u a re m e te r) completion time average floor area figure 6: average floor area and completion time in western australia australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 42 new south wales and queensland: in these two states, the completion times grew dramatically, with only modest average house floor area growth. according to the abs, the average floor area in nsw has increased by 10 percent while the completion time has been facing a 35 percent increase. queensland also followed the same trend where the increasing trend of completion time does not match the trend of the average floor area. south australia: south australia is the state that strongly refutes the hypothesis of the impact of the average house floor area on the average house completion time. the average floor area in this state dropped from 206m 2 to 191.5m 2 (figure 7), while at the same time the completion time climbed from 1.7 to 2.4 quarters. this 40 percent increase in completion time when the average size of houses reduced, strongly contradicts the activity based planning methods for explaining the increase in the average house completion time. the trend of the completion time and average floor area (sa) 206 193.8 197.8 197.8 198.9 193.5 191.5 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time c o m p le ti o n t im e ( q u a r te r s ) 0 50 100 150 200 250 300 a v e r a g e f lo o r a r e a ( s q u a r e m e te r ) completion time average floor area figure 7: average floor area and completion time in south australia australia: the average house completion time was explained in section 3.1, which demonstrated that it had increased, by 35 percent in australia since 2000. in the same period, the average floor area for houses had gone up by 5 percent. this percentage does not match the increase in the completion time. figure 8 shows this inconsistency. while the completion time grew, the average floor area remained around 235m 2 . there was not any dramatic change in the average floor area over this period that might explain the increased completion time. therefore, the reason for the dramatic increase in the average house completion time cannot be attributed to an increase in scope and therefore length of activities. this further demonstrates the weakness of activity-based planning systems at explaining the housing industry's behavior. australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 43 the trend of the completion time and average floor area (aus) 227.5 221.2 229.2 235 238.4 242.6 239.2 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time c o m p le ti o n t im e ( q u a r te r s ) 0 50 100 150 200 250 300 a v e r a g e f lo o r a r e a ( s q u a r e m e te r ) completion time average floor area figure 8: average floor area and completion time in australia summary: in all states, house size has had limited impact on completion time. the size of houses has grown during last 8 years but without any correlation to the increase in the average house completion time. in fact, south australia has shown a contradictory trend in which while the average house floor area decreased the completion time rose dramatically. the growth of completion time is an undeniable fact in the australian house building industry. it has been shown that this fact cannot be explained by the activity-based planning methods where the main focus is on the scope of work and production rate of resources. therefore, another paradigm affecting the average house completion time is required. the following section uses the alternate method to explain the reason behind this increase. workflow planning approach the other method of planning which has been suggested as a planning tool in residential construction is production planning. production planning focuses on the flow of work. in this method of planning variables such as work in process, cycle time and throughput are considered as the interrelated variables (koskela, 1999). in the house building industry, houses are the products. the cycle time of these products represents house completion time and the work in process, houses under construction. with these definitions and knowing that the cycle time is influenced by the work in process, it can be concluded that according to the workflow planning method the completion time is influenced by the number of houses under construction. this idea has been proven true in chandler, arizona by bashford (2005) and this research attempts to study its validity in the australian house building industry. number of houses under construction (nhuc) previous sections were dedicated to the investigation of the possible effects of the production rate and average house floor area on the average house completion time in australia. this section investigates the correlation between the average house completion australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 44 time and the number of houses under construction. the actual data for these variables was collected quarterly by the abs (2009). for this purpose, the same method of monitoring and comparison of the two parameter trends will be used. further, this part of research will adopt the correlation coefficient to indicate the level of correlation (hogg and craig, 1995). this coefficient has a value between -1 and 1 and shows the association between two variables (kottegoda and rosso, 2008). the values closer to 1 indicate high positive correlation and values closer to -1 demonstrate high negative correlation. 0 shows no correlation. the same six case studies as the previous section will be considered. victoria: according to figure 9, victorian house building industry shows correlation between the number of houses under construction and the average house completion time. in this state, the growth of house completion time starts from mid 2002. this growth is the result of the increase in the number of houses under construction in mid 2001. the overall trend of these two parameters is similar and the correlation coefficient between them is 0.623, which is a positive correlation. the trend of the completion time and number of houses under construction (vic) 1.7 1.9 2.1 2.3 2.5 2.7 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time a v e r a g e h o u s e c o m p le ti o n t im e ( q u a r te r s ) 11,000 13,000 15,000 17,000 19,000 21,000 23,000 n u m b e r o f h o u s e s u n d e r c o n s tr u c ti o n completion time nhuc figure 9: number of houses under construction and the average house completion time in victoria western australia: western australia also shows the same correlation between number of houses under construction and the average house completion time. the nhuc in this state has an increasing trend in the last decade. this increase starts in mid 2001 with around 4,600 houses under construction and it reaches more than 16,500 houses by the end of 2006. figure 10 clearly demonstrates that the growing trend of nhuc complies with the growing trend of average house completion time. the correlation coefficient measured for this state in this period is 0.95 that suggests a high positive correlation. this state is the second case that shows the strength of workflow planning methods in the explanation of the house building industry’s behavior. australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 45 the trend of the completion time and number of houses under construction (wa) 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 3.1 3.3 3.5 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time a v e ra g e h o u s e c o m p le ti o n t im e ( q u a rt e rs ) 0 2,500 5,000 7,500 10,000 12,500 15,000 n u m b e r o f h o u s e s u n d e r c o n s tr u c ti o n completion time nhuc figure 10: number of houses under construction and the average house completion time in western australia new south wales: it has been shown in previous section that new south wales is the only state in which the increase in the average house completion time can be explained by activity-based planning methods. in this state, the loss of production rate has been considered as the reason for the increase in the completion time. the influence of the production rate on the completion time is also suggested by the workflow planning methods. these methods argue that as long as the production rate is consistent, the completion time is affected by the number of houses under construction. but when the industry faces a loss in the production rate, this parameter also comes to the account and affects the completion time. this phenomenon can be clearly seen in nsw where the loss of production rate makes the average house completion time grow. therefore, nsw is the case, which shows the comprehensiveness of the workflow planning methods in the explanation of the house building industry’s behavior. queensland: the correlation between the average house completion time and nhuc can be clearly seen after 2001 in this state. the nhuc peak points in mid 2004 and 2008 are followed by the completion time peak points. the overall increasing trend of nhuc can be seen in the average house completion time too. comparison of figure 11 with figure 3 shows the strength of workflow planning method against activity based planning methods in explanation of the reasons for the increase in the average house completion time after 2000. it has been mentioned before that the maximum value for the correlation coefficient is 1 that indicates the absolute correlation. this coefficient between number of houses under construction and the average house completion time is 0.97 that shows the strength of correlation in this state. australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 46 the trend of the completion time and number of houses under construction (qld) 1.0 1.3 1.6 1.9 2.2 2.5 2.8 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time a v e ra g e h o u s e c o m p le ti o n t im e ( q u a rt e rs ) -2,000 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 n u m b e r o f h o u s e s u n d e r c o n s tr u c ti o n completion time nhuc figure 11: the trend of number of houses under construction and the average house completion time in queensland south australia: in this state, the number of houses under construction has had an increasing trend since 2001 that matches the increasing trend of the average house completion time. the correlation coefficient between these two parameters is 0.85. it means the correlation suggested by the workflow planning methods between the completion time and nhuc is valid in this state too. australia: contrary to the production rate and the average house floor area, the number of houses under construction shows a strong consistency with the average house completion time. the correlation coefficient has been measured for this case too. this coefficient has a value of 0.88, which indicates a high positive correlation. as can be clearly seen in figure 12, the average house completion time and nhuc follow a similar trend. the rise in nhuc is followed by a rise in completion time and a fall is followed by a fall in completion time. therefore, as is suggested by workflow planning methods, there is a strong correlation between these two parameters in australian house building industry. summary: this part of the research has been dedicated to the investigation of the probable correlation between the average house completion time and the number of houses under construction. this correlation is suggested by workflow planning method. in this regard, the two parameters of the average house completion time and number of houses under construction have been drawn against each other and compared. further, the correlation coefficient between these two parameters has been measured. this analysis has been undertaken for australia and five of its states including victoria, western australia, new south wales, queensland and south australia. as a result, a strong correlation between the average house completion time and number of houses under construction was found using the correlation coefficient. this correlation has been also appeared in the graphs and the validity of workflow planning methods in the house building industry has been proven. australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 47 the trend of the completion time and number of houses under construction (aus) 1.5 1.7 1.9 2.1 2.3 2.5 2.7 2.9 2000.1 2001.1 2002.1 2003.1 2004.1 2005.1 2006.1 2007.1 2008.1 time a v e ra g e h o u s e c o m p le ti o n t im e ( q u a rt e rs ) 20,000 30,000 40,000 50,000 60,000 70,000 80,000 n u m b e r o f h o u s e s u n d e r c o n s tr u c ti o n completion time nhuc figure 12: the trend of number of houses under construction and the average house completion time in australia conclusions the australian house building industry has been facing an increase in the average house completion time since 2000. this research has used two planning approaches to explain this; i) the activity based planning methods and ii) the workflow planning methods. further, it has tried to investigate the strengths and weaknesses of these two planning approaches particularly in reasoning the increase of the average house completion time and generally in the explanation of the house building industry behavior. in this regard, the effect of production rate, project’s scope and the number of houses under construction on the average house completion time have been studied. the first two are proposed by the activity-based methods as the effective parameters on completion time and the last one is the parameter proposed by the workflow planning approaches. quarterly number of completions has been used as the representative of production rate of the industry. the analysis has shown no apparent correlation between production rate and the average house completion time since 2000 in australia, victoria, western australia, queensland and south australia. the only state that has shown the correlation was new south wales. in this state, the production rate has been declining since 2000. this decline made the completion time longer during this period. in case of australia and other states, because the increasing trend of completion time has happened during the time that production rate has been constant, it can be concluded that this increase has not been caused by the loss in production rate as it is suggested by activity based planning approaches. the other parameter suggested by these methods is project’s scope. for finding the effect of this parameter on the completion time, the trend of the average house floor area has been studied. this trend also has shown that the reason for the increase in the average house completion time is not the increase in project’s scope. south australia is the strong refuting australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 48 case in this matter where the average house floor area has been declining since 2000 while the completion time has been consistently increasing. the next parameter that has been investigated in this research was the number of houses under construction. this parameter is proposed by the workflow planning approach as an effective factor on completion time. the study of the trend of this parameter has shown a strong correlation between the average house completion time and this parameter. this correlation has been verified in australia and its states. it has been also shown that the correlation between the number of houses under construction and the average house completion time is positive. whenever the nhuc increases, the completion time would increase and whenever it decreases the completion time would decrease. this paper began by discussing a concern over the recent increase in the house completion time in australia. the research has described that the main reason for this increase is the growth of the number of houses under construction. this research has also demonstrated that the workflow planning approach is able to explain the house building industry’s behavior in relation to house building completion times. therefore, we suggest that this approach should be used by the industry’s policy makers and practitioners to better understand the dynamics of the housing construction process. references australian bureau of statistics (2008) feature article: average quarterly completion times for new houses. 8731.0 building approvals, australia, jul 2008 australian bureau of statistics (2009) 8752.0 building activity, australia, dec 2009 australian bureau of statistics (2010) feature article: average floor area of new residential dwellings. 8731.0 building approvals, australia, feb 2010 bashford, h. h., walsh, k. d. & sawhney, a. (2005) production system loading-cycle time relationship in residential construction. journal of construction engineering and management, 131, 15-22 dipasquale, d. (1999) why don't we know more about housing supply? journal of real estate finance and economics, 18, 9-23 glaeser, e. l. (2004) nber reporter spring 2004: housing supply, the national bureau of economic research harris, r. b. & ioannou, p. g. (1998) scheduling projects with repeating activities, journal of construction engineering and management, 124, 269-278 hogg, r. v. & craig, a. t. (1995) introduction to mathematical statistics, englewood cliffs, nj, usa, prentice-hall, inc hopp, w. j. & spearman, m. l. (2008) factory physics, mcgraw hill higher education koskela, l. (1992) application of the new production philosophy of construction. cife australasian journal of construction economics and building gharaie, e et al. (2010) ‘explaining the increase in the australian average house completion time: activity-based versus workflow-based planning’, australasian journal of construction economics and building, 10 (4) 34-49 49 koskela, l. (1999) management of production in construction: a theoretical view, 7th annual conf. of int. group for lean construction. univ. of california, berkley, calif., international group for lean construction kottegoda, n. t. & rosso, r. 2008. applied statistics for civil and environmental engineers, oxford, uk, wiley-blackwell. murphy, a. d. (2008) the microfoundation of housing market dynamics, department of economics. duke university national housing supply council (2010) 2nd state of supply report, state of supply report, national housing supply council o’brien, m., wakefield, r. & beliveau, y. (2000) industrializing the residential construction site, washington, dc, u.s. department of housing and urban development, office of policy development and research reda, r. m. (1990) rpm: repetitive project modeling, journal of construction engineering and management, 116, 316-330 sacks, r. & partouche, r. (2009) production flow in the construction of tall buildings. in samuel, t. a. & eddy, m. r. (eds.) construction research congress. seattle, washington, asce sawhney, a., walsh, k. d., bashford, h. h. & palaniappan, s. (2009) impact of inspected buffers on production parameters of construction processes, journal of construction engineering and management, 135, 319-329 willenbrock, j. h. (1998) residential building design and construction, upper saddle river, n.j., prentice-hall yin, r. k. (1994) case study research; design and methods, sage publications buildability factors influencing formwork labor productivity of columns the effects of buildability factors on rebar fixing labour productivity of beamless slabs abdulaziz m jarkas, phd, peng, ceng ecuk mied (mazaya real estate development co. projects development state of kuwait) abstract buildability is an important factor affecting labour productivity. nevertheless, a thorough search of the literature revealed a dearth of research into its effects on in situ reinforced concrete construction, especially at the activity levels. since rebar fixing is an integral trade of this type of construction material, and beamless slabs are amongst the major encountered activities on construction sites, the objective of this research is to explore the buildability factors affecting its rebar fixing efficiency. to achieve this objective, a large volume of fixing productivity data was collected and analysed using the categorical interaction regression method. as a result, the main and interaction effects of rebar diameter; reinforcement quantity; slab geometry; and reinforcement layer location are determined. the findings show a significant influence of these factors on the fixing operation, which can be used to provide designers and construction managers with feedback on how well the design of this activity considers the requirements of buildability, and the tangible consequences of designers’ decisions on labour productivity. keywords: beamless slabs, buildability, categorical interaction-regression, labour productivity, rationalisation, rebar fixing, standardisation introduction construction is the world's largest and most challenging industry (tucker 1986). in 1997, the us construction industry accounted for 10% of the gross domestic product (gdp) and employed over 10 million, making the industry the largest in the country (allmon et al. 2000). since construction is a labour intensive industry, the significance of this influence, clearly justifies the concern over its labour productivity. several factors affect labour productivity, but buildability is amongst the most important (adams 1989; horner et al. 1989). buildability, as defined by the construction industry research and information association, is “the extent to which the design of a building facilitates ease of construction, subject to the overall requirements for the completed building” (ciria 1983). buildable design leads to higher labour productivity and lower construction cost (carter 1999; dong 1996; williamson 1999). design simplification is achieved through the implementation of the following buildability principles: (a) rationalisation; (b) standardisation; and (c) repetition (jarkas 2005; fischer and tatum 1997; dong 1996). design rationalisation is defined as “the minimisation of the number of materials, sizes, components or sub-assemblies”, whereas standardisation is "a design philosophy requiring the designed product to be produced from those materials, components and sub-assemblies remaining after design rationalisation has taken place" (moore 1996a). the design repetition principle involves repeating bay layout, floor grids, dimensions of elements, and storey height. australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   17 numerous previous studies investigated the influence of buildability on the construction process (lam and wong 2009; saghatforoush et al. 2009; lam et al. 2007; trigunarsyah 2007, 2004; pulaski and horman 2005; nima et al. 2002; cheetham and lewis 2001; jergeas and put 2001; poh and chen 1998; fischer and tatum 1997; alshawi and underwood 1996; hyde 1996; moore 1996a, 1996b; cidb 1995; o’connor and victoria 1988; griffith 1987; o’connor et al. 1987; o’connor et al. 1986). nonetheless, to date, little research has been conducted to investigate and quantify the effects and relative influence of buildability factors on rebar fixing labour productivity of situ reinforced concrete construction, especially at the activity levels. moreover, most of the previous buildability studies were heuristic in principles, generic and qualitative in nature; a few were even rudimentary, based upon anecdotal perceptions and adopted practice, insights and common sense. one of the barriers, and perhaps the most important, to the implementation of the buildability concept, is the difficulty in measuring its benefits to the construction industry; the industry still lacks methodologies to represent the requirements for buildability analysis and measurement (song and chua 2006). although seminal work has been developed, apart from the “buildable design appraisal system (bdas)”, which was established by the construction industry development board of singapore (cidb 1995), previous research has not provided “specific” guidance on how to measure the buildability of a design. in one of the few text books entirely devoted to buildability, ferguson (1989) shows the breadth of factors which must be considered to make a design buildable and provides many examples of buildability problems and suggestions for improvements. while such suggestions allow the classification of buildability issues according to their level of details, they do not link buildability issues to “specific” design decisions. notwithstanding that the bdas is the only available quantitative design appraisal tool to date, the scientific reliability of the methodology employed in developing the system's buildable scores is questioned. buildable scores were obtained from inputs provided by government agencies, private consultants, and product manufacturers based upon previous personal and group experience and judgment (dong 1996). while such an approach can be regarded as good practice and common sense, the scientific method requires facts to be established and supported by rigorous research, measurement and analysis. another major shortcoming of this appraisal system stems from the lack of depth in which buildability is assessed. buildable scores are awarded based on the overall structural type and construction method. such an approach is too general in nature where the impacts of buildability factors require investigations in far greater depth to establish and quantify their effects on labour productivity. furthermore, poh and chen (1998), in an empirical study of 37 completed buildings, determined inconsistent patterns amongst buildable scores, labour productivity, and construction cost, thus went on to conclude that “while a design with a high buildable score will result in more efficient labour usage, the relationship between the buildable score and construction cost is less distinct”. the basic dilemma, the researcher argues, may be attributed to the methodology employed by most related previous research, where the effect of buildability was investigated on a generic basis, which has overlooked the important aspect of the current problem. a practical solution to the problem, the researcher suggests, especially in reinforced concrete projects, where the construction process of such structures are composed of various trades and activities, may be achieved through: (1) investigating and determining the effects and relative influence of buildability factors at the activity or component levels, i.e. foundations, grade beams, columns, australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   18 walls, beams and slabs, which support and make up the building frame, and are common to each activity, so that the impacts of buildability on such trades and activities can be readily available to designers to provide specific guidance to a particular design decision on the one hand, and the collective effects upon the overall phenomenon of buildability on a global basis may be well supported, established and understood, hence can be implemented with sufficient ease, on the other; and (2) quantifying such effects in measurable terms so that the tangible benefits of buildability principles may be realized and formalized. since rebar fixing is an integral, labour intensive, trade of this type of construction, the objective of this study is to investigate the effects and relative influence of the following buildability factors on fixing labour productivity of a frequently encountered activity on construction sites; namely, beamless slabs: (a) rebar diameter; (b) quantity of reinforcement fixed; (c) geometry of slab; and (d) reinforcement layer location, i.e. top and bottom, so that labour cost and benefits related to the application of buildability principles to this activity can be estimated for the various levels both, reliably and with reasonable accuracy. this paper briefly overviews the rebar fixing operation, introduces the characteristic diameter concept, presents the research method and analysis, provides a discussion of the results obtained, furnishes a set of recommendations geared towards enhancing the design buildability level and improving the rebar fixing labour productivity of this activity, and concludes with recommendations for further research into the influence of buildability on other elements and trades of in situ reinforced concrete structures. rebar fixing operation overview the universal “in situ” rebar fixing mechanism involves placing and tying bars in positions. the most common method of tying the reinforcement is to use soft iron binding wires at selected intersections of bars in footings, walls and slabs, and at intersections of main bars and stirrups or links in beams and columns. reinforcing steel fixing is a labour intensive operation which requires a high degree of strength and skill. firm fixing and holding reinforcing bars in position is essential during concreting. spacers are used to maintain an adequate concrete cover to protect the reinforcement from rusting and expanding due to air and moisture penetration. the most commonly used type is the plastic spacers which are made to fit particular bar sizes. mortar blocks may be also used as spacers to ensure the provision of adequate cover. for deep slabs, on site fabricated steel chairs are usually used to support and provide the minimum required cover for the top reinforcement layer. depending on the scale of the project and reinforcement level of details, reinforcing steel bars are delivered to construction sites either as straight bars in standard bundles of twelve meters in length and two tons in weight, or cut and bent to sizes and shapes off site. cutting and bending, and fixing of reinforcement are two distinct activities which may be performed by two different gangs on site. on the other hand, prefabricated reinforcements can be also preassembled into cages which may be lifted and fixed in positions. based on the preceding discussion, it can be concluded that the task level difficulty associated with rebar fixing operation largely depends upon whether reinforcement is assembled, placed and tied on sites, or pre-fabricated off sites, where the fixing operation is limited to lifting, centring and securing in required positions. hence, this investigation focuses on the “in situ” fixing operation where the reinforcement is placed, tied, centred and securely fixed in positions on sites. australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   19 top layer reinforcement bottom layer reinforcement slab thickness beamless slabs reinforcement commonly consists of a double layer grid of reinforcing bars, i.e. bottom and top, placed at ninety degree and tied at selected intersections in each layer. the bottom layer reinforcement grid is fixed first, followed by the required electro-mechanical services. upon the inspection of the bottom layer reinforcement and other services, top layer supporting chairs are evenly distributed and securely fixed in positions. at this stage, the top layer reinforcement grid is fixed. a typical cross-section of slabs observed is shown in figure 1. figure 1typical arrangement of slab reinforcement the characteristic rebar diameter concept in its most basic form, the “characteristic item” is the largest quantity of an item contained in a work package composed of several items. horner and zakieh (1996), found an almost perfect linear relationship between percentage cumulative quantity and percentage cumulative value in two different categories of projects; reinforced concrete bridges, and steel framed supermarkets. the linearity of the relationship indicated that a similar relationship exists between quantity and value, and that any marginal increase in quantity would cause a similar marginal increase in value, especially for large quantity items. it was concluded that the influence of large quantity items would overshadow the effect of any differences in rates of small quantities, and that the relationship is dominated by the rate of the largest quantity. consequently, the unit rate associated with the largest quantity can be applied to all items within the work package. this item, having the largest quantity within any work package, is referred to as the characteristic item. the concept of the characteristic item is extremely useful in productivity research and studies. an activity such as rebar fixing is associated with difficulties in productivity measurement due to the variety of bar diameters. therefore, the application of the “characteristic productivity concept” would greatly simplify the measurement procedure (jarkas 2005; lal 1999). the application of the characteristic productivity concept to reinforcing steel trade involves identifying the rebar diameter which accounts for the majority of the quantity, i.e. tonnage, thus referring to as the “characteristic diameter”, and basing the productivity measurement on the assumption that the productivity of all other bar diameters is represented by the productivity of the characteristic diameter. this approach yields negligible error as the large quantity of the characteristic diameter would swamp the small quantities of all other diameters (horner and duff 2001), hence was applied throughout this research project. australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   20 research method and analysis the labour productivity data were collected at both levels; macro, and micro. macro-level observation involves monitoring the overall activity within the trade, where the total productive labour inputs associated with completing the overall activity is recorded, therefore, a single labour productivity index is achieved, i.e. quantity of reinforcement fixed (kg) per man-hour (mh). labour inputs collected at this level included both; “contributory time”, i.e. time spent in settingout, preparing work areas, transporting reinforcing steel bars within the site, reading plans and details, as well as “direct or effective time” used to work out the activity, i.e. fixing reinforcement in positions (jarkas 2005; chan and kumaraswamy 1995; salim and bernold 1994). micro-level observation on the other hand, focused on the direct observation of pre-selected elements within the activity. therefore, the contributory time had negligible effect at this level of observation where only direct productive labour inputs spent to achieve the outputs are used in quantifying the labour productivity of elements observed. the advantages of monitoring an activity at the micro-level are twofold: (1) the results obtained would assist in cross-referencing patterns depicted from the macro-level observation analysis, which may further provide a better understanding of the overall phenomena and findings of the explored factors influencing the activity; and (2) the impacts of other, non-buildability factors, e.g. communication complexity, sequencing problems, and proportion of work subcontracted, on labour productivity are minimized at this level of observation. since numerous factors, other than buildability, influence labour productivity on sites (horner et al. 1989), which may mask or even overshadow the effect of buildability on the rebar fixing operation, the focus was on selecting construction projects which shared common features such as, contract procurement method, geographical locations, and to a large extent, construction methods, yet differed in types and magnitudes, so that the impacts of the explored buildability factors could be unravelled; similar sites, largely share similar characteristics of buildability factors, especially at the activity levels, therefore, their effects may not be best revealed. on the other hand, the differences in management procedures applied amongst the various types and magnitudes of sites observed, have little effect at the activity level of observation, whereas the possible effects of other interfering factors such as, skill of labours, gang size, site layout, and supervision quality, can be moderated by collecting a large volume of labour productivity data (jarkas 2005). consequently, sites observed included residential and office buildings, commercial centres, and industrial facilities. moreover, to minimize the negative influence of interruptions and disruptions on labour productivity, which can further mask the influence of buildability on the rebar fixing operation, major encountered delays were recorded and discounted from both, macro and micro-level total labour inputs, where only productive inputs were used to quantify the labour productivity indices of the activity. the buildability factors investigated, which are common to this activity, included: (a) rebar diameter; (b) quantity of reinforced fixed; (c) slab geometry; and (d) rebar layer location. as was previously explained, the rebar diameter effect was presented by the characteristic diameter, whereas the reinforcement quantity was presented by the physical weight of reinforcement fixed. since rectangular slab geometry is the most encountered shape on construction sites, the distinction is made between this shape and all other geometries. although the level of fixing complexities is different amongst other non-rectangular shapes, i.e. trapezoidal, triangular, australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   21 circular, amongst others, such geometries are least encountered on sites. therefore, classifying all these shapes into one category, in comparison with the volume of rectangular shapes normally encountered, would yield reasonably accurate conclusion. in view of the aforementioned, this factor was presented by two categorical variables; rectangular, and nonrectangular. the reinforcement layer location indicates the position of the observed layer, i.e. bottom or top. as with the slab geometry, this qualitative factor was further classified into two categories; bottom, and top. the productivity data of this activity, which were part of a larger research project, were collected from sixty-seven different construction sites located in the state of kuwait, where in situ reinforced concrete is the prevailing type of construction. the data collection duration spanned over a period of nineteen months, in which, a total of 130 and 200 labour productivity data points were collected at the macro and micro-levels respectively. such a large volume of data made it possible to achieve valid, reliable and robust statistical results. macro and micro-levels labour inputs for the corresponding slabs observed were collected using the intermittent and direct observation techniques respectively (jarkas 2005; williamson 1999; munshi 1992; noor 1992). upon prior arrangements with management personnel of sites selected for observation, specifically designed data collection forms were distributed to rebar fixing gang leaders and members to systematically and consistently record the essential productivity parameters of the labour inputs for the various slabs monitored, and document major delays encountered during the fixing operation. the intermittent observation technique involved collecting the macro-level labour inputs upon the completion of the activity, yet conducting occasional site visits during the process of the fixing operation to ensure that data collection forms are filled out regularly by gang leaders, and assess the physical progress of activities under observation. the direct observation method on the other hand, focused on collecting the corresponding fixing labour inputs of the reinforcement layer observed, i.e. top and bottom. micro-level labour inputs, which were filled out by operating gang members, were collected upon the completion of the fixing operation of reinforcement layers observed. the data collected at the macro-levels were cross-checked by both; site foremen, and charge hands, whereas micro-level data were double-checked by different gang members, who were also involved in the fixing operation of reinforcement layers monitored, for verification and accuracy. furthermore, slabs observed were visually inspected and marked on drawings for output measurements. all labour inputs collected were screened for possible measurement errors or outliers, i.e. an unusual observation which lies outside the range of the data values. the outputs of buildability factors explored were determined by the researcher using the “physical unit of measurement” technique (talhouni 1990). the rebar fixing labour productivity indices of the elements observed were then quantified as shown in equation (1). )hour-man(inputlabour (kg) fixedquantity entreinforcem (kg/mh)typroductivilabour = eq. 1 australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   22 the screened data were entered into a spreadsheet where the regression analyses were conducted using the “phstat” software, a statistics add-in for microsoft® excel. normal probability plots of labour productivity data revealed that the values belong to almost normally distributed populations, thus validating the statistical reliability inferences. a sample plot of the macro-level rebar fixing labour productivity of slabs observed is shown in figure 2. figure 2 normal probability plot of macro-level rebar fixing labour productivity the main and interaction effects of the investigated buildability factors were analysed using the categorical interaction-regression method (jaccard and turrisi 2003; gujarati 1995; hardy 1993; lawrence 1992; aiken and west 1991; sanford 1985; friedrich 1982). since the slab geometry and reinforcement layer location are categorical, i.e. qualitative, factors, binary dummy variables, which assume the values of either 0 or 1, e.g. 0 if the slab geometry is rectangular and the observed layer of reinforcement is at the bottom level, and 1 if the slab is nonrectangular in shape and the reinforcement is at the top level, were introduced into the regression model to quantify the average difference in labour productivity amongst the categories. the coding however is arbitrary and it would be just as valid to switch the coding criteria, e.g. 1 for rectangular slabs and bottom layer level, and 0 for non-rectangular and top layer level of reinforcement. main effects regression models assume no interaction between the independent variables and therefore the unique effect of each independent variable on the dependent variable is quantified while all other independent variables in the model are held constant. however, there are many cases when the effect of an independent variable on the dependent variable depends on the level or intensity of another independent variable in the model (aiken and west 1991). when such a situation is encountered, an interaction term between the two independent variables is added to the model to incorporate their joint effect on the dependent variable, over and above their separate effects. an interaction term is added in the model as a cross product of the interacting variables. a typical regression model involving interaction between continuous and dummy variables has the basic form shown in equation (2) (jaccard et al. 1990). )dx(bdbxbby 21322110 ∗+++= eq. 2 australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   23 where is a continuous variable; is a dummy variable; and 1x 2d )dx( 21 ∗ is an interaction term between and ; the interaction coefficient , quantifies the average difference in the slope, i.e. rate of change, of the relationship between the continuous independent variable and the dependent variable y for the two categories represented by the dummy variable . 1x 2d 3b 1x 2d even though we have shown the most commonly encountered interaction case in this model, i.e. interaction between continuous and dummy variables, interaction can occur between two continuous or two dummy variables. moreover, a multiple regression model may involve several interaction terms. due to the observed complexity and additional labour input associated with rebar fixing in nonrectangular slabs, an interaction term between the slab geometry and quantity of reinforcement fixed was assumed and included in the regression model of the corresponding level of analysis, i.e. macro and micro. this term unravels the impact of reinforcement quantity on fixing labour productivity, over and above its separate effect, for the two categories of slab geometry; rectangular, and non-rectangular. since the multiple regression models involve several independent variables, i.e. buildability factors, having different units of measurement, a direct comparison of the size of various coefficients to assess the relative influence on the dependent variable, i.e. labour productivity, could be spurious. therefore, before a meaningful investigation can be conducted, the regression coefficients of the independent variables must to be standardised (kim and feree 1981). the standardised regression coefficients are then measured on the same scale, with a mean of zero and a standard deviation of one, and thus are directly comparable to one another with the largest coefficient in absolute value indicating the greatest influence on the dependent variable. a regression coefficient is standardised as shown in equation (3). ⎟ ⎟ ⎠ ⎞ ⎜ ⎜ ⎝ ⎛ =∗ y k kk s s bb eq. 3 where is the standardised regression coefficient of the independent variable; is the regression coefficient of the independent variable; is the standard deviation of the independent variable; and is the standard deviation of the dependent variable. commonly, standardised regression coefficients are referred to as beta weights. ∗ kb thk kb thk y ks thk s furthermore, to determine the relative influence of such factors, the most influential factor was chosen as the reference factor, and was assigned the value of 1.00. the relative influence of each factor was then measured relative to the reference factor as shown in equation (4). factorreferencetheofvaluetcoefficienedstandardis factorktheofvaluetcoefficienedstandardis factorktheofinfluencerelative th th = eq. 4 the reliability of the regression relationships was determined by conducting statistical significance tests at 5% significance level. the extent to which the data disagree with the null australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   24 hypothesis, i.e. the regression coefficient of the corresponding buildability factor within the regression model is insignificantly different from zero, thus its effect on labour productivity is statistically insignificant, was determined by the p-value obtained for each factor investigated. the smaller the p-value of the corresponding factor, the greater the extent of disagreement between the data and the null hypothesis, and the more significant the result is. in general, if the p-value of the regression coefficient is less than the significance level, i.e. p-value < 0.050, the null hypothesis is rejected in favour of the alternate hypothesis, that is the impact of the corresponding buildability factor explored upon labour productivity is statistically significant (sincich et al. 2002). furthermore, the goodness of fit of the regression models was assessed by the correlation and determination coefficients. the correlation coefficient, measures the strength of the linear correlation between the dependent and independent variables in the regression model, whereas the coefficient of determination indicates the percent of variance in the dependent variable which can be explained by the independent variables of the model. the higher the coefficients of correlation and determination in the regression model, the better the goodness of fit. the algebraic sign of the regression coefficient on the other hand, denotes the direction of the corresponding buildbability factor’s effect on labour productivity, i.e. positive or negative. macro-level observation analysis a total of 130 labour productivity data points were collected at the macro level. the relationship between fixing labour productivity and the buildability factors was determined by the multiple categorical interaction-regression model shown in equation (5). )tqgeom(bgeombtqbcbdiabb)mh/kg(p 43210 ∗++++= eq. 5 where cbdia (mm) is the characteristic rebar diameter; tq (kg) represents the total quantity of reinforcement fixed in both layers; geom is a dummy variable, which quantifies the average difference in fixing labour productivity between non-rectangular and rectangular slabs. it assumes the value of 0 if the slab is rectangular, and 1 if non-rectangular; and (geom ∗ tq) is an interaction term, which quantifies the average difference in the slope of the relationship, i.e. rate of change, between labour productivity and quantity of reinforcement fixed, for the two categories of slab geometry. the overall regression model and coefficients statistics are presented in tables 1 and 2 respectively. correlation coefficient (r) 91.09% coefficient of determination (r2) 82.97% standard error 21.48 f(4,125) 152.25 p-value 0.000 no. of observations 130 table 1 overall regression model statistics for macro-level rebar fixing labour productivity of beamless slabs australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   25 coefficient value standard error p-value vif1 standardised coefficient value influence rank relative influence cbdia (mm) 7.43 0.556 0.000 1.77 0.656 1 1.00 tq (kg) 0.000492 0.000 0.000 1.52 0.241 2 0.37 geom -20.78 5.56 0.000 1.99 n/a2 n/a n/a (geom∗ tq) 0.000761 0.000 0.00201 2.06 n/a n/a n/a table 2 regression coefficients statistics for macro-level rebar fixing labour productivity of beamless slabs notes: 1variance inflation factor indicates the correlation amongst the independent variables in the model. 2dummy variables are used to quantify differences in levels between or amongst categories, therefore, the normal interpretation for standardized coefficients does not apply. the relationship between rebar fixing labour productivity and the relevant buildability factors was therefore quantified by the regression model shown in equation (6). )tqgeom(000761.0geom78.20tq000492.0cbdia43.772.51)mh/kg(p ∗+−++= eq. 6 in order to quantify the average percentage difference in fixing labour productivity between nonrectangular and rectangular slabs, the average values of the corresponding buildability factors shown in table 3, were substituted into equation (6) as follows: geometry of slab average characteristic bar diameter (mm) average total quantity of reinforcement fixed (kg) rectangular 15.29 18192.33 non-rectangular 13.39 14164.13 total 14.62 16766.97 table 3 average values of buildability factors influencing macro-level rebar fixing labour productivity of beamless slabs non-rectangular slabs, geom = 1: 18.148)13.141641(000761.0 =∗+ )1(78.20)13.14164(000492.0)39.13(43.772.51)mh/kg(p −++= )0(78.20)33.18192(000492.0)29.15(43.772.51)mh/kg(p rectangular slabs, geom = 0: 28.174)33.181920(000761.0 =∗+ −++= therefore, the average difference in fixing labour productivity was determined as shown in equation (7). %98.14100 28.174 )18.14828.174( =∗⎥⎦ ⎤ ⎢⎣ ⎡ − eq. 7 australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   26 in comparison with rectangular slabs, an average loss in labour productivity of approximately 15% is associated with reinforcement fixing in non-rectangular slabs. table 1, shows strong correlation and high determination coefficients between the investigated factors and labour productivity, i.e. 91.09% and 82.97% respectively. table 2 further shows that all the investigated buildability factors, including the interaction effect, are statistically significant in their effects on labour productivity, i.e. p-value < 0.050. in addition, the influence rank determines a greater effect of rebar diameter on labour productivity than the total quantity of reinforcement fixed. micro-level observation analysis at this level of observation, 200 labour productivity data points were collected and analysed. in addition to cross-referencing the patterns of results obtained from the macro-level analysis and limiting the effects of non-buildability factors on fixing labour productivity, the purpose of this observation was to quantify the average difference in fixing labour productivity between top and bottom layers. consequently, the productive labour input of fixing the reinforcement in each layer was collected separately, and the fixing labour productivity of each layer was determined based on the quantity of reinforcement fixed in the observed layer and its associated labour input. in addition to the buildability factors explored at the macro-level, micro-level analysis included the reinforcement layer location factor. therefore, the relationship between the buildability factors and labour productivity was determined by the multiple categorical interaction-regression model shown in equation (8). llocb)qgeom(bgeombqbcbdiabb)mh/kg(p 543210 +∗++++= eq. 8 where cbdia (mm), q (kg) and geom are, as previously defined, the characteristic bar diameter, quantity of reinforcement fixed in the observed layer, and the slab geometry respectively. lloc is a categorical dummy variable, which represents the location of the reinforcement layer observed and quantifies the average difference in fixing labour productivity between the top and bottom layers. this factor assumes the value of 0 if the monitored layer is at the bottom level of the slab, and 1 if at the top. the overall regression model and coefficients statistics are presented in tables 4 and 5 respectively. correlation coefficient (r) 89.71% coefficient of determination (r2) 80.49% standard error 25.96 f(5,194) 160.04 p-value 0.000 no. of observations 200 table 4 overall regression model statistics for micro-level rebar fixing labour productivity of beamless slabs australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   27 coefficient value standard error p-value vif standardised coefficient value influence rank relative influence cbdia (mm) 8.71 0.619 0.000 2.06 0.641 1 1.00 q (kg) 0.000871 0.000173 0.000 1.71 0.209 2 0.33 geom -27.26 5.37 0.000 2.05 n/a n/a n/a (geom∗ q) 0.00157 0.000452 0.000 2.34 n/a n/a n/a lloc -37.28 3.73 0.000 1.02 n/a n/a n/a table 5 regression coefficients statistics for statistics for micro-level rebar fixing labour productivity of beamless slabs the relationship between fixing labour productivity and the buildability factors were quantified by the regression model shown in equation (9). lloc28.37)qgeom(00157.0 geom26.27q000871.0cbdia71.855.57)mh/kg(p −∗+ −++= eq. 9 the average difference in fixing labour productivity between the top and bottom layers of reinforcement was quantified, for the relevant category of slab geometry, by substituting the average values of the corresponding buildability factors shown in tables 6-a and 6-b, into equation (9) as follows: layer location average characteristic bar diameter (mm) average total quantity of reinforcement fixed (kg) bottom 13.95 9380.42 top 14.82 10942.69 total 14.35 10090.55 table 6-a average values of buildability factors influencing micro-level rebar fixing labour productivity of rectangular beamless slabs layer location average characteristic bar diameter (mm) average total quantity of reinforcement fixed (kg) bottom 13.39 7454.35 top 14.73 9353.03 total 13.95 8247.47 table 6-b average values of buildability factors influencing micro-level rebar fixing labour productivity of non-rectangular beamless slabs australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   28 quantifying difference in labour productivity between top and bottom reinforcement layers in rectangular slabs the average difference in labour productivity between top and bottom layers fixed in rectangular slabs, i.e. geom = 0, was quantified as follows: top layer, lloc = 1: 88.158)1(28.37)69.109420(00157.0 =−∗+ )0(26.27)69.10942(000871.0)82.14(71.855.57)mh/kg(p −++= )0(26.27)42.9380(000871.0)95.13(71.855.57)mh/kg(p bottom layer, lloc = 0: 22.187)0(28.37)42.93800(00157.0 =−∗+ −++= accordingly, the average percentage difference was determined as shown in equation (10). %14.15100 22.187 )88.15822.187( =∗⎥⎦ ⎤ ⎢⎣ ⎡ − eq. 10 an average loss of approximately 15% in labour productivity, compared with the bottom layer, is realized in fixing the top layer reinforcement of rectangular slabs. quantifying average percentage difference in labour productivity between top and bottom reinforcement layers in non-rectangular slabs the average difference in labour productivities between top and bottom layers fixed in nonrectangular slabs, i.e. geom = 1, was quantified as follows: top layer, lloc = 1: 14.144)1(28.37)03.93531(00157.0 =−∗+ )1(26.27)03.9353(000871.0)73.14(71.855.57)mh/kg(p −++= )1(26.27)35.7454(000871.0)39.13(71.855.57)mh/kg(p bottom layer, lloc = 0: 11.165)0(28.37)35.74541(00157.0 =−∗+ −++= therefore, the average percentage difference was determined as shown in equation (11). %70.12100 11.165 )14.14411.165( =∗⎥⎦ ⎤ ⎢⎣ ⎡ − eq. 11 on average, a loss in labour productivity of approximately 13%, in comparison with the bottom layer, is associated with fixing the top layer reinforcement of non-rectangular slabs. australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   29 consistent with the results obtained from the macro-level observation analysis, table 4 determines strong correlation and high determination coefficients between the buildability factors explored and labour productivity, i.e. 89.71% and 80.49% respectively. moreover, table 5 shows that all factors are significant in their impacts on labour productivity, i.e. p-value < 0.050, and that the influence of the rebar diameter remains the more influential of the two continuous factors on fixing labour productivity. discussion of results and implementation of findings this investigation has determined the effects and relative influence of buildability factors on rebar fixing labour productivity of beamless slabs. there are few published quantitative results, especially at this activity level, with which to compare the findings of this study, however, such data as exist have been examined and discussed. aldana (1991) and hidayatalla (1992) concluded a positive relationship between rebar diameter and fixing labour productivity. the findings of this study at both levels; macro and, micro, further substantiate their findings. the quantified results show that as the rebar diameter increases by 1.00 mm, macro and micro-level average fixing labour productivity significantly increases by 7.43 kg/mh and 8.71 kg/mh, respectively. this pattern can be explained by the rationale that, for the same quantity of reinforcement, as the rebar diameter increases, fewer number of reinforcing bars are fixed, hence resulting in higher labour productivity. furthermore, since the fixing process comprises, mainly, placing and tying rebar in positions, tying reinforcement bars is a time consuming process, but it is approximately the same for tying thin or thick bars. as a result, within the same labour input, thick bars can be tied; thus fixing larger reinforcement quantity and therefore higher labour productivity is achieved. however, this argument may be valid up to a certain point where the weight of a rebar becomes too great and physically stressful to allow a single fixer to lift and work with for a prolonged period of time, which may require two or more fixers to lift and place in position. such a required increase in labour input, relative to the rebar diameter size being fixed, can reduce or even counterbalance the ratio of the quantity fixed to labour input, which can overshadow the positive effect gained from placing and tying large diameter size bars. in view of this discussion, strictly speaking, the pattern depicted in this investigation is valid for the rebar diameters observed, which ranged from a minimum of 8 mm to a maximum of 25 mm. hidayatalla (1992) concluded a negative relationship between high steel content and fixing labour productivity of slabs. his works quantified an average loss of 1.11 kg/mh in labour productivity as the steel content increases by 1.00 kg/m3. however, other factors which simultaneously affect fixing labour productivity, e.g. geometry of slabs, location of reinforcement layer, and any possible related interaction amongst these factors, were not considered. in contrast to the previous finding, this research determines a significant positive relationship between reinforcement quantity and fixing labour productivity; as the quantity of reinforcement fixed increases by 1.00 kg, macro and micro-level labour productivity, on average, increases by 0.000492 kg/mh and 0.000871 kg/mh, respectively. the interaction effect between the reinforcement quantity and slab geometry reveals an interesting finding. the interaction coefficient term determines a significant increase in the intensity of the positive influence of reinforcement quantity on labour productivity of non australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   30 rectangular slabs, i.e. the positive influence of reinforcement quantity on labour productivity is greater in non-rectangular slabs, in comparison with rectangular slabs. this finding may be related to the following two factors: (1) as the quantity of reinforcement increases in non-rectangular slabs, less variability of bar lengths is encountered by steel fixers to locate the “right” bar length, hence higher labour productivity is achieved; and (2) the positive effect of reinforcement quantity on labour productivity is stronger than the negative impact of the slab geometry, therefore, overshadowing its negative influence on the efficiency of the fixing operation. the positive relationship between the reinforcement quantity and fixing labour productivity determined by this study may be further ascribed to the following reasons: (a) an initial contributory time is required by gang members to prepare work areas, work out rebar splicing locations and details, transport and distribute reinforcing steel bars prior to commencing the direct or effective work. therefore, if an activity is of a small-scale type, a major portion of the macro-level total input is directed towards contributory rather than effective work; (b) the researcher noticed that a fixer would just as easily and within approximately the same time frame, place and tie for instance, similar number of 14 mm and 16 mm diameter bars, thus larger quantity and higher labour productivity; (c) when gang members are confronted with large scale activities, better preparation, planning and control is applied on sites; and (d) in large scale monitored activities, the researcher further observed that gang members tend to work harder and take less frequent breaks. in view of the preceding discussion, such an effect may be referred to as “economy of scale”. the importance of applying the design rationalisation and standardisation concepts was the subject of several research projects (ciria 1999; fischer and tatum 1997; dong 1996; moore 1996a). unlike rectangular slabs, where reinforcing steel bars are only of two different lengths, and in the special case of the square type where all bars have the same length, fixing reinforcement in non-rectangular slabs is associated with additional labour inputs directed toward searching for the “right” bar length amongst the variable stacked lengths. therefore, standardising layout modules minimises waste of materials, improves the buildability of this activity, and enhances the productivity of the operation. the investigation of the effect of slab geometry on labour productivity further corroborates the positive influence of these concepts on fixing labour productivity. the results obtained show that, in comparison with rectangular slabs, macro and micro-level fixing labour productivity, on average, decreases by 20.78 kg/mh and 27.26 kg/mh, respectively as a result of rebar fixing in non-rectangular slabs. furthermore, on average, a loss of approximately 15% in fixing labour productivity, compared to rectangular slabs, is incurred due to rebar fixing in non-rectangular slabs. fischer and tatum (1997) discussed the potential effect of reinforcement location on the buildability level of construction projects. however, their work was limited to design guidelines and recommendations geared towards buildability knowledge and improvement. this research explored the influence of reinforcement location in slabs and quantified the average difference in fixing labour productivity between bottom and top layers. fixing the top reinforcement layer in slabs is associated with a significant loss in labour productivity. moreover, this pattern is consistent in both categories of slabs observed, rectangular and non-rectangular. in comparison with fixing bottom layer reinforcement, the australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   31 results obtained determine an average labour productivity loss of approximately 15% and 13%, relative to fixing top layer reinforcement of rectangular and non-rectangular slabs, respectively. this finding can be attributed to the following reasons. first, the mobility and motor skills of fixers are substantially reduced when tying top layer bars while standing on top of the reinforcement grid. second, unlike fixing bottom layer reinforcement, top layer fixing operation involves lifting bars a distance approximately equal to the thickness of the slab prior to placing and tying bars in positions. third, the additional labour input required to place the supporting chairs of the top layer reinforcement does not contribute to the measurement of the output, i.e. quantity of reinforcement fixed, hence lower fixing labour productivity is associated with this layer. notwithstanding that general buildability heuristic principles are available for designers, knowledge bases that support specific and timely buildability input to design decisions do not exist (fischer and tatum 1997). consequently, such principles may be regarded as exhortations of good practice and common sense, often obtained using “delphic research methods” (cheetham and lewis 2001). furthermore, most of the existing recommendations and suggestions for buildability improvement, the researcher argues, lack the supporting quantitative evidences, which lend little reliability to the extent to which such recommendations influence the productivity of the construction process on the one hand, and are often associated with scepticism, especially amongst design practitioners, on the other. conversely, the quantitative results of this study are obtained through rigorous research and analysis, and thus can be used as supporting references for “formalizing” the specific buildability knowledge of this activity. however, since some recommendations, when implemented at the design level, may result in material increase, e.g. forms, reinforcement and/or concrete, designers should carefully evaluate the cost/benefit ratio before deciding on a specific option. the effect of rebar diameter on labour efficiency suggests that structural designers should, for the same quantity of reinforcement required and within allowable limits under the prevailing code of practice, opt for specifying the largest possible rebar diameter. the effect of reinforcement quantity further suggests that any marginal increase in quantity, hence cost, as a result of specifying a larger rebar diameter, may be compensated by its positive influence on labour productivity. furthermore, architects should consider the negative influence of slab geometry on the fixing operation and take advantages of design rationalisation and standardisation concepts by keeping non-rectangular modules and bays to a minimum. on the other hand, the patterns of results obtained may be further used by construction managers for effective activity planning, scheduling, resource levelling, and efficient labour utilisation. conclusions and recommendations for further research due to the importance of in situ reinforced concrete material to the construction industry, this research focused on investigating and quantifying the effects and relative influence of buildability factors on the labour productivity of one of its major labour intensive trades; rebar fixing. since beamless slabs are among the major activities, which are frequently encountered on construction sites, improving its rebar fixing labour productivity would help reducing the risk of labour costs overrun and increases the efficiency of the operation. australasian journal of construction economics and building jarkas, a m (2010) ‘the effects of buildability factors on rebar fixing labour productivity of beamless slabs’, australasian  journal of construction economics and building, 10 (1/2) 16‐35   32 the effects of rebar diameter; reinforcement quantity; slab geometry; and reinforcement layer location, on fixing labour productivity of beamless slabs are determined and found to be statistically significant in their impacts at both levels observed; macro, and micro. the findings of this study fill an important gap in quantitative buildability knowledge of this activity, which may be used to provide designers with feedback on how well their designs consider the requirements of buildability principles, and the tangible consequences of their decisions on site labour efficiency. in addition, practical recommendations are presented, which can improve the buildability level of this activity, hence translate into higher labour productivity and lower labour costs. moreover, the depicted patterns of results may provide guidance to construction managers for effective activity planning and efficient labour utilization. although several findings have been drawn from this investigation, further similar research into the effects of buildability factors on rebar fixing, and other trades, i.e. formwork and concreting, labour productivity which are common to other structural members, is recommended. it is further recommended to investigate the range of rebar diameters, beyond 25 mm, within which the positive effect determined on fixing labour productivity, remains valid. the results obtained, in addition to other trades and structural elements recommended for exploration, can ultimately be used to develop an automated “buildability design support system”. such a system would be useful for formalizing the specific buildability knowledge of in situ reinforced concrete construction, thus improving the performance of projects in an everincreasing demand for faster and lower cost delivery of constructed facilities. references adams, s. 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(1999) buildability – the effect of design complexity on construction productivity, msc dissertation, department of civil engineering, university of dundee, dundee, uk the effects of buildability factors on rebar fixing labour productivity of beamless slabs abstract introduction rebar fixing operation overview the characteristic rebar diameter concept research method and analysis macro-level observation analysis micro-level observation analysis discussion of results and implementation of findings conclusions and recommendations for further research references microsoft word ajceb vol.2 no.1 compiled sized.doc the influence of project managers on construction health and safety in south africa the australian journal of construction economics and building vol.2 no.1 57 the influence of project managers on construction health and safety in south africa john smallwood and danie venter university of port elizabeth, south africa introduction construction occupational fatalities, injuries and disease result in considerable human suffering and affect, not only the workers directly involved, but also their families and communities and contribute to the national cost of medical care, and rehabilitation (smallwood, 1996). however, occupational fatalities, injuries and disease also contribute to variability of resource, which increases project risk. such risk can manifest itself in damage to the environment, reduced productivity, nonconformance to quality standards and time overruns, and ultimately in an increase in the cost of construction. other possible manifestations include damage to client property and, or impaired production processes, and a poor client and contractor image as a result of accidents (smallwood, 1996). literature review given that all project stakeholders — clients, designers, project managers (pms) and contractors — influence and contribute to construction health and safety (h&s), pms, in their capacity as project leaders and co-ordinators, are uniquely positioned to integrate h&s into all aspects of the design and construction processes (smallwood, 1996; hinze, 1997). however, only one of the nine project management knowledge areas in the project management body of knowledge (pmbok) makes any reference to h&s (and that is perfunctory), namely project human resource management (project management institute, 1996). given that occupational fatalities, injuries, disease, and accidents in general increase project risk, it is significant that a further knowledge area, namely project risk management does not make reference to h&s. traditionally pms have focused on cost, quality and time. however, this traditional approach has not been successful, with the greater percentage of projects not being completed within budget, or to quality and time requirements (allen, 1999). the need for a paradigm shift and focus on h&s is amplified by the complementary role of h&s in overall project performance cited by various authors — h&s enhances productivity, quality, time and ultimately, cost (hinze, 1997; levitt and samelson, 1993). given the documented impact of accidents, the influence of h&s on other project parameters, the need for a multi-stakeholder approach to h&s, the minimal status afforded to h&s by the project management body of knowledge and the unique position and role of pms in projects, the objectives of this study are to determine: pm perceptions relative to the importance of h&s and other project parameters the frequency at which pms consider and refer to h&s during the design and development, and implementation or construction phases the frequency at which pms consider and refer to h&s relative to various design and related activities the frequency at which various procurement related situations and interventions, which affect h&s, are encountered and taken by pms respectively the aspects or actions which pms perceive can improve or contribute to an improvement in h&s performance the perceived impact of inadequate or the lack of h&s on other project parameters and project risk. project life-cycle given that projects are unique and involve a certain degree of risk the pmbok recommends that projects be subdivided into several phases to provide for better management control. these phases, which are collectively referred to as the project life cycle (project management institute, 1996), are: concept and initiation design and development john smallwood and danie venter 58 the australian journal of construction economics and building vol.2 no.1 implementation or construction commissioning and handover. this paper addresses only the second and third phases, namely design and development, and implementation or construction, hereafter referred to as design and construction for reasons of brevity. holistic client satisfaction research conducted in the usa among a range of electrical contractor clients developed a client satisfaction model. the model consists of five satisfaction quality dimensions: safety, project management, contractor/customer relationship, cost and prepared/skilled workforce (cook, andersen and andersen, 2000). a national survey conducted during the research indicated safety to be the most important quality dimension, followed by project management and contractor/customer relationship. prepared/ skilled workforce and cost dimensions were jointly ranked lowest in importance. research conducted in the uk among consultants (kometa, olomolaiye and harris, 1996) investigated the fundamental needs of clients. the computation of a relative importance index enabled the needs to be ranked in terms of importance. quality, time and cost were ranked third, fourth and fifth after the first ranked ‘functionality of a building’ and the second ‘safety’, both during construction and throughout the life of a building. research conducted in south africa investigated the degree of importance of eleven project parameters according to architects (smallwood, 2000a). based upon an importance index, client satisfaction was ranked first, followed by project quality, project cost and project time — h&s was ranked eleventh. the influence of design according to jeffrey and douglas (1994) it has to be accepted that in terms of causation there is a link between design decisions and safe construction. this is based on research carried out by the european foundation for the improvement of living and working conditions, which concluded, that of site fatalities, 35% were caused by falls, which could have been reduced through design decisions. schneider and susi (1994) in turn say that constructing a new building is, by its very nature, a problem in ergonomics, as construction requires work at floor and ceiling level, resulting in, inter alia, kneeling, bending, reaching out, twisting and in general, the adoption of uncomfortable work postures. designers influence h&s directly through design specific, supervisory and administrative interventions. design specific interventions include: concept design general design selection of type of structural frame site location site coverage details method of fixing specification of materials and finishes. supervisory and administrative interventions include: reference to h&s upon site handover, and during site visits and inspections inclusion of h&s as an agenda item during site meetings requiring of h&s reporting by contractors. designers also influence h&s indirectly through type of procurement system used, prequalification, project time, partnering and the facilitating of pre-planning (smallwood, 2000b). a further role identified for designers is that of optimal interaction with clients, particularly at the design brief stage. this is the most crucial phase for the successful, and healthy and safe completion of any project. deviations from it at a later stage resulting in variation orders (vos) can be the catalyst that triggers a series of events from designer through to workers that culminates in an accident on site. consequently, clients must know exactly what they require and develop a comprehensive brief for the design team (jeffrey and douglas, 1994). designers, and consequently pms, also influence the pre-planning of h&s. preplanning h&s realises a structured approach to h&s related issues by both designers and contractors. liska (1994) maintains there are two parts to pre-planning: pre-project and pre-task, and that preplanning provides the foundation for project h&s programmes. pre-planning identifies all the ingredients of and resources the influence of project managers on construction health and safety in south africa the australian journal of construction economics and building vol.2 no.1 59 required for the h&s programme to be effective and efficient. however, the design of a project is a great influence on determining the method of construction and the requisite h&s interventions. consequently, designers need to make sufficient design related information available at pre-project stage to facilitate budgeting for adequate resources. this is reinforced by oluwoye and maclennan (1994) who found that among pms and site managers of multi-storey projects in sydney, australia, drawings, legislation and site inspections are the sources of information most frequently consulted for h&s planning. constructability is a further design related issue; ‘design for safe construction’ is one of 16 constructability design principles listed by adams and ferguson (mcgeorge and palmer, 1997). however, most of the other 15 principles are indirectly related to, and consequently do influence h&s. method of fixing, size, mass and area of materials, position of components, inter alia, amplify the relevance of constructability to h&s. consequently pms and designers should assess constructability throughout the design stage of a project. it is notable that prior research conducted in south africa to determine the role of pms in h&s, indicates that ‘evaluating constructability’ is the occasion throughout all project stages when pms deliberate h&s most frequently (smallwood, 1996). procurement related issues procurement systems and related issues are important as they affect, among other things, contractual relationships, the development of mutual goals and the allocation of risk, and ultimately provide the framework within which projects are executed (dreger, 1996). research indicates that procurement systems influence h&s. evidence gathered suggests incorrect choice and use of procurement systems has contributed to neglect of h&s by project stakeholders (rwelamila and smallwood, 1999). designbuild complements h&s as a result of the integration of the design and construction processes (meere, 1990). however, the traditional construction procurement system (tcps) which entails, inter alia, the evolution of a design by designers, the preparation of bills of quantities and related documentation by quantity surveyors, the engagement of a contractor through competitive bidding, invariably on the basis of price, does not complement h&s. this may be due to the separation of the design and construction processes, the incompleteness of design upon both preparation of documentation and the commencement of construction, and the engagement of contractors on the basis of price (rwelamila and smallwood, 1999). competitive tendering marginalises h&s. market conditions in south africa are such that contractors frequently find themselves in the iniquitous position that should they make the requisite allowances for h&s, they run the risk of losing a tender or negotiations to a less committed competitor (smallwood, 1996). fryer (1997) says that clients may have to accept that there is an ‘h&s premium’ to pay in the cost of construction. during research conducted in south africa approximately 50% of pms advocated the inclusion of a provisional sum for h&s (smallwood, 1996). this would ensure that all tenderers allocate an equitable amount of resources to h&s. south african contract documentation does not engender h&s. although references are made to h&s in standard contract documentation, they are generally indirect, hardly coercive, and depending upon the level of commitment, contractors continue to address h&s to varying degrees (smallwood and rwelamila, 1996). project duration also impacts on h&s. a shortened contract period may result in a project duration that is incompatible with the nature and scope of the work to be executed (hinze, 1997). a shortened contract period invariably results in a relative increase in the number of workers and/or the number of hours worked per worker, amount of plant and equipment introduced and used in the workplace, and the simultaneous contributions of an increased number of subcontractors (scs). research conducted in south africa determined project schedule to be the primary cause of stress among construction management and workers, and overtime was ranked 13 out of a total of 27 causes of stress (smallwood and ehrlich, 1999). hinze (1997) cites pressure to meet unrealistic deadlines as a common source of mental diversion, which diversion increases the susceptibility of injury. various authors, for example, levitt and samelson (1993), advocate prequalification john smallwood and danie venter 60 the australian journal of construction economics and building vol.2 no.1 of general contractors (gcs) and scs on h&s by clients and gcs respectively. the purpose of pre-qualification in the h&s sense is to provide a standardised method for the selection of contractors on the basis of demonstrated safe work records, h&s commitment and knowledge, and the ability to work in a healthy and safe manner. this will ensure that only h&s conscious contractors are selected. construction phase pms can implement processes, strategies and undertake various interventions that can complement h&s, during the construction phase. partnering is a process that brings the various stakeholders involved in a project together, i.e. client, designers, general contractor, subcontractors and suppliers. the process includes the developing of mutual goals and mechanisms for solving problems. there are two reasons for expecting partnering to reduce accidents: first, the improvement in all-round relations on the project, which in turn, according to research, results in reduced accidents; second, the performance objectives, which form part of the partnering charter, usually include a specific mention of h&s (levitt and samelson, 1993). the prior research conducted in south africa included a structured interview (smallwood, 1996). haddon, a pm, says: “pms should not turn a blind eye, and if necessary issue site instructions, as h&s is an integral part of working on site.” he recommends that pms refer to h&s during initial site inspections and site handovers (due to the effects of the project on the immediate environment), at site meetings (if the gc or scs are not addressing it), and during site inspections and discussions (as “h&s is the most important aspect on site.”) other research findings are that the majority of pms always or often made reference to h&s during site handovers, site meetings, site inspections and site discussions. oosthuizen (1994) maintains pms will be successful in their endeavours if they adopt a holistic approach as h&s, productivity and quality are inextricably intertwined. ideally, pms should make frequent reference to h&s on all occasions during the construction phase, namely site handovers, meetings, inspections and discussions, to ensure that the project environment is conducive to and complementary to the synergy between h&s, productivity, quality and time (smallwood, 1996). risk during the prior research conducted in south africa, 95.8% of pms maintained that inadequate h&s, or the lack of it, increased project risk (smallwood, 1996). although inadequate, or non-existent h&s results in variability of resource output, and consequently an increase in risk, it also results in the probability of an accident. given that, firstly, risk is a function of probability and impact, and secondly, that the outcome of accidents is largely fortuitous, the potential risks that are a result of inadequate or nonexistent h&s are substantial. generic tools and techniques to engender h&s according to kerzner (1992), oral communication, which is preferred by most people in the construction industry is a major source of communication breakdown. however, oosthuizen (1994) maintains this problem can be circumvented by formalizing the process of communication and recommends the use of checklists and the implementation of a documented quality management system (qms). hood (1994) concurs, and says problems related to h&s, productivity and quality can frequently be traced to substandard, inconsistently applied or non-existent operating procedures and practices. standard operating practices and procedures, and safe work procedures (swps), are the core component of both qmss and h&s management systems as they guarantee uniformity of operation throughout an organisation. they effectively ensure that each time a task is performed, it is done consistently, correctly and in a healthy and safe manner. the need for qmss is not constrained to construction — according to cornick (1991) there are a number of incentives for design practices to implement qmss in their practices, e.g. reduced liability risk because of a reduction in professional indemnity insurance premiums. this occurs as a result of the systematic discipline demanded of any process by the application of a qms — client requirements are clearly defined and agreement thereof is recorded, sources of information pertaining to any design decision the influence of project managers on construction health and safety in south africa the australian journal of construction economics and building vol.2 no.1 61 are clearly defined and documented, responsibilities for project quality are clearly defined and documented, and there is reduced supervisory responsibility relative to the construction process. consequently pms should endeavour to procure the services of designers and contractors that have documented qmss, and, in the case of contractors, documented h&s management systems that include swps. prequalification of designers and contractors on the basis of documented qmss, and contractors on the basis of documented h&s management systems including swps, will engender the implementation of such systems and procedures. research sample frame the sample frame was intended to consist of ‘construction’ pms, who were members of the project management institute of south africa (pmisa). however, the pmisa would not provide the researchers with a membership directory, as they were concerned about the confidentiality of their membership. provision of the directory would have enabled the identification and sole inclusion of the construction pms in the survey. consequently 489 questionnaires were mailed by the pmisa on behalf of the researchers to a sample frame, which supposedly consisted of construction pms. however, a response was received from both an information technology (it) pm, and a general contractor pm member. further, it is significant to note that the total membership of the more recently established association of construction project managers (acpm), established by the construction pms that seceded from the pmisa, is 95. therefore, although the 30 responses received constitutes a response rate of 6.2% (30/487), the ‘theoretical’ response rate is in the order of 31.6% (30/95). however, the former level of response reflects the general level of response to national construction related surveys conducted among various sample frames in south africa. further, it should be noted that the possibility exists that the respondents might constitute the more committed pms in general, and particularly with respect to h&s, and consequently a degree of bias exists — the perceived bias may overstate the importance of parameters, the frequency of consideration or reference to h&s on various occasions and relative to various design related aspects, the potential contribution to improvement in h&s by various aspects and actions, and the impact of inadequate h&s on various project parameters, and the level of risk. importance index (ii) given that respondents were required to respond in terms of frequency and importance, it was necessary to compute an importance index (ii) with a minimum value of 0, and a maximum value of 3 or 4, to enable a comparison of, and to rank various aspects/actions, parameters, occasions, and situations/interventions. the ii is calculated using the formulae: 4n1 + 3n2 + 2n3 + 1n4 + 0n5 n1 + n2 + n3 + n4 + n5 where n1 = very important/always n2 = important/often n3 = neutral/sometimes n4 = not really important/rarely n5 = not important/never and don’t know or 3n1 + 2n2 + 1n3 + 0n4 n1 + n2 + n3 + n4 where n1 = very important/often n2 = important/sometimes n3 = fairly important/rarely n4 = not important and unsure/ never and don’t know it should be noted that ‘don’t know’ responses have been consolidated with ‘not important’ and ‘never’ responses on the basis that not knowing the degree of importance of a parameter, or whether h&s is addressed on various occasions or relative to various aspects, is tantamount to h&s not being important or never addressed, i.e. if h&s was important, or if it was addressed, then respondents would know. findings the responding pms worked for practices, which employed an average of 5.7 pms. the greater percentage of practices, represented by pms, managed projects as follows: a$ 16.7m per annum (36.7%), a$ 8.3m < a$ 16.7m’ (16.7%), john smallwood and danie venter 62 the australian journal of construction economics and building vol.2 no.1 a$ 4.2m < a$ 8.3m’ (16.7%), a$ 0.17m < a$ 0.83m (16.7%) i.e. approximately one-third of practices were large in south african terms. the practices represented by pms were, on average, principal agent for 77.7% of projects for which they provided project management services. infrastructure (39%) and industrial (30%) predominated among the types of construction undertaken by the practices, followed by commercial (19.7%). no particular level predominated among the level of structures/construction: ground (23.3%) 0–10 floors (16.7%) single storey (13.3%), double storey (13.3%). respondents were asked to rate the three key total quality management (tqm) parameters of contractor h&s, labour productivity and quality on a scale of ‘very important’ to ‘not important’. table 1 indicates the resultant rankings based on an ii with a maximum value of 3.0 and a minimum value of 0.0. it is significant that the values of all the iis are above the midpoint value of 1.5, which indicates that all three parameters can be deemed to be perceived as important by pms. table 1: importance of contractor h&s, labour productivity and quality to pms degree of importance (%) parameter very important fairly not ii rank quality 76.7 20.0 3.3 0.0 2.73 1 h&s 60.0 26.7 13.3 0.0 2.45 2 labour productivity 53.3 36.7 10.0 0.0 2.43 3 table 2: importance of various project parameters to pms degree of importance (%) very .……………………………………. not parameter 1 2 3 4 5 ii rank client satisfaction 76.7 23.3 0.0 0.0 0.0 3.77 1 project quality 73.3 23.3 3.3 0.0 0.0 3.70 2 project cost 70.0 23.3 6.7 0.0 0.0 3.63 3 project time 60.0 33.3 6.7 0.0 0.0 3.53 4 project health and safety 60.0 20.0 16.7 3.3 0.0 3.37 5 public health and safety 56.7 6.7 30.0 6.7 0.0 3.13 6 labour productivity 36.7 40.0 13.3 10.0 0.0 3.03 7 environment (natural) 40.0 23.3 23.3 10.0 0.0 2.97 8 worker satisfaction 20.0 43.3 23.3 13.3 0.0 2.70 9 designer satisfaction 20.0 40.0 26.7 13.3 0.0 2.67 10 contractor satisfaction 16.7 36.7 33.3 13.3 0.0 2.56 11 the influence of project managers on construction health and safety in south africa the australian journal of construction economics and building vol.2 no.1 63 respondents were also asked to rate eleven project parameters on a scale of 1 (very important) to 5 (not important). table 2 indicates the resultant rankings based on an ii with a maximum value of 4.0 and a minimum value of 0.0. it is significant that the values of all the iis are above the midpoint value of 2.0, which indicates that all the project parameters can be deemed to be perceived as important by pms. it is also significant that the ii values of the top seven ranked project parameters are above 3.0, which indicates that these project parameters can be deemed to be perceived as very important, or close thereto. client satisfaction achieved a ranking of first, followed by the traditional project parameters of quality, cost and time. it is notable that project h&s and public h&s achieved rankings of fifth and sixth respectively. table 3 presents the frequencies at which pms consider or refer to construction h&s on various occasions in terms of the frequency range: always, often, sometimes, rarely, never and don’t know. the fourteen occasions are ranked based upon an ii with a maximum value of 3.0 and a minimum value of 0.0. it is significant that the values of all the iis are above the midpoint value of 2.0, which indicates that the consideration of or reference to h&s on various occasions can be deemed to be prevalent. it is also significant that the ii values of the top six ranked occasions are equal to or higher than 3.0, which indicates that h&s is ‘always’/’often’ considered or referred to on these occasions. site meetings achieved a ranking of first; followed by site handover, site inspections/discussions, constructability reviews, pre-tender meeting, and prequalifying contractors. it is notable that the highest ranked ‘upstream’ occasion, constructability reviews, achieved a ranking of fourth, followed by prequalifying contractors, sixth. however, preparing project documentation and detailed design, which achieved rankings of seventh and eighth, followed closely. table 3: frequency at which pms consider, or refer to construction h&s on various occasions frequency (%) occasion always often sometimes rarely never don’t know ii rank site meetings 56.7 26.7 13.3 3.3 0.0 0.0 3.37 1 site handover 63.3 13.3 16.7 6.7 0.0 0.0 3.33 2 site inspections/discussions 53.3 26.7 16.7 3.3 0.0 0.0 3.30 3 constructability reviews 46.7 23.3 26.7 3.3 0.0 0.0 3.13 4 pre-tender meeting 43.3 26.7 23.3 6.7 0.0 0.0 3.07 5 prequalifying contractors 40.0 36.7 6.7 16.7 0.0 0.0 3.00 6 preparing project documentation 43.3 20.0 20.0 13.3 0.0 0.0 2.97 7 detailed design 26.7 36.7 30.0 6.7 0.0 0.0 2.83 8 client meetings 26.7 33.3 30.0 10.0 0.0 0.0 2.77 9 evaluating tenders 33.3 30.0 20.0 10.0 6.7 0.0 2.73 10 concept (design) 23.3 36.7 26.7 13.3 0.0 0.0 2.70 11 design coordination meetings 23.3 33.3 30.0 13.3 0.0 0.0 2.67 12 working drawings 23.3 30.0 10.0 26.7 6.7 0.0 2.38 13 deliberating project duration 16.7 20.0 33.3 20.0 10.0 0.0 2.13 14 john smallwood and danie venter 64 the australian journal of construction economics and building vol.2 no.1 table 4 presents the frequencies at which pms consider/refer to construction h&s relative to various design related aspect in terms of the frequency range: always, often, sometimes, rarely, never and don’t know. the sixteen aspects are ranked based upon an ii with a maximum value of 4.0 and a minimum value of 0.0. it is significant that the values of all the iis are above the midpoint value of 2.0, which indicates that the consideration of or reference to h&s relative to various design related aspects can be deemed to be prevalent. it is significant that only specification achieved an ii value equal to or higher than 3.0, which indicates that h&s is ‘always’/‘often’ referred to relative thereto. type of structural frame and method of fixing achieved rankings of second and third respectively, followed closely by position of components and design (general). given that certain materials contain hazardous chemical substances it is notable that content of material achieved a ranking of sixth. given that materials handling, and more specifically the mass of materials, contributes to manual materials handling, it is also notable that mass, edge, texture and surface area of materials achieved rankings from thirteenth to sixteenth respectively. however, finishes and schedule, which encapsulate materials and processes, achieved rankings of eleventh and twelfth respectively. plan layout, site location, elevations and details achieved ii values of 2.62 and higher. table 4: frequency at which pms consider / refer to construction h&s relative to various design related aspects frequency (%) aspect always often sometimes rarely never don’t know ii rank specification 33.3 43.3 10.0 6.7 3.3 0.0 3.00 1 type of structural frame 43.3 23.3 16.7 6.7 6.7 0.0 2.93 2 method of fixing 26.7 46.7 16.7 10.0 0.0 0.0 2.90 3 position of components 30.0 33.3 20.0 10.0 0.0 0.0 2.89 4 design (general) 33.3 30.0 26.7 3.3 6.7 0.0 2.80 5 content of material 33.3 23.3 26.7 10.0 6.7 0.0 2.67 6 plan layout 23.3 33.3 26.7 10.0 3.3 0.0 2.66 7 site location 33.3 26.7 20.0 10.0 10.0 0.0 2.63 8 elevations 23.3 33.3 23.3 13.3 3.3 0.0 2.62 9= details 20.0 36.7 26.7 10.0 3.3 0.0 2.62 9= finishes 30.0 30.0 6.7 23.3 6.7 0.0 2.55 11 schedule 23.3 30.0 20.0 20.0 3.3 0.0 2.52 12 mass of materials 30.0 16.7 23.3 20.0 6.7 0.0 2.45 13 edge of materials 16.7 20.0 43.3 6.7 6.7 3.3 2.28 14 texture of materials 20.0 26.7 13.3 20.0 10.0 3.3 2.21 15 surface area of materials 13.3 23.3 33.3 26.7 3.3 0.0 2.17 16 the influence of project managers on construction health and safety in south africa the australian journal of construction economics and building vol.2 no.1 65 table 5 presents the frequencies at which pms achieve/encounter/use various procurement related situations/interventions in terms of the frequency range: often, sometimes, rarely, never and don’t know. the eight aspects are ranked based upon an ii with a maximum value of 3.0 and a minimum value of 0.0. it is significant that the values of all the iis are above the midpoint value of 1.5, which indicates that the achieving/encountering/use of the situations/ interventions can be deemed to be prevalent. it is also significant that the top four ranked situations/interventions are cited by literature as having a negative influence on h&s are clients revise their requirements, competitive tendering, drawings are revised, and variation orders. similarly, with respect to the sixth ranked situation, design is separated from construction. although the situations/interventions which complement h&s achieved rankings of fifth, seventh and eighth (i.e. optimum project period, prequalification of contractors, and design is complete when construction commences) their ii values are all above the midpoint value of 1.50. table 6 indicates the extent to which pms perceive various aspects/actions can contribute to an improvement in h&s performance. respondents could respond relative to ‘yes’, ‘no’ and ‘unsure’, as opposed to scaled responses. with the exception of choice of procurement system, prequalification of contractors on quality, partnering, optimum project programme, the majority of pms responded in the affirmative to the various aspects/actions. it should be noted that the level of affirmative support relative to the aforementioned is in conflict with the literature (dreger, 1996; oosthuizen, 1994; levitt and samelson, 1993; hinze, 1997). the level of ‘unsure’ responses relative to choice of procurement system, partnering, optimum project programme and project specific plan for quality is possibly attributable to a lack of knowledge and/or familiarity therewith. the level of affirmative response relative to the top three ranked aspects/actions is significant. it is also significant that two of the top three are solely design related, and that the third aspect/action, project specific plan for h&s and quality requires both designer and contractor input. various authors ratify the perceived potential contribution by clients and contractor programming, including, hinze (1997) and levitt and samelson (1993). the fifth to seventh rankings achieved by qms, prequalification of contractors on h&s, and contract documentation, reflect the potential contribution expressed in the literature (hood, 1994; levitt and samelson, 1993; smallwood and rwelamila, 1996). table 5: frequency at which pms achieve/encounter / use various procurement related situations/interventions frequency (%) situation/intervention often sometimes rarely never don’t know ii rank clients revise their requirements 83.3 16.7 0.0 0.0 0.0 2.83 1= competitive tendering 83.3 16.7 0.0 0.0 0.0 2.83 1= drawings are revised 73.3 23.3 3.3 0.0 0.0 2.70 3 variation orders 70.0 20.0 10.0 0.0 0.0 2.60 4 optimum project period 60.0 23.3 16.7 0.0 0.0 2.43 5 design is separated form construction 46.7 33.3 13.3 6.7 0.0 2.20 6 prequalification of contractors 33.3 46.7 16.7 3.3 0.0 2.10 7 design is complete when construction commences 36.7 23.3 30.0 10.0 0.0 1.87 8 john smallwood and danie venter 66 the australian journal of construction economics and building vol.2 no.1 labour productivity, cost of construction and project programme predominated in terms of the extent to which project parameters are perceived to be negatively affected by inadequate or non-existent h&s (table 7). less than half of the pms identified quality, environment, client satisfaction and designer satisfaction. possible responses to the question: “does inadequate h&s increase overall project risk?” included ‘yes’, ‘no’ and ‘don’t know. 93.3% of pms responded in the affirmative. during the prior research conducted in south africa, 95.8% of pms responded in the affirmative (smallwood, 1996). 63.3% of pms responded that h&s should be afforded status equal to that of the traditional project parameters of cost, quality and schedule. those respondents who responded in the negative were requested to qualify their response. nine of the ten responses were different, ranging from “should always have higher status” to “h&s goes hand in hand with quality” and “h&s can be delegated to contractors under pm’s supervision.” table 6: extent to which various aspects/actions can contribute to an improvement in h&s performance according to pms response (%) aspect/action yes no unsure rank project specific plan for h&s, and quality 96.7 3.3 0.0 1 designer prioritization / consideration 86.7 0.0 10.0 2= constructability reviews by designers 86.7 6.7 3.3 2= client actions 73.3 13.3 10.0 4 quality management system 70.0 13.3 10.0 5= prequalification of contractors on h&s 70.0 16.7 10.0 5= contract documentation 66.7 26.7 3.3 7= contractor programming 66.7 23.3 10.0 7= project specific plan for quality 63.3 13.3 23.3 9 optimum project programme 46.7 26.7 23.3 10 prequalification of contractors on quality 40.0 43.3 10.0 11 partnering 36.7 33.3 26.7 12 choice of procurement system 33.3 36.7 26.7 13 table 7: extent to which inadequate or the lack of health and safety negatively affects other project parameters parameter response (%) rank labour productivity 83.3 1 cost of construction 73.3 2 project programme 66.7 3 quality 43.3 4 client satisfaction 40.0 5= environment 40.0 5= designer satisfaction 23.3 7 the influence of project managers on construction health and safety in south africa the australian journal of construction economics and building vol.2 no.1 67 conclusion the conclusions, based upon the literature and descriptive surveys, have been presented relative to the objectives of the study. the importance of h&s and other project parameters to pms the descriptive survey reflects the findings of literature, namely that quality, cost and time are the ‘most important’ parameters. although these parameters achieved rankings of second, third and fourth, the first ranked, client satisfaction, is a function of satisfactory performance relative to quality, cost and time. project h&s, which is the subject of this paper, and a directly related parameter, public h&s, achieved rankings of fifth and sixth respectively. labour productivity which impacts substantially on cost and time, and which is influenced by h&s and quality, only achieved a ranking of seventh. a similar analogy applies to worker satisfaction, which achieved a ranking of ninth. however, the values of all the iis for the parameters are above the midpoint value of 2.0, which indicates that they can be deemed to be important to pms. relative to this objective it can be concluded that pms prioritise the traditional project parameters of cost, quality and time. however, almost the majority of pms recognise the need for h&s to be afforded status equal to that afforded to cost, quality and time. the frequency at which pms consider and, or refer to h&s during the design and construction phases given that the values of the iis for all the occasions were above the midpoint value of 2.0, it can be concluded that h&s can be deemed to be considered and/or referred to by pms on all occasions. however, the top three ranked occasions are all construction related, i.e. site meetings, site handover, and site inspections/discussions, which indicates a preference by pms to address h&s during construction. the top ranked design occasion, constructability reviews, which achieved a ranking of fourth, indicates a preference by pms to ‘filter’, rather than influence the design of designers. ultimately, however, this occasion represents the optimum occasion for pms, as opposed to detailed design, which achieved a ranking of eighth. the subsequent rankings of pre-tender meeting, prequalifying contractors and preparing project documentation indicate an appreciation for and the use of procurement related occasions to engender h&s. relative to this objective it can generally be concluded that pms consider and refer to construction h&s more frequently during construction, than during procurement and design. the frequency at which pms consider and, or refer to h&s relative to various design related activities given that the values of the iis for all the various design related activities were above the midpoint value of 2.0, it can be concluded that h&s can be deemed to be considered and, or referred to by pms during all the design related activities. although no particular category of design related activities predominate, assembly (including type of structural frame, method of fixing and position of components) achieved substantially higher rankings than materials related aspects such as mass, edge, texture and surface area. the frequency at which various procurement related situations or interventions, which affect h&s, are encountered or taken by pms respectively given that the ii values for all the various procurement related situations and interventions are above the midpoint value of 1.5, it can be concluded that the situations or interventions are encountered or taken by pms. relative to this objective it can be generally concluded that situations or interventions that negatively affect h&s, are encountered or taken more frequently than those that positively affect h&s. the former being clients revise their requirements, competitive tendering, drawings are revised, and variation orders and the latter being optimum project period, prequalification of contractors, and design is complete when construction commences. john smallwood and danie venter 68 the australian journal of construction economics and building vol.2 no.1 the aspects or actions, which pms perceive can improve or contribute to an improvement in h&s performance the majority of pms identified nine out of thirteen aspects/actions identified in the literature as having the potential to improve or contribute to an improvement in h&s performance. the top four ranked aspects or actions clearly indicate the necessity for a multistakeholder approach to h&s, i.e. project specific plan for quality, designer prioritisation/consideration, constructability reviews by designers, and client actions. the level of negative, and particularly unsure responses relative to certain aspects or actions indicates that pms may not be familiar with, or do not appreciate the potential influence of the following aspects or actions: choice of procurement system, partnering, optimum project programme, project specific plan for quality, and prequalification of contractors on quality. relative to this objective it can generally be concluded that various design, procurement and construction related aspects and actions have the potential to improve or contribute to an improvement in h&s. the perceived impact of inadequate or non-existent h&s on other project parameters and project risk although pms appreciate the extent to which inadequate or non-existent h&s negatively affects labour productivity, cost of construction and project programme, they do not do so relative to the other project parameters. despite the latter status quo, pms do appreciate that inadequate h&s increases overall project risk. recommendations the following recommendations are suggested based on the findings of the study: health and safety should be afforded status equal to that afforded the traditional project parameters/performance measures of cost, quality and time by clients, designers, pms and contractors. the pmbok should be amended so that it presents h&s as an individual knowledge area, and so that h&s is included in the knowledge area of project risk management. consequently project management programmes should include h&s education. pms should consider or refer to h&s more frequently during the upstream phases of design, namely concept design, preparation of working drawings and design coordination meetings. a similar recommendation applies relative to evaluating tenders and deliberating project duration. relative to design related aspects, pms should consider or refer to h&s more frequently in relation to elevations, details, finishes and schedules, and various characteristics of materials. pms should endeavour to integrate design and construction, realise an optimum client brief, finalise design before construction commences, discourage client changes, pre-qualify contractors on h&s and quality, include a specific mention of, and a financial allowance for, h&s in contract documentation, avoid competitive tendering, and realise the implementation of qmss in design and construction. references allen, j.d. 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(1999) appropriate project procurement systems for hybrid tqm. in: singh, a., hinze, j.w. and coble, r.j. (eds) proceedings of the second international conference of cib working commission w99. implementation of safety and health on construction sites, honolulu, hawaii, 87–94. balkema, rotterdam. schneider, s. and susi, p. (1994) ergonomics and construction: a review of potential hazards in new construction. american industrial hygiene association journal, 55, july, 635–649. smallwood, j.j. (1996) the role of project managers in occupational health and safety. in: dias, l.a. and coble, r.j. (eds) proceedings of the first international conference of cib working commission w99. implementation of safety and health on construction sites, lisbon, portugal, 227–236. balkema, rotterdam. smallwood, j.j. (2000a) a study of the relationship between occupational health and safety, labour productivity and quality in the south african construction industry. unpublished phd (construction management) thesis, university of port elizabeth, port elizabeth, south africa. smallwood, j.j. (2000b) the holistic influence of design on construction health and safety (h&s): general contractor (gc) perceptions. in: gibb, a. (ed.) proceedings of the designing for safety and health conference, london, 27–35. european construction institute, loughborough. smallwood, j.j. and ehrlich, r. (1999). stress and construction. in proceedings of the second international conference of cib working commission w99. implementation of safety and health on construction sites, honolulu, hawaii (edited by a. singh, j.w. hinze, and r.j. coble), 351–357, balkema, rotterdam. smallwood, j.j. and rwelamila, p.d (1996) department of public works enabling environment initiative. final report on initiatives to promote health and safety, productivity and quality in south african construction. unpublished report, port elizabeth, south africa. whilst the construction industry has developed over the years there is increasing pressure to become more innovative and deliver better value for money for clients innovation, procurement and construction industry development gerard de valence, (university of technology, sydney, australia) abstract the implications for analysis of innovation in construction of theoretical developments in industrial organisation are considered in this research, as an attempt to outline a new approach to construction innovation incorporating the ideas found in knowledge based, technology centred models. the paper firstly summarises characteristics of the construction industry, focusing on their effects on innovation, before surveying some of the ideas about the sources of innovation and the expansion and application of knowledge. construction can be seen as an industry with limited scope for knowledge externalities, where the procurement methods used by the industry‟s clients do not pay for innovation. the following discussion uses recent developments in the research on the economics of innovation and industrial organization theory, such as research intensity and the endogenous sunk costs in competitive, fragmented, low research intensity industries. the effects on r&d of procurement methods and on industry structure are discussed, with a focus on the appropriability of innovations and the role of the client on the heathrow terminal 5 project. the paper concludes that the procurement methods used for building and construction projects appears to be a determining factor in the level of innovation in the construction industry. keywords: construction, innovation, research intensity, procurement, clients introduction whilst the construction industry has developed over the years there is increasing pressure to become more innovative and deliver better value for money for clients. however there are certain characteristics of the industry that appear to slow progress and make innovation difficult, because the particular interplay of technological change and industry adaptation and development has characteristics unique to building construction. product innovation is the introduction of new materials and/or components into the constructed product, and there has been a great deal of this form of innovation in recent decades. its counterpart, process innovation, is generally more difficult to manage and deals with the development of new organisational structures, management methods, and other techniques or actions that improve business processes and competitiveness. the construction industry‟s sense of its history, with strong craft traditions and focus on individual projects, has significantly affected efforts to improve the constructed product in terms of cost, time and quality (woudhuysen and abley 2004). innovation in the construction industry has been a focus of research since rosefielde and mills (1979). by the commonly accepted measures of innovation, such as patents, technological research papers, introduction of new products or process improvements (freeman and soete 1997: 7-8), the construction industry has a record of very low identifiable innovation and has thus been viewed as a technological laggard, with a slower adoption of new technology and lower levels of research and development (r&d) and innovation than other industries (miozzo and dewick 2002). although there are good arguments to the contrary, winch (2003) for example argues that the comparison between construction and manufacturing is inherently biased against construction if r&d is used as australasian journal of construction economics and building de valence, g (2010) ‘innovation, procurement, construction industry development’, australasian journal of construction economics and building, 10 (4) 50-59 51 the criteria, this is nonetheless a widely held view. one issue that this debate raises is whether the determinants of innovation and the rate of technological advancement in construction are well understood. using hobday‟s (1998) ideas on innovation in complex systems, as developed by gann and salter (2000), it is may be that many of the significant factors influencing innovation and development of technological capabilities in construction are found in aspects of custom and practice that are taken for granted by the industry. the purpose of this paper is to look at the r&d intensity and level of innovation that characterizes the construction industry, and relate these to the procurement systems and market structure in the industry. this discussion covers the characteristics of the construction industry and innovation, the relationship between r&d and procurement, r&d and industry structure, and the difficulty of achieving returns on r&d in an industry that is fragmented and highly dispersed. the implications of these factors for construction industry development are discussed. industry characteristics and r&d construction was described as a heterogeneous, widely dispersed industry, where no two products share the same characteristics, with limited scope for learning curve benefits and productivity growth associated with them by cassimatis (1970). construction offers a customised product with unique characteristics: immobility, complexity, durability, costliness, and a high risk of failure (nam and tatum 1988). there is little direct repetition, individual projects are designed and built to serve a particular function or meet a special requirement. although many design and process skills are commonly used, the outputs differ and this impacts substantially on the efficiency and economies of scale of the construction process, which in turn significantly influences innovation and technological development rates (hobday 2000). tatum‟s papers focused on advantages and constraints to innovation in construction, and despite being two decades old this work captures many of the key features of the discussion raised by more recent efforts such as reichstein et. al. (2005), fairclough (2002), or slaughter (1998). tatum (1986) identified seven features of the construction industry that he claimed as advantages for innovation. construction project teams are presented with high levels of necessity and challenge, which promotes innovation by forcing examination of new technologies for each project. integration of engineering, design and construction can simplify the construction process and decrease cost. the low capital investment typical of construction firms allows high flexibility for the adoption of new technologies. a pool of technologically experienced personnel provides depth of knowledge. the strong emphasis on process limits barriers to imitation, because new processes can spread rapidly without patent restraints (but this may also discourage innovation). lastly, construction production processes do not create rigid restraints (slaughter 1993 generally followed this approach). nam and tatum (1988) compared the characteristics of constructed products with those of manufacturing, arguing that five specific differences limit the development of construction technology. these are: immobility, complexity, durability, costliness and high degree of social responsibility. their effect is to create conditions for production processes that result in a „locked system‟ in which innovation becomes difficult (reichstein et. al. 2005 also used some of these characteristics in their analysis, which reached a similar conclusion). dubois and gadde (2002) also argued the temporary character of project-based construction hindered innovation. five other characteristics of the construction industry were later identified by tatum (1989) as being constraints to innovation. the low capital intensity of the industry limits its interest in investment for automation. if a firm has adequate market share and profitability then pressure to innovate is reduced. the institutional framework is not supportive of innovation (the number of firms, the legal incentives for technological inertia, regulatory influences, and australasian journal of construction economics and building de valence, g (2010) ‘innovation, procurement, construction industry development’, australasian journal of construction economics and building, 10 (4) 50-59 52 craft organization of labour). building cycle volatility affects capital investment and economies of scale, and suppliers have not created technological improvements in the equipment and tools used by construction. tatum's analysis is descriptive of the construction industry and remains representative of much of the research on models of innovation in the industry to date, but lacks an explanation of how innovation occurs, or could occur in the industry. reichstein et. al. (2005) identify what they call ‟organisational liabilities‟ for innovation and low demand for innovation from clients and the market. similarly, manly and mcfallan (2006) found the business strategies of individual firms more important than markets or marketing strategies for innovating firms or organisations. gann (2003: 554) cites bowley (1960) as showing that construction is an adopter of innovations from other industries, rather than a source of innovation. bowley‟s work “shows that demand for new types of buildings is usually more important in stimulating radical technical and organizational innovation than the need to erect better and cheaper buildings to accommodate existing functions. she also shows that innovation in basic materials, originating from outside the building industry and with markets far wider, play an important role in the evolution of construction.” none of this provides an explanation of the construction industry‟s record of innovation that is grounded in the broader theories of innovation available, in order to identify the most important factors at work. the industry characteristics approach, even when done with the detail of manley and kajewski (2011) for example, works better at the level of firms rather than the industry. this paper therefore develops a model of construction innovation in a revised framework, identifying procurement methods as the driver or inhibitor of innovation. the argument is on two levels. firstly, at the level of industry structure, the relationship between innovation and concentration is discussed. the issue here is whether the research intensity of construction is an outcome of industry competition rather than a requirement, as in high research intensity industries. secondly, the issues of appropriateness of research and innovation revenues and treatment of knowledge externalities are considered in the context of procurement methods used. characteristics of innovation and r&d although not in a formal model, schumpeter (1942) argued economic development is a dynamic process, occurring discontinuously over time as his 'perennial gales of creative destruction' drive ongoing change of the economic structure, driven by waves of product innovation that sweep away old industries, old goods, and old services (schumpeter 1942: 81-87). as the pace of diffusion of a particular innovation slackens so will the rate of economic development. in the search for profits, a better innovation will be created, allowing the development process to repeat the cycle. the main agents for change were entrepreneurs, as distinct from capitalists, innovators, and managers of production and distribution. two ideas of schumpeter are particularly important in the context of this paper: the impact of economic incentives on the development of new technology, which makes clear the endogenous nature of the growth process; and, linkages between investment and other areas of the economy through diffusion of technologies. the development of new technology has significant costs, and schumpeter's emphasised the importance of the rate of return in determining investments in innovations. schumpeter recognised that investment in r&d was a calculated risk for the firm but, if successful, a benefit to society as a whole. the concept of linkages and diffusion was used to develop a theory of growth through leading industrial sectors with strong linkages to other industries. initial investment creates knowledge for the investor and others to make more informed decisions about future australasian journal of construction economics and building de valence, g (2010) ‘innovation, procurement, construction industry development’, australasian journal of construction economics and building, 10 (4) 50-59 53 investments. the 'leading sectors' in this theory are those that generate the most externalities and where diffusion of technologies to other industries occurs most rapidly (romer 1990). this „new growth theory‟ made technology endogenous by bringing technological progress inside these models and allowing innovators to capture the benefits of their r&d. research in intensity there are major differences between industries in rates of both technological progress and productivity growth. efforts have been made to find both theoretical and empirical explanations of the factors that drive these differences, and one explanation is r&d intensity, or the degree of innovation that is found in one industry compared to another. research intensity is typically measured by r&d as a percentage of sales or income. r&d intensity in an industry is determined by two key variables. one is "technological opportunity", which determines the productivity of r&d and the opportunities that are available for innovation. the other is the ability of innovating firms to "appropriate" a significant share of the economic value created by innovation, or to capture the externalities created through new knowledge. however, although both these variables influence r&d intensity of firms in an industry, only technological opportunity will affect the rate of technological advance in an industry in the long-run, even if both opportunity and appropriability influence r&d intensity . “differences across industries in their r&d intensities tend to be quite durable. this suggests that, to the extent that these are the major determining variables, differences across industries and technological opportunities and inappropriability conditions tend to be persistent." (nelson and wolff 1997: 207). nelson and wolff propose cross industry differences in technological opportunities are due to r&d opportunities differing between industries. in turn, differences between industries in technological progress will be driven by differences in r&d intensity, appropriability and available opportunities. their theory is that industries with high r&d intensity and technological opportunity must have a high rate of new technological opportunities to make up for those that are being exhausted (see nelson and winter 1982). in the industrial organization or industry economics literature, industries are usually seen in terms of a number of firms which advance along a single technological trajectory, and these firms compete in enhancing the quality of their individual versions of the same basic product (homogeneity of product). in this case, firms make decisions on how much r&d to finance, and apply that r&d to product development. this view fits some industries well, however many industries encompass several groups of products rather than a large number of versions of a single product (sutton 1991). the products may be close substitutes in consumption, but embody different technologies, so r&d projects that enhance products in one group may generate huge spillovers for products in other groups. such complex overlapping patterns of substitutability have bedeviled industrial organization analysis for decades, since chamberlin (1932) first developed the definition of an industry as limited by the scope for substitution between products, where industries were defined by their product. if industries are broken into separate sub-industries in order to address this problem, the choice in r&d spending can be between any number of technologies for the development of different groups of products. the products may be close or distant substitutes for products of firms on other technological trajectories. both of these linkages operate on the demand side. when the linkages are strong they reflect the presence of scope economies in r&d, where the linkages are weak these scope economies will be absent and there will be a low degree of substitution across sub-markets. australasian journal of construction economics and building de valence, g (2010) ‘innovation, procurement, construction industry development’, australasian journal of construction economics and building, 10 (4) 50-59 54 r&d and market structure the degree of monopoly power exercised by the largest firms in an industry is expressed in the concentration ratio, which is the degree to which an industry is dominated by the largest firms. typically the concentration ratio uses the largest four firms in an industry, ranked by market share or sales as a percentage of total industry sales. the definition of the concentration ratio is the percentage of industry total sales (other measures are capacity, output, employment or value added) accounted for by the largest firms. the extent of control over prices is determined by the intensity of competition in a market, which is, in turn, determined by entry barriers, the number of firms and type of product. the effects of competition from new firms and new ideas drive change and development. thus industries with rapid changes in technology and/or aggressive new entrants are likely to be those where competition drives firms toward greater efficiencies and innovative methods. sutton (1999) in his development of a theory of market structure and concentration, suggests the effect of r&d spending on the technological trajectory of industries is crucial. where the degree of substitutability across products associated with different r&d trajectories is high, concentration will necessarily be high, because if all firms have a low market share an increase in r&d spending will be profitable, and the high spending firm can capture sales from low spending rivals on its own trajectory and on others. sutton shows that under these circumstances, the number of trajectories along which firms will operate is small, since low spending firms are vulnerable to increases in r&d spending by rivals. on the other hand, if the degree of substitution across products is low, then in spite of the effectiveness of r&d spending, concentration may be low. "this can only happen if there are many product groups, associated with different independent r&d trajectories. here, escalation yields poor returns, since outspending rivals can lead only to the capture of sales from products in a single, small product group" (sutton 1999: 13). in sutton's analysis it turns out that industries or sub-industries with a low r&d to sales ratio can have a low level of concentration, and this can continue indefinitely. the industries where there are a large number of firms in an increasing market, characterised by buyers who place different relative weights on different aspects of technical performance (product attributes), and many alternative technologies are available for those products, leads to a market where there is an indefinite number of firms, each with a small market share. for an industry with low r&d spending, sutton's theory predicts the concentration ratio will be low and that the level of concentration will decrease as the size of the market increases. for industries where the r&d to sales ratio exceeds a high threshold value, sutton's theory predicts concentration will increase as the spending on r&d increases. in a low r&d intensity industry, the market share of the largest firm will be relatively small, in a high r&d intensity industry the market share of the largest firm can be very high (sutton 1999: 14-16). procurement and innovation how can the key issues identified here be addressed? the roles of appropriability, patterns of substitutability, the importance of r&d intensity in determining concentration and the risks associated with innovation for clients, these are a set of mutually reinforcing factors that work against innovation and r&d for many, perhaps the majority of construction industry firms. the answer proposed here is that the best way to increase innovation lies in the methods and systems used to procure building and construction projects. that is a broad generalisation that needs to be supported by evidence and argument, so the discussion below covers two cases where procurement and innovation can be seen to be closely related. the first case is the difference between traditional procurement and design and build (d&b). for the building and construction industry the methods used for tendering and procurement of projects are important determinants of the level and form of competition in the industry, australasian journal of construction economics and building de valence, g (2010) ‘innovation, procurement, construction industry development’, australasian journal of construction economics and building, 10 (4) 50-59 55 and distinguish the industry from many others where competition is through marketing campaigns, new products and so on (de valence 2011). craig (1997a) concludes tendering rules or codes have been developed to maintain the integrity of the bidding process, not to encourage innovation. craig (1997b) then argues that „alternative tenders‟ are potentially valuable to both clients and contractors, and to society at large. contractors can make novel proposals to owners, and society benefits from such innovation. craig (2000) develops these issues and asks three questions on procurement and innovation. the first is whether tendering processes encourage innovation. he suggests the essential of tendering is that all tenderers are to be treated equally, and that contract award criteria are established in advance and known by all parties, thus creating a transparent award process. tendering rules produce direct price competition for a specified product. the question then becomes: can traditional tendering processes permit innovation? his answer is that a successful tenderer's scope to be innovative is very limited. there is opportunity to maximise profits within the tender price by novel ways of organising work or 'bid shopping' to drive down subcontract prices. but bidders are not asked to put forward design suggestions, there are no criteria for evaluation of novel proposals, and tenderers cannot be treated equally if one is preferred on an alternative tender, which is non-conforming in terms of the original invitation. finally, craig (2000) asks whether d&b as a procurement system more easily permits innovation. the point is made that using the tender process to competitively evaluate design, capability, time and cost is not easy, and the integrity of the process has to be safeguarded. craig concludes that the traditional tendering process for building works does not encourage design innovation by tenderers, but it has always been possible for tenderers to seek competitive advantage through novel construction methods. the potential for innovation in d&b is there, but may not be easy to realise. this argument by craig can be extended to other non-traditional forms of procurement where the client has the opportunity to encourage innovative solutions. these would include build, own, operate (boo), and build and maintain (b&m) contracts, where the long-term performance and maintenance costs of the facility are important factors in design decisions. this also applies to ppp or pfi projects, and other concessions that transfer back to the government at the end of the contract, with condition specifications to be met. clients and innovation ivory (2005) argued clients will avoid risk associated with innovation on their projects. he found clients act as a significant barrier to innovation because they are concerned about both construction budgets and operating costs, and do not think they will benefit significantly from a successful innovation. further, he suggests clients carry a „disproportionate‟ share of innovation risk and as a result “should not be routinely expected to take on the risks (in terms of cost and time overruns or poor building performance) and costs associated with innovation”(2005: 868-9). while ivory‟s argument might be generally true, the exceptions prove the rule. therefore the second case looked at here is the heathrow terminal 5 (t5) project. this project demonstrates the effect a determined client with a clear strategy to encourage innovation in order to improve performance can have. the project has been extensively documented elsewhere (including the book by doherty 2008), so this discussion visits the main points and provides references for the supporting detail. in its role as the client baa took on all the risk for the ₤4.3 billion project, under the unique t5 agreement that the 60 first tier contractors signed. in total, 15,000 suppliers were australasian journal of construction economics and building de valence, g (2010) ‘innovation, procurement, construction industry development’, australasian journal of construction economics and building, 10 (4) 50-59 56 involved. the overall project was divided into 147 sub-projects, with an integrated team led by baa responsible for each one. unlike the majority of megaprojects, t5 was delivered on time and on budget (wolstenholme, fugeman and hammond 2008). to achieve its objectives baa implemented a comprehensive strategy to change both its own capabilities and those of its main suppliers. brady et al. (2007) looked at the role of baa, how it applied lessons from previous projects, its interaction with the networks of firms involved and how their capabilities were developed. consultants were sent by baa into the major suppliers to identify ways and means to improve their efficiency and the agreement included gain sharing when cost targets were bettered (davies, gann and douglas 2009). the key relevant point about t5 is that innovations in many forms were actively sought out and developed. these included product innovations in off-site fabrication such as the roof structure (franklin and hulme 2008), technological innovations such as the tunnelling process and equipment (williams 2008), process innovations such as the two logistics centres (potts 2008), and management innovations such as the insurance provisions and incentives built into the t5 agreement, deakin and koukiadaki (2009) detail the industrial relations aspects of the project. caldwell, roehrich and davies (2009) suggest that the risk associated with these large, complex projects can provide the motivation for clients to pursue and reward innovation by contractors and suppliers. by taking on and actively managing project risk, baa was able to purse a strategy of rewarding performance enhanced by innovations from all participants. following on from t5 is the wider case for alliance contracting. in particular, the expectation of knowledge sharing by the participants and the effect of working in integrated teams (see gil 2009 in particular for detail on, and analysis of, the workings and outcomes of the many aspects of the alliance relationships on t5). conclusion tatum‟s (1986, 1989) characteristics of the construction industry represent a widely applied model of construction industry innovation. from the viewpoint of the economics of innovation and endogenous growth theories, most of these characteristics are not drivers of innovation, and such a model of the industry therefore excludes the main sources of innovation identified by those theories. this paper has explored the applicability of some of these ideas to construction innovation. the comparatively low level of investment in innovation appears to be a result of construction being a mature, highly competitive industry with limited scope for knowledge externalities. in particular, the combination of individual procurement of heterogeneous products by clients and increasing specialisation and sub-contracting within the industry significantly limits the scope and potential for positive knowledge externalities, as argued by dubois and gadde (2002). this is despite the industry‟s project-based form of organisation (hobday 2000) and the opportunities for innovation in service industry firms (gann and salter 2000). research into the economics of innovation has shown investment in r&d has a significant effect on industry growth, but the effect of r&d is most pronounced where technological opportunity is high. the general results of sutton‟s research can be applied to the construction industry where most of the technical advances of the last four decades have come from the materials suppliers and equipment manufacturers, who have been responsible for the r&d leading to the introduction of new products and equipment, such as building facades, power tools and lifts. many generic technologies such as it and telecommunications have also impacted on the building and construction process, particularly in the design professions, but at a significantly slower pace than in other industries such as retailing and finance. australasian journal of construction economics and building de valence, g (2010) ‘innovation, procurement, construction industry development’, australasian journal of construction economics and building, 10 (4) 50-59 57 the act of investment in innovation, and the associated human and physical capital, generates knowledge externalities. however, the traditional tendering process used by construction industry clients has them typically select on price and not pay for innovation in particular or intellectual property in general. this does not allow tenderers to appropriate the benefits of knowledge, thus removing the main incentive to innovation identified by endogenous growth theory. as argued by craig, this has two main causes, firstly, an innovative tender will probably not be a conforming tender. secondly, the client gets the benefit of the design and/or construct solutions of all tenderers, and can revise the project or recall tenders. procurement has thus become a more central issue to the industry because the method of project procurement used by the client determines the nature of competition in the industry, and this in turn determines the role and extent of innovation on their projects. baa showed on t5 that innovation can be a strategic option on complex projects, if the client is prepared to manage the risks involved. one of the striking features of the t5 project was the incentive structure produced a wide range of innovations across many different sub-projects that made up the project as a whole. more generally, the move away from traditional procurement systems will have significant effects on innovation. because the traditional design-bid-build method does not allow for capture of intellectual property and knowledge externalities by contractors in their tenders, there was a perverse disincentive to innovate. with the increased use of non-traditional procurement methods such as design and construct, d&b, build, own, operate, and build and maintain, this disincentive is removed and firms can more easily appropriate the benefits of innovation and r&d over the extended life of these contracts or concessions. the influence of procurement methods appears to be a determining factor in the level of innovation in the construction industry, and the significance of increased use of alternative forms of procurement lies in the opportunity for increased r&d and innovation they provide. in the past, the level of innovation may have been an outcome of industry structure, not a determinant. however a more r&d intensive industry would tend toward having structure determined by research intensity. as r&d expenditure increases the potential level of concentration also rises, and this should be seen in the sectors of the industry where large, complex projects that require intellectual property and innovation are common. the interplay between these factors may determine the eventual number of large firms in construction industry sectors where national, international and global contractors compete. references brady, t., davies, a., gann, d. and rush, h. 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(2004) why is construction so backward? chichester, john wiley & sons from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim jeremy coggins (school of the natural & built environments, university of south australia; phd candidate, university of adelaide, australia) abstract since the introduction of the building and construction industry security of payment act into new south wales in 1999, construction industry payment legislation has progressively been enacted on a jurisdiction-by-jurisdiction basis throughout australia. of the eight australian acts, two distinct legislative models can be discerned – what have been termed the „east coast‟ and „west coast‟ models. this article compares the two models with respect to their payment systems and adjudication schemes, procedural justice afforded, incursion upon freedom of contract, uptake rates and efficiency. from this comparison, the strengths and weaknesses of the two models are identified. finally, a dual process of adjudication based on progress payment claim size is proposed for a harmonised model, developed from previous proposals put forward by other authors, which aims to combine the strengths of the two existing models. introduction over the past 13 years, construction industry payment legislation („the legislation‟) has come into force in several commonwealth jurisdictions. a common objective of all of this legislation has been the eradication of unfair contractual provisions and practices with regards to payment in order to get cash flowing in as fair a manner as possible down the hierarchical contractual chains that exist on most commercial construction projects. a central feature of all this legislation is the provision for a rapid statutory adjudication scheme, designed to facilitate quick and inexpensive resolution of contractual payment disputes in the construction industry. there is general consensus that the legislation has had a significant and positive effect on the construction industry in those jurisdictions where it has been enacted. in australia, the first jurisdiction to pass such legislation was new south wales (nsw). the nsw act formed the model upon which most other australian jurisdictions, to varying degrees, progressively based their legislation culminating in the tasmanian act which received royal assent on 17 december 2009. a list of the relevant acts is presented in table 1. the consequence of this piecemeal, jurisdiction-by-jurisdiction, approach to enacting the legislation throughout australia has been inconsistency, to varying degrees, between the various acts. such inconsistency is particularly marked, with respect to the underlying conceptual frameworks and detail of the drafting, between the western australia (wa) and northern territory (nt) acts on the one hand which more closely resemble the construction industry payment legislation in the united kingdom (uk) and new zealand (nz), and the other australian acts on the other which are more closely modelled on the nsw act. accordingly, the wa and nt acts have been collectively labelled (stenning & associates 2006) as the „west coast‟ model legislation as opposed to the „east coast‟ model tag given to the other australian acts. this paper generally refers to the nsw legislation as representative of the east coast model, and the wa legislation as representative of the west coast model. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 35 jurisdiction legislation date of commencement nsw building and construction industry security of payment act 1999 26 march 2000 victoria building and construction industry security of payment act 2002 31 january 2003 queensland building and construction industry payments act 2004 1 october 2004 western australia construction contracts act 2004 1 january 2005 northern territory construction contracts (security of payments) act 2004 1 july 2005 tasmania building and construction industry security of payment act 2009 17 december 2009 act building and construction industry security of payment act 2009 1 july 2010 south australia building and construction industry security of payment act 2009 yet to be proclaimed table 1 construction industry payment legislation in australia the key differences between the east and west coast models have been described by coggins, elliott and bell (2010: 15) as follows:  the east coast model acts provide a detailed statutory payments regime, overriding any inconsistent contractual provisions, which parties undertaking “construction work” or “related goods and services” may choose to engage by submitting a payment claim under the act at regular intervals and have it responded to within a certain timeframe. conversely, the west coast model acts largely preserve (rather than override) the parties‟ contractual interim payment regimes.  the east coast model acts only allow for payment claims to be made up the “contractual stream” (typically by a subcontractor against its head contractor, or head contractor against its principal). conversely, the west coast model allows for payment claims both up and down the “contractual stream”.  whilst both models allow for a statutory adjudication scheme to determine, in the interim, disputed payment claims, they differ with respect to adjudicator appointment, submissions which may be considered by an adjudicator, and the approach which an adjudicator is to adopt in order to arrive at his or her determination. in all of these respects the east coast acts are more restrictive, disallowing mutual agreement of an adjudicator, consideration of reasons for withholding payment which have not been duly submitted in accordance with the statutory payment scheme, and discouraging an evaluative approach to adjudicators‟ determinations. in recent times there has been a strong consensus, and call, from commentators (bailey 2009; zhang 2009; bell & vella 2010) – echoing the recommendation of the cole royal commission nearly a decade ago (cole 2003) – that the legislation should be harmonised into a uniform national approach in order to benefit the construction industry. accordingly, some commentators have put forward proposals and ideas as to the most appropriate conceptual framework for a unified approach. after an initial consideration of the objectives of the east and west coast model legislation and a review of each model‟s payment systems and adjudication schemes, this paper considers the operation of each model with respect to four key issues – procedural justice, freedom of contract, uptake rates and efficiency. next, an overview of two existing proposals for harmonisation – one by davenport (2007) and the other by bailey (2009) – is given. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 36 finally, building upon the davenport and bailey proposals, a third proposal for harmonisation is proffered by the author. the objective of the legislation despite their differences, the common objective of this raft of legislation, apparent from the second reading speeches for each of the acts, 1 is to facilitate the flow of cash in a swift manner down the hierarchical contractual chain on construction projects. the focus of the second reading speech for the nsw bill given by the minister, mr morris iemma, was very much on protecting the small subcontractor. mr iemma (1999: 1594) states: it is all too frequently the case that small subcontractors such as bricklayers, carpenters, electricians and plumbers are not paid for their work. many of them cannot survive financially when that occurs, with severe consequences for themselves and their families. mr iemma (1999: 1595) emphasises the vulnerability of the small subcontractor to payment problems as follows: hundreds of subcontractors in new south wales struggle to survive when they do not receive money owed to them for work undertaken. they do not have the cash flow allowing them to keep on working while waiting for payment. this causes hardship not only to them but also to their families. however, despite this focus on small subcontractors, the apparent intent of the nsw legislation is far wider ranging affording protection to all parties who carry out work (or supply goods and services) in the construction industry. as mr iemma (1999: 1595) states: the bill covers civil engineering as well as architectural work, mechanical and electrical work in buildings, maintenance, and landscaping and decorating. it affects all parties who contract for that work, including owners, contractors, subcontractors and consultants, and applies to both commercial and residential work. accordingly, the object of the east coast model legislation is to ensure contractors or suppliers are entitled to, and are able to recover, progress payment claims for construction work they have undertaken or related goods and services they have supplied (s 3(1) of the nsw act). the other australian acts have similar wide ranging intent. as noted by bell and vella (2010: 568): such a [wide-ranging] reform intent is indicated not only…in the minister‟s [mr iemma‟s] comments, but also in the second reading speeches for the other australian acts, and in the objects provisions for the acts, each of which is widely cast as to the participants within the industry at whom the act is directed. in her second reading speech for the wa construction contracts bill, the minister, ms mactiernan (2004: 274), also refers to the vulnerability of subcontractors as follows: the building and construction industry is made up of many consultants, contractors, subcontractors and suppliers all of whom work together to deliver buildings and 1 act (hargreaves j, 15 october 2009); nsw (iemma m, 29 june 1999); nt (toyne p, 14 october 2004); queensland (r e schwarten, 18 march 2004); sa (kenyon t, 5 march 2009); tasmania (singh l m, 4 november 2009); victoria (thomson m r, 21 march 2002); wa (mactiernan a j, 3 march 2004. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 37 infrastructure for the western australian economy. this interdependence makes security of payment a vital foundation for the industry. failure to pay at any link in the contracting chain can be disastrous to those subcontractors and suppliers who are waiting to be paid in their turn and, until now, there has been little recourse available to those who are affected. ms mactiernan (2004: 275) also implies, however, that the wa legislation is intended for a wide range of contractual claims, ranging from small to complex, when she states that the legislation‟s primary aim is to keep the money flowing in the contracting chain by enforcing timely payment and sidelining protracted or complex disputes. the process is kept simple, and therefore cheap and accessible, even for small claims. this is consistent with the west coast model legislation allowing for either contracting party to apply for adjudication for damages claims, whose recovery is within the scope of the contract provisions, as well as progress payment claims. payment systems and adjudication schemes under the legislation the east coast model operates a „dual payment‟ system for progress payment claims, creating a statutory payment system which runs alongside any contractual regime (beckhaus v brewarrina council [2002] nswsc 960 per macready aj at [60]). this dual payment system was described as a “dual railroad track system” by macready aj in transgrid v siemens & anor [2004] nswsc 87 at [56]. in order to engage the statutory payment system, a claimant must endorse its payment claim as being made under the act (s 13(2)(c) of the nsw act), and serve it upon the respondent (s 13(1) of the nsw act). the west coast model does not operate a dual payment system, but rather payment claims referred to in the act are those made under the contractual regime. the east coast model provides for recovery of progress payments for construction work undertaken or goods and services supplied only and, therefore, by definition only allows contractors or suppliers to recover payment from their principals (ie, „upstream‟ claims). the scope of the west coast model is wider, providing the right for either party to make an adjudication application in relation to any payment disputes (s 25 of the wa act) falling within the scope of the building contract, including debts and damages claims. under the east coast model‟s statutory payment regime, a respondent has up to 10 business days 2 after the payment claim is served to serve a payment schedule indicating the amount of the payment it proposes to make. if the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less with reasons for withholding payment (s 14(3) of the nsw act). if the respondent either schedules an amount less than the payment claim or fails to pay the whole or part of the scheduled amount by the due date, the claimant may make an adjudication application under the act (s 17(1) of the nsw act). in the case where a lesser amount is scheduled and paid, the claimant must serve an adjudication application on an authorised nominating authority (ana) of their choice (s 17(3)(b) of the nsw act), with a copy served on the respondent (s 17(5) of the nsw act), within 10 business days after receiving the payment schedule (s 17(3)(c) of the nsw act ). 3 2 except in the sa act which allows 15 business days – see s 14(4)(b)(ii) of the sa act. 3 except in the sa act which allows 15 business days – see s 17(3)(c) of the sa act. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 38 the respondent then has either a period of 5 business days 4 after receiving a copy of the application or 2 business days 5 after receiving notice of an adjudicator‟s acceptance of the application, whichever is the later, to lodge an adjudication response with the adjudicator (s 20(1) of the nsw act). if the respondent does not duly provide a payment schedule, it becomes liable to pay the claimed amount to the claimant on the due date for the progress payment (s 14(4)(b) of the nsw act). where no payment schedule is provided, the claimant has two paths available under the act by which to recover the payment claim. the first path is for the claimant to seek summary judgment in court for the debt due (s 15(2)(a)(i) of the nsw act), in which case the respondent is not entitled to bring any crossclaim against the defendant in the summary judgment proceedings, or raise any defence in relation to matters arising under the construction contract (s 15(4)(b) of the nsw act). the second path is for the respondent to apply for the payment claim to be determined in adjudication, 6 in which case the respondent will be disallowed from lodging an adjudication response (s 20(2a) of the nsw act). this means that a respondent will not then have an opportunity to be heard by an adjudicator who is essentially limited to a consideration of the submissions duly made by the parties (ie, payment claim, payment schedule and all submissions that have been duly made in their support) when determining the adjudication (s 22(2) of the nsw act). even in circumstances where the respondent has duly served a payment schedule, it may only include in its adjudication response reasons for withholding payment which have previously been included in the payment schedule (s 20(2b) of the nsw act). thus, a respondent may be prevented from being able to present its full case to the adjudicator unless it has previously served a comprehensive payment schedule which covers all the issues it may wish to rely on subsequently. unlike the east coast model, the west coast model provides no detailed statutory payment system but rather gives primacy to the parties‟ agreed contractual payment regime. thus, where no progress payment is certified in response to a payment claim under the contract within the time stipulated in the contract, the claimant has no statutory right to summary judgment (as per the east coast model) but must apply to the courts for summary judgment. 7 if no such payment regime is provided for in the construction contract, then the payment provisions set out in schedule 1 of the west coast legislation are implied into the contract. unlike the east coast model, the west coast legislation does not make the serving of a response to the payment claim 8 a condition precedent to the right of a party who is served 4 except in the tasmanian act (7 business days) and act act (10 business days). 5 except in the tasmanian act (5 business days) and act act (5 business days). 6 this second path may be preferable to some claimants in terms of speed of recovery as the claimant may request an adjudication certificate from the relevant ana stating the adjudicated amount (see s 24 of the nsw act) and file the adjudication certificate as a judgment for a debt in any court of competent jurisdiction (see s 25 of the nsw act). 7 if the courts permit summary judgment this does not guarantee swift and inexpensive recovery of a certified payment. there is still the possibility that a defendant may be able to defeat an application for summary judgment by demonstrating to the court that it can mount a reasonable defence by way of a cross claim based upon the facts and law, in which case the only option left to the contractor will be to pursue its claim in a relatively lengthy and costly court trial or arbitration hearing. 8 ie, the equivalent of a “payment schedule” in east coast terminology. although under the west coast legislation a response to a payment claim is a contractual requirement rather than a statutory requirement. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 39 with an adjudication application 9 to lodge an adjudication response. additionally, there are no limitations as to the inclusion of reasons for withholding payment in a response to an adjudication application. thus, providing that a party lodges their response to an adjudication application within the time allowed by the legislation (within 14 days (wa act, s 27(1)) or 10 working days (nt act, s 29(1)) after the date on which a party to a construction contract is served with an application for adjudication), it will not be deprived of the opportunity to present its full case to the appointed adjudicator. furthermore, an adjudicator under the west coast legislation is not restricted to a consideration of documents submitted by the parties when making his or her determination as in the east coast model, which in practice means that an adjudicator under the east coast legislation often makes a determination on documents only. rather, the legislation encourages a west coast adjudicator to be more evaluative in their approach to determination by providing that an adjudicator “is not bound by the rules of evidence and may inform himself or herself in any way he or she thinks fit” (s 32(1)(b) of the wa act) or “appropriate” (s34(1)(b) of the nt act). this has the effect of extending the adjudicator‟s investigative powers beyond the consideration of the parties‟ submissions, thus assisting the adjudicator in ascertaining the facts and the law. procedural justice procedural justice refers to the justice of the processes or methods used to arrive at an outcome or determination. a review of literature in the field of dispute resolution and social psychology shows a strong consensus that procedural justice, or merely the perception of it, has positive consequences (thibaut & walker 1975; ury, brett & goldberg 1988; allred 2005) including: a mutual satisfaction of the disputing parties with the outcome; a willingness of the parties to settle; a willingness of the parties to abide by the agreement or determination; and, feelings of trust, cooperation, and commitment toward the other side (see figure 1). indeed, it has been shown that procedural justice becomes especially important to disputants when outcomes are unfavourable to them as they may draw some satisfaction from the resolution‟s fairness (thibaut & walker 1975; latour 1978; greenberg 1987). a fundamental characteristic of procedural justice in dispute resolution is that both parties have an opportunity to voice their side of the argument, and that both parties feel as though their perspective has at least been considered. numerous studies have made it clear that the voice effect enhances procedural fairness (lind, kanfer & earley 1990; folger 1977; kanfer, sawyer, earley, & lind 1987; latour 1978; lind, kurtz, musante, walker, & thibaut 1980; lind, lissak, & conlon 1983; tyler 1987; tyler, rasinski, & spodick 1985). accordingly it is widely considered to be a fundamental principle in dispute resolution proceedings that each party shall be given a full opportunity to present its case (article 18 of the united nations commission on international trade law (uncitral) model law on international commercial arbitration; article 6 of the european convention on human rights; s 24 of the victorian charter of human rights and responsibilities act 2006). a strong argument may be made that the east coast model falls foul of this fundamental principle based upon it:  not allowing a respondent to include any reasons for withholding payment in its adjudication response unless those reasons have previously been included in the payment schedule (s 20(2b) of the nsw act); and, 9 ie, the equivalent of the “respondent” in east coast terminology. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 40  barring the respondent from lodging an adjudication response if it has not served a payment schedule within the stipulated timeframe (ie, 10 business days after the payment claim is served except in the sa act which allows 15 business days). indeed, a significant proportion of respondents have lost their right to be heard by an adjudicator on the basis that they have failed to duly serve a payment schedule on the claimant. in queensland, for example, this proportion amounts to 39% of all adjudication applications to date in the 2010/11 financial year (building and construction payments agency 2011). antecedents consequences figure 1 antecedents and consequences of procedural justice source: allred (2005: 91) davenport (2010) argues that the east coast model‟s restrictions on respondents being able to have their reasons for withholding payment heard by an adjudicator do not compromise procedural justice. in this respect, davenport (2010: 10) draws an analogy with formal legal court proceedings, stating: “it [the east coast model adjudication process] is not very different to the court process. if a defendant fails to lodge a defence, the defendant cannot complain if the claim is decided on the claimant‟s evidence”. it is contended, however, that davenport‟s argument overlooks three significant points. firstly, statutory adjudication is a form of alternative dispute resolution (adr), and is not intended to mirror formal court proceedings. as bowsher j put it, in the english high court case of austin hall building ltd v buckland securities ltd [2001] ewhc technology 434 at [19]: “proceedings before an adjudicator are not legal proceedings. they are a process designed to avoid the need for legal proceedings”. thus, in the interests of conducting an adr process which is procedurally satisfactory to both parties, every possible opportunity should be given to an adjudicator to hear both sides of the argument when determining the outcome of the payment dispute. this would encourage both parties to accept the participation: 1. voice 2. feeling that perspective has been considered 3. input on design of process perceptions of procedural justice satisfaction with outcome willingness to settle willingness to abide by agreement feelings of trust, cooperation, and commitment toward other side australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 41 adjudicator‟s determination, and deter a losing party from subsequently pursuing the dispute in court or arbitration – hence achieving the aim of avoiding the need for legal proceedings, the costs of which are ultimately detrimental to all parties associated with the construction industry. the application of differing requirements with respect to the opportunity to have one‟s arguments heard in a dispute resolution process, as in this case between litigation and statutory adjudication, is consistent with the court‟s approach in administrative law that rules of natural justice should be flexible and fair in all the circumstances of a particular case (aronson, dyer & groves 2004: 468). such circumstances include a consideration of the nature of the dispute resolution process being used. as stated by kitto j in mobil oil australia pty ltd v federal commissioner of taxation (1963) 113 clr 475 at 504: “what the law requires in the discharge of a quasi-judicial function is judicial fairness. that is not a label for any fixed body of rules. what is fair in a given situation depends upon the circumstances”. thus, even if one were to accept davenport‟s analogy between the east coast model‟s statutory adjudication process and formal court proceedings, the nature and objectives of the dispute resolution processes being used would justify a difference in the content of procedural fairness rules with respect to being given an opportunity to have one‟s case heard. litigation is in nature a formal process resulting in a final binding determination, as opposed to the nature of statutory adjudication which is a form of adr leading to a determination which is binding in the interim. the objective of statutory adjudication, as previously stated, as a form of adr, should be to avoid the need for legal proceedings. secondly, rather than legal proceedings, a more accurate analogy of the east coast model‟s statutory adjudication process, as previously observed by davenport (2007) himself, is that of an independent certification process. with respect to the enforcement of contractual payment certificates in court, the established common law position is to allow a defendant to thwart a plaintiff‟s application for summary judgement by the raising of a cross-claim for which the defendant can show a reasonable cause of action (dey v victorian railways commissioners (1949) 78 clr 62; general steel industries inc v commissioner for railways (nsw) (1964) 112 clr 125), even if such cross-claim is raised for the first time after the date of certification. the courts have adopted this position in order that a defendant who may have a valid case for a cross-claim against a certified contractual payment will not be denied their right to have their case heard before payment is ordered, because to deny such a right would deprive the defendant of both procedural and substantive justice. as habersberger j stated in main roads construction pty ltd v samary enterprises pty ltd [2005] vsc 388 at [11]: the power to order summary judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried. if it is not possible to say without doubt on the whole of the material that there is no question to be tried, there should be leave to defend. this is not dissimilar, in principle, to the situation where a respondent has a valid reason for withholding monies in a payment claim under the east coast model‟s payment system, but did not raise the reason in a payment schedule. indeed, if the east coast model is viewed as akin to an independent certification process with an adjudicator‟s determination equating to an independent payment certificate, then a reason for withholding payment raised by a respondent for the first time in its adjudication response would actually be notified to the independent certifier (the adjudicator) within a reasonable amount of time before the independent payment certificate (adjudicator‟s determination) is due to be issued. although, as discussed below in further detail, the original object of the east coast model was not generally for disputed cross-claim amounts for debts or damages (in the form of set offs or back charges) to be subject to adjudication, it should be noted that: in practice some adjudicators are allowing and assessing them (davenport 2007: 22); and, the east coast australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 42 model does allow for set offs against payment claims for the estimated cost of rectifying any defective work by the contractor (s 10(1)(b)(iv) of the nsw act). the problem with the common law position in practice, however, has been that the duration and expense of a full litigation process have been prohibitive to potential plaintiff contractors – thus when a contractor‟s summary judgment application is denied, the contractor simply cannot afford to pursue its payment claim in a full court trial. this impracticality of the court system has caused injustice to contractors. however, whilst this presents a practical problem at common law due to the inefficiencies of the litigation process, it does not present such a problem if a rapid and inexpensive statutory adjudication process is available to the claimant. thirdly, even if one were to accept the proposition that statutory adjudication proceedings were akin to formal court proceedings, as fenwick elliott (2010: 4) points out: there are many reasons why parties may fail to meet a procedural deadline for the lodging of a defence, and courts throughout the common law world allow defendants nevertheless to advance their cases, where appropriate with an accompanying cost order. to do otherwise offends against the fundamental principle of natural justice that both parties should be given the opportunity to be heard. procedural justice under the east coast model is further limited by it restricting an adjudicator to a consideration of documents submitted by the parties when making his or her determination, which in practice means that an adjudicator under the east coast legislation often makes a determination on documents only. this severely limits the ability of the adjudicator to use their discretion to exercise more procedural flexibility in order to ascertain the pertinent facts and law. other issues which restrict procedural justice exist in the east coast model, including the restriction on parties to agree upon a particular adjudicator, and the restriction on legal representation at conferences (s 21(4a) of the nsw act). in contrast, the west coast model allows for the parties to the contract to agree upon a registered adjudicator or prescribed appointer (s 26(1)(c) of the wa act), and does not specifically preclude legal representation at hearings. whilst such issues may not be as significant, or affect as many cases, as those previously raised, they may well be highly relevant in large and/or complex cases where the communication of complex legal and factual issues by trained legal counsel, and determination by a mutually respected adjudicator, would give the parties confidence in the outcome. the more restrictive, and less procedurally just, design of the east coast, as compared to the west coast, adjudication process can be explained by the more limited scope of the east coast legislation. the east coast legislation was only intended to cover „purely progress payment claims‟ (davenport 2007: 15). consequently, the east coast adjudication scheme was designed solely for the valuation of construction work undertaken or related goods and services supplied. as submitted by brand and davenport (2010: 5), the east coast adjudication scheme was not intended (and, therefore, designed) to accommodate more complex claims for monies due under the contract such as, for example, delay damages claims by a contractor or liquidated damages claims which the principal, or their contract administrator, may set off against a progress claim. accordingly davenport (2007: 23) states “adjudication of a progress claim is a fast track process that is not suitable for deciding issues of breach of contract, extensions of time, repudiation and termination, causation, quantification of damages etc.”. consequently, the role of the adjudicator under the east coast process is essentially limited to determining a progress claim amount by assessing the quantity of construction work undertaken (or related goods and services supplied) and whether such work (or goods and australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 43 services) accord with the contract requirements in terms of scope and quality, and valuing such work at the applicable contract prices or rates (s 10(1)(b)(i), (ii) & (iii) of the nsw act). it is worth reiterating here that the east coast legislation does provide for statutory set off in one respect: the estimated cost of rectifying any defective work by the contractor (s 10(1)(b)(iv) of the nsw act), the evaluation of which is consistent with the adjudicator‟s general role as assessor of quantity and quality of work. the difference in progress payment amount between the statutory entitlement, as determined by the adjudicator under the east coast legislation, and the contractual entitlement, as determined by the contract administrator, appears to have resulted in some confusion and inconsistency with respect to what amounts should or should not be included in an adjudicator‟s determination. accordingly, with respect to set offs under the current east coast adjudication process, davenport (2007: 22) states: there are differences in the approach taken by adjudicators. some take the approach that only a debt (owed to the purchaser) that is admitted by the supplier or has been decided by a court or tribunal or in arbitration or has been created under a dispute resolution clause in the contract, can be set off against progress payments… other adjudicators decide disputed issues of liability for and quantum of the back charges… some adjudicators allow a set off of an amount claimed by the purchaser even if liability and quantum have not been proven. furthermore, the nsw judiciary has allowed claimants to recover amounts for delay damages in adjudicated payment claims under the act. 10 according to davenport (2007: 14) and davenport & brand (2010: 5), this creates an “imbalance” as only one party is allowed to apply for adjudication of payment disputes regarding damages. as claims for damages falling within the scope of the contract (eg, contractors‟ claims for delay and disruption costs caused by principals, and principals‟ claims for liquidated or general damages for contractor‟s delay in achieving practical completion) have the potential to be made by either contractual party, it is procedurally unfair to allow only one party the right to refer such claims to the act‟s dispute resolution processes. thus, whilst the east coast legislation may not have been originally designed or intended to resolve disputes regarding claims for debts or damages, it is currently being used for this purpose. consequently, notwithstanding the reason for the more restrictive adjudication scheme of the east coast model, its inherent lack of procedural justice is likely having significant impacts upon substantive, or distributive, justice. it may be considered as somewhat disconcerting, therefore, that multi-million dollar progress claim disputes are being resolved, albeit on an interim basis, by means of a fast track adjudication scheme which limits the adjudicator‟s power to investigate and potentially bars a respondent from having its arguments heard by the adjudicator. restriction on freedom of contract as noted by bell & vella (2010: 569), the uk legislation, which is a lot less regulatory in nature than the east coast legislation, has been criticised as representing an unjustified incursion into freedom of contract. in this respect, as noted by bell and vella (2010: 569), lloyd (2001: 448) commented in relation to the way in which coverage of the uk act was framed: 10 see coordinated construction co pty ltd v jm hargreaves pty ltd [2005] nswca 228; coordinated construction co pty ltd v climatech (canberra) pty ltd & ors . [2005] nswca 229; minister for commerce (formerly public works & services) v contrax plumbing (nsw) pty ltd & ors [2005] nswca 142; and, john holland pty limited v roads & traffic authority of new south wales & ors [2007] nswca 19. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 44 it is hard to think of another comparable case of parliament singling out parts of a sector of the commercial life of the country and requiring them to alter their contracts… on the basis that it knew better than its members how their commercial relationships should be regulated. it is a remarkable interference in the freedom of contract enjoyed by people who are normally well able to look after themselves. further, as noted by bell and vella (2010: 569), duncan wallace (1999: 21) was particularly critical of the uk act‟s application as between the principal and the main (or head) contractor: here adjudication does not fill a gap, as it might be said to do in… sub-contracts… but it quite simply abrogates at a stroke the long-established machinery of professional administrative regulation during the construction period, subject to later arbitration or litigation, which has evolved and been implemented by most commonly used forms of main contract in england and the commonwealth for over a century. the undermining of the traditional independent contractual payment certification process by the contract administrator, provided for in the vast majority of standard forms of construction contracts, is indeed a common feature to all the enacted construction industry payment legislation. the legislation adopts a „one-size fits all‟ approach rather than targeting those lower hierarchical tiers of the contractual chain where traditional independent contractual payment certification mechanisms are not commonly provided. this is the case despite there seeming to be little evidence to support a „one-size fits all‟ approach. accordingly, albeit in the english context, duncan wallace (1999: 21) points out that in the latham report (latham 1994), the catalyst for the uk act, the only evidentiary basis in support of alleged bias or unfairness in the contractual payment traditional system relates to the quite different sub-contract setting, and not the principal/head contractor setting. towards the top of the contractual chain are those parties (principal, head contractors and large sub-contractors) who are more likely to have equality of bargaining power with each other, and have entered into contracts which provide for an independent payment certification process by a contract administrator. conversely, towards the bottom of the chain are those parties (medium and small sized sub-contractors) who are more likely to have inequality of bargaining power with their principals, and have entered into contracts which do not provide for an independent payment certification process by a contract administrator. accordingly, fenwick elliott (2010: 2) observes: it is certainly true that… head contracts frequently provided for an architect or engineer to act as certifier, but there was no history of any such arrangements being applied down the contractual chain to the case of subcontracts, where individual tradesmen were in any position analogous to employees. whilst the application of statutory mandatory adjudication to the whole contractual chain may be regarded as contentious, the situation under the east coast model is compounded further still by the provision for a highly regulatory dual payment system (i.e., statutory payment scheme alongside contractual payment scheme) which has the potential to override several freely agreed contractual provisions relating to payment (e.g., provisions regarding making claims for payment, responding to claims for payment and time for payment). furthermore, s 34 of the nsw act, and its equivalent in the other east coast acts, provides: (1) the provisions of this act have effect despite any provision to the contrary in any contract. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 45 (2) a provision of any agreement (whether in writing or not): (a) under which the operation of this act is, or is purported to be, excluded, modified or restricted (or that has the effect of excluding, modifying or restricting the operation of this act), or (b) that may reasonably be construed as an attempt to deter a person from taking action under this act, is void. the scope of s 34, and its potential to be an incursion on freedom of contract, is still unknown. 11 indications from the nsw judiciary to date suggest that the operation of s 34 will depend upon a contractual provision‟s degree of inimicality upon the relevant statutory provision. for example, hodgson ja stated in minister for commerce v contrax plumbing [2004] nswca 142 at [54]: in my opinion a provision of a contract as to the determination of reference dates, or as to the calculation of the amount of progress payments, could be such as to restrict the operation of the act within the meaning of s.34, even though the act in s.8(2)(a) and s.9(a) expressly defers to such provisions. for example, if a contract provided for yearly reference dates, or provided that progress payments should be calculated on the basis of 1% of the value of work done, in my opinion such provisions could be so inimical to s.3(1), s.3(2) and s.8(1) as to be avoided by s.34. there seems little doubt, however, that s 34 has eroded freedom of contract. accordingly, mcdougall (2006) states: s.34 will operate in all circumstances where contractual clauses attempt to eradicate or limit the rights given under the act. as a result, the section is likely to alter the effect of numerous contractual provisions. additionally, if the true intent of the east coast legislation were followed, and damages falling within the scope of the contract were to be excluded from progress payments, the east coast legislation may entitle a claimant to adjudicated amounts that are not in fact due as agreed under the contract. whilst the west coast model imposes statutory adjudication upon the entire contractual chain, it otherwise generally endeavours to preserve freedom of contract. 12 as stated by ms mactiernan (2004: 275) in her second reading speech for the wa construction contracts bill: the bill draws on legislation already enacted in the united kingdom, new south wales and victoria, but has been drafted to overcome a number of problems that have become apparent in those jurisdictions. in particular, it is based on enforcing the contract between the parties and does not introduce a separate, and possibly conflicting, statutory right to payment. 11 for decisions considering the effect of s 34, see minister for commerce v contrax plumbing[2004] nswsc 823; john goss projects v leighton contractors pty ltd & davenport [2006] nswsc 798; and, john holland pty ltd v roads and traffic authority of new south wales [2006] nswsc 874. 12 although the west coast legislation is not totally without regulation on the contractual payment system. for example, the west coast legislation prevents the period between payment claim and payment from being any longer than 50 days – see s 10 of the wa act. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 46 the degree of regulation afforded by the east coast model, therefore, is significantly more than that imposed by the uk act or the west coast model. it is also worth noting here that the regulatory nature of the east coast model is at odds with the approach of the judiciary in recent times which has conspicuously refrained from interfering with freedom of contract even in cases where a contractual term may appear, at first sight, to be harsh (multiplex constructions (uk) ltd v. honeywell control systems ltd (no.2) [2007] ewhc 447 (tcc); ringrow pty ltd v bp australia pty ltd [2005] hca 71; state of tasmania v leighton contractors pty ltd [2005] tassc 133). accordingly, their honours (gleeson cj, gummow, kirby, hayne, callinan and heydon jj ) in ringrow pty ltd v bp australia pty ltd [2005] hca 71 at [31] and [32] stated: the law of contract normally upholds the freedom of parties, with no relevant disability, to agree upon the terms of their future relationships… exceptions from that freedom of contract require good reason to attract judicial intervention to set aside the bargains upon which parties of full capacity have agreed. it may be argued that the highly regulatory nature of the east coast model is akin to that usually found in legislation enacted to protect vulnerable individual consumers and employees. indeed, davenport (2010: 2-3) draws parallels between construction industry payment legislation and protection afforded to employees under industrial relations legislation ( s 118(1) of the industrial relations act 1996 (nsw), and s 323(1) of the fair work act (cth)), and notes that similar protection was not available for contractors who were not employees until the east coast legislation was enacted. however, even if one were to accept that such regulatory legislation was justified in the context of small subcontractors, it would seem extraordinary that legislation akin to that of employee protection legislation should be extrapolated to protect contractors throughout the whole industry regardless of size. nevertheless, it is the case that the east coast model with all its regulations, curbs on freedom of contract, and restrictions on procedural justice is being used by contractors to make payment claims for tens of millions of dollars. 13 uptake rates table 2 shows the total number of adjudication applications lodged in the four jurisdictions of nsw, queensland, victoria and wa since commencement of the respective acts. 14 the table shows that there has been a significant use of statutory adjudication in nsw and queensland since commencement of the legislation. in contrast, however, statutory adjudication under the victorian act has been used very little. the victorian act deviates the most from the other east coast acts particularly with respect to making certain matters “excluded amounts” from payment claims, as discussed in further detail by bell and vella (2010: 574). it is, perhaps, such complexities in the victorian act which have deterred usage. in 2009/10 there were 999 adjudication applications in queensland (building and construction industry payments agency 2010). in 2008, there were 940 adjudication applications in nsw (nsw procurement, nsw department of commerce. data obtained upon request). in 2008/09, there were 105 adjudication applications made in wa (construction contracts registrar (wa) 2009). 13 according to the queensland building and construction industry payments agency report june 2009: 62 of the determined adjudications in 2008/2009 involved payment claims in excess of $500,000, and the largest payment claim, for which an adjudicator‟s decision had been released, was in the amount of $16,094,294. data obtained from the nsw department of commerce shows maximum payment claims of almost $83.4 million in 2005, $93.9 million in 2006, $26.7 million in 2007, and $9.3 million in 2008. 14 in the case of nsw, since commencement of the amended act in march 2003. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 47 when comparing these figures, the relative size of population and economy of each jurisdiction should be considered. queensland‟s population is around 95% larger (australian bureau of statistics 2010), and final demand around 65% larger (australian bureau of statistics 2009), than wa‟s. nsw population is 215% larger (australian bureau of statistics 2010), and final demand around 150% larger (australian bureau of statistics 2009), than wa‟s. based upon the annual adjudication application figures quoted above, the number of annual adjudication applications in queensland is 850%, and in nsw is 795%, more than in wa. therefore, even when adjusting for population and economy, it can be seen that statutory adjudication is being used to a far greater extent in queensland and nsw than in wa. the building services authority (qld) (2010: 10) observes that “the average payment claim proceeding to adjudication in queensland is only 29% ($264,493) of the average payment claim proceeding to adjudication in wa ($902,280)”, and notes that this means that adjudication under the queensland act is being used by many more small to medium size contractors and suppliers than are using adjudication under the wa act. however, the mean wa payment claim figure quoted by the building services authority (qld) does not appear to accord with that of $341,324 15 reported by the construction contracts registrar (wa) (2009) for payment claims made in 2008/2009, which would mean that the average payment claim in queensland for 2008/2009 16 was 69% of that in wa. new south wales (amended act commenced march 2003, calendar years 2003-2009) queensland (commenced october 2004, calendar years up to december 2009) victoria (commenced 2002, calendar years 20022009) western australia (commenced 2005, calendar years up to december 2009) applications lodged 5877 2760 258 307 total claim value (rounded up) $2.5 billion $730 million $152 million $277 million table 2 use of rapid adjudication – interstate comparison 17 source: building services authority (qld) (2010: 8) the building services authority (qld) (2010: 10) also notes that “under the bcipa for the 2008/2009 financial year, of the 754 decided adjudication matters, 463 (61%) were in respect of payment claims under $40,000”. the data presented in table 3 shows that in 2008/2009, 52% of all adjudicated payment claims in queensland were for less than $25,000, whereas in wa 30% of all payment claims lodged were for less than $25,000. 15 even when the mean payment claim calculation is adjusted to exclude payment claims dismissed and withdrawn, the result is still only $347,712. 16 using the figure of $234,800 reported by the building and construction industry payments agency (2009). 17 note: the queensland building services authority did not consider the nt act in this analysis because of the very small number of adjudications received over its 5½ years of operation. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 48 range of claims queensland (building and construction industry payments agency 2009) western australia construction contracts registrar (wa) (2009) number of adjudication decisions released percentage of total adjudication decisions number of adjudication applications lodged percentage of total adjudication applications lodged $0-$9,999 241 32% 19 18% $10,000-$24,999 150 20% 13 12% $25,000-$99,999 185 25% 27 26% $100,000-$249,999 79 10% 12 12% $250,000-$499,999 37 5% 15 14% >$500,000 62 8% 19 18% total 754 100% 105 100% table 3 number of adjudications by claim value in queensland and wa, 2008/2009 18 efficiency of adjudication process the efficiency of each of the legislative models is considered with respect to adjudication fees, duration of the adjudication processes, and the volume of litigation resulting from statutory adjudication. adjudication fees table 4 shows the mean adjudication fees for a various ranges of payment claim sizes in 2008/2009 as reported by the building and construction industry payments agency (2009) and the construction contracts registrar (wa) (2009). range of claims mean fees for adjudication queensland western australia $0-$9,999 $919 $1,364 $10,000-$24,999 $1,836 $2,653 $25,000-$99,999 $3,432 $2,650 $100,000-$249,999 $6,123 $6,133 $250,000-$499,999 $9,029 $3,923 >$500,000 $16,324 $6,065 table 4 mean adjudication fees reported in queensland and wa in 2008/2009 it must be noted that these mean adjudication figures are not directly comparable as the wa figures have been calculated based upon the total number of adjudication applications received during the year, 19 whereas the queensland figures have been calculated based upon the number of adjudication decisions released. therefore, these figures can only be 18 although not a direct comparison – the queensland figures are for adjudication decisions released and the wa figures are for adjudication applications lodged – these figures provide an indicative measure of the proportionate numbers of adjudications at each claim value. 19 of the 105 applications received in wa, 37 were either dismissed withdrawn or are pending. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 49 treated as indicative as to comparative levels of adjudication fee. it may be observed from the figures that adjudication fees are low in both jurisdictions. mean adjudication fees are at least around 45% lower in queensland for payment claims below $25,000. however, for larger payment claims mean adjudication fees between the two jurisdictions would appear to be more on an equal footing or, if anything, more expensive in queensland. 20 duration of adjudication scheme practically, there is little difference in the time allowed for an adjudicator to make his or her determination between the east coast and west coast models. the east coast model requires determination within 10 business days (s 21(3) of the nsw act), whereas the wa act requires determination within 14 days (s 31(1) of the wa act). 21 there is a difference, however, in timing with respect to the period which a respondent has to serve a response to the adjudication application. under the east coast model a respondent has to lodge its adjudication response within 5 business days after receiving the claimant‟s adjudication application or 2 business days after receiving notice of the adjudicator‟s acceptance of the adjudication application, whichever is the later (s 20(1) of the nsw act). thus, assuming an adjudication response is lodged 5 business days after the adjudication application is received by the respondent and the adjudicator notifies their acceptance of the pplication in a timely fashion, 22 the whole adjudication process from application to determination (presuming the adjudicator takes the full 10 business days to make their determination) takes 15 business days (or 3 weeks). the west coast model allows the respondent 14 days 23 (s 27(1) of the wa act) from the date on which the adjudication application was served to prepare and serve its adjudication response. thus, assuming an adjudication response is lodged by the respondent 14 days after the serving of the adjudication application, the whole adjudication process from application to determination (presuming the adjudicator takes the full 14 days to make their determination) takes 28 days (or 4 weeks). under the east coast model‟s payment system, as described above, if the respondent takes the full 10 business days 24 permitted after the payment claim is served to lodge a payment schedule, the soonest which an adjudication application can be lodged is on the 11 th business day after the payment claim is served. thus, the minimum period of time from payment claim to adjudication determination will be approximately 5 weeks. in the case where a respondent fails to serve a payment schedule and is given a second chance to do so by the claimant who chooses to apply for adjudication (s 17(2) of the nsw act), this period of time extends to around 6 weeks. under the west coast model there is, of course, no statutory payment system. therefore, the minimum period of time between a payment claim and an adjudication application will be 20 however, such comparison for larger claim ranges must be treated with caution due to the outlier effect. accordingly, in queensland the maximum single payment claim with a decision released in 2008/2009 was in the amount of $16,094,294, whereas, in wa it was $4,464,818. 21 the wa act does not define „day‟. however, s 61(1)(e) of the interpretation act (wa) 1984 states that where the time limited for the doing of a thing expires or falls upon a saturday, sunday or public holiday, the thing may be done on the next day that is not an excluded day. 22 under s 21(3) of the nsw act, the start of the adjudication termination period is triggered by the adjudicator‟s notice of acceptance. in practice this may mean that the determination period may commence before the adjudication response has been lodged. however, the adjudication determination period is triggered by the serving of the adjudication response under the queensland, sa, tasmanian, act, wa and nt acts. 23 s 29(1) of nt act allows 10 working days. 24 15 business days under the sa act s 14(4)(b)(ii). australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 50 subject to the contractually agreed payment provisions. the west coast model provides that a party must apply for adjudication within 28 days after a dispute arises (s 26(1) of the wa act). a dispute arises if by the time when the amount claimed in a payment claim is due to be paid under the contract, the amount has not been paid in full, or the claim has been rejected or wholly or partly disputed (s 6(a) of the wa act). under a typical standard form of building contract conditions, such as the australian standard general conditions of contract (as 2124-1992), the principal has a period of 14 days after receipt of the payment claim to issue a payment certificate (which shall contain any reasons for withholding payment) and a further 14 days to pay the contractor. 25 thus, the minimum period of time from payment claim to adjudication determination will be approximately 6 weeks where the contractor disputes the certified amount, 26 and 8 weeks where the principal fails to pay the certified amount. thus, it may be seen that an adjudication determination will generally take 1 to 2 weeks longer to obtain under the west coast model as compared to the east coast model. in the interests of achieving more procedural justice in a determination, 1 to 2 weeks extra is a relatively small price to pay. however, for small contractors whose commercial survival may be dependent on timely payment of relatively small claims, 1 to 2 weeks may indeed make a significant difference. further, small contractors nearer the bottom of the hierarchical contractual chain are more likely to be vulnerable to unfavourable contract payment terms, due to their weaker bargaining position, which may extend the period between the date of claim and date of payment beyond those normally found in standard forms of building contracts. litigation since its commencement, the nsw act has generated a significant amount of litigation. since 2001, there have been well in excess of 200 judgments emanating from the nsw supreme court and court of appeal in relation to the nsw act. the majority of these judgments concern cases where a respondent has attempted to have an adjudicator‟s determination, or part thereof, set aside. invariably, the judgments have concerned adjudicator determinations of significant amounts (usually, at least, hundreds of thousands of dollars). the numbers of such applications show little sign of abatement, with at least 21 judgments 27 coming out of the nsw supreme court, and 4 out of the nsw court of appeal, in 2009 concerning, for one reason or another, challenges to the payment of an amount determined in adjudication. a significant proportion of these applications have been made on the basis that either a payment claim 28 or payment schedule 29 has not been validly served in accordance with the act‟s dual payment system. 25 if no such timeframes are provided for in the building contract then the west coast model implies the following provisions: a notice of dispute (stating reasons for disputing the claim) must be given within 14 days of the payment claim, and the due date for payment of any undisputed claim (or portion thereof) is 28 days after the payment claim is received by the paying party – see schedule 1, division 5 of the wa act. 26 assuming the certificate containing reasons for withholding payment is issued at the end of the contractually prescribed period. 27 this figure was obtained by conducting a search on the nsw lawlink case law website <http//:www.lawlink.nsw.gov.au/lawlink/caselaw/ll_caselaw.nsf/cases/cl_sc > using the keywords “building and construction industry security of payment act”. the figure is indicative and not necessarily a fully accurate number of the total judgments in 2009. 28 5 of the 21 cases referred to above in 2009 concerned whether the payment claim (in full or in part) was valid: see the owners strata plan 56587 v consolidated quality projects [2009] nswsc 1476 ; allpro building services v c&v engineering services [2009] nswsc 1247; urban traders v paul michael [2009] nswsc 1072; the university of sydney v cadence australia pty limited & anor [2009] nswsc 635; perform (nsw) pty ltd v mev-aus pty ltd trading as novatec construction systems [2009] nswsc 416. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 51 furthermore, following the nsw court of appeal‟s recent judgment in chase oyster bar v hamo industries [2010] nswca 190, which may have reopened the door 30 for adjudicators‟ determinations to be amenable to orders in the nature of certiorari, there would now appear to be an increase in the potential scope of grounds 31 upon which a disgruntled party could mount a challenge to an adjudicator‟s determination. it remains to be seen, however, whether the chase oyster bar decision will encourage an increase in the amounts of challenges in nsw. there has been a total of three wa supreme court judgments (and no wa court of appeal judgments) in relation to issues concerning the wa act since its enactment in 2004, only one (o’donnell griffin pty ltd v john holland pty ltd [2009] wasc 19 ) of which concerned an application to have the adjudicator‟s determination set aside. 32 the relatively large amount of litigation arising from the nsw model detracts from the efficiency of statutory adjudication as a dispute resolution process for payment claims in the construction industry due to the resultant increased transaction costs, defined as “the time, money, and emotional energy expended in disputing, the resources consumed and destroyed, and the opportunities lost” (ury, brett & goldberg 1988: 11), in resolving such disputes. additionally, it may be indicative of a lack of confidence which adjudication users have in the adjudication process to deliver accurate and fair outcomes. overview of existing proposals for harmonisation davenport’s proposal for a dual process of adjudication davenport (2007) has proposed a dual process of adjudication which aims to combine the east coast and west coast model statutory adjudication processes in order to “solve many of the perceived problems with adjudication in the building and construction industry” (davenport 2007: 12). this proposed dual process has been further discussed by brand & davenport (2010). davenport (2007: 15) states that: the proposed dual process would retain the [east coast] certification process for purely progress payment claims, i.e. for claims for the value of work, goods or services that have actually been provided, and would adopt the traditional [west coast] process for other payment disputes. davenport (2007: 16-17) cites examples of such „other payment disputes‟, which he terms „ex-contractual claims‟, including, inter alia: a contractor‟s claim for delay damages for breach of contract by the principal, a contractor‟s claim for the value of extra work carried out for which the superintendent refuses to direct a variation in writing, a principal‟s claim for 29 2 of the 21 cases referred to above in 2009 concerned whether the payment schedule was validly served: see perform (nsw) pty ltd v mev-aus pty ltd trading as novatec construction systems [2009] nswsc 416, and lucas stuart v hemmes hermitage [2009] nswsc 477. 30 a „door‟ that was previously shut by the nsw court of appeal in brodyn pty ltd (t/as time, cost and quality) v davenport (2004) 61 nswlr 421. 31 beyond the “basic and essential” requirements” listed in brodyn pty ltd (t/as time, cost and quality) v davenport (2004) 61 nswlr 421 at [53]. 32 note that a search on the wa state administrative tribunal (sat) decisions database website <http://decisions.justice.wa.gov.au/sat/satdcsn.nsf> revealed that there have been 34 sat judgments since the enactment of the wa act in 2004. however, most of these judgments concern a review of an adjudicator‟s decision to dismiss an adjudication application without making a determination of its merits (see s 31(2)(a) & s 46(1) of the wa act). sat has made it clear it will only review adjudicators‟ decisions with respect to jurisdiction, and that it will not review an adjudicator‟s determination on the merits – for example, see match projects pty ltd and arcon (wa) pty ltd [2009] wasat 134. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 52 liquidated or general damages for delay in achieving practical completion, and a principal‟s claim for the costs of having work carried out under the contract, which the contractor disagrees is included in the contract, by another contractor. davenport (2007: 15) explains that his proposed dual process of adjudication „would be basically the same as now exists but with slightly different rules for dealing with progress claims and ex-contractual claims‟. this would, thus, allow an adjudication process which is faster-track, cheaper and significantly more restrictive on the investigative powers of the adjudicator for purely progress payment claims, and a quasi-judicial adjudication process for adjudication of excontractual claims where, as davenport (2007: 19) points out, an adjudicator „is more likely to call for further submissions or hold a conference or make an inspection.‟. notably, however, davenport has proposed some significant procedural modifications with respect to the operation of the „traditional‟, west coast, process for adjudication of excontractual claims in that:  a statutory system, similar to the current statutory payment system under the east coast model, is prescribed for the serving of ex-contractual claims by claimants and defences by respondents prior to the lodging of a „traditional‟ process adjudication application. this statutory system provides that: the claimant of an „ex-contractual‟ claim must endorse its claim as being made under the act; the respondent would have a prescribed period (davenport uses an example of 10 business days in this respect ) to provide a defence; if no defence was served within the prescribed period, a second chance to serve a defence within a further prescribed period would be permitted subsequent to a reminder notice from the claimant; and, failing the serving of the second chance defence, a claimant could initiate an adjudication by making an application to an authorised nominating authority.  it is proposed that respondents to „ex-contractual‟ claims could provide a defence, cross-claim or defence and cross-claim within the prescribed period. further, if the defence includes a cross-claim, the claimant would have a prescribed period in which to lodge a response to the cross claim (to be called a „rejoinder‟). davenport (2007: 18) states that: “this simply mirrors the usual processes of claim, defence, cross claim and rejoinder familiar to arbitrators and courts”. in davenport‟s dual process, a purchaser who had obtained a determination for an „excontractual‟ set off claim under the „traditional‟, west coast, process of adjudication would then be entitled to have that set off made against a progress payment amount being determined under the, east coast, „certification‟ process of adjudication. bailey’s proposal for a cap on claim amounts bailey (2009: 3) advocates a cap on claim amounts under rapid mandatory adjudication schemes for payment, thereby confining the benefits of the „short, sharp interim adjudication procedure‟ to participants in small business. accordingly, bailey (2009: 3) states: if the intended small business focus of the reform had been more narrowly defined in the legislation and the process refined for that sector of the construction industry, then the complexities that pervade the process might not have developed as they have. the outline conceptual framework of bailey‟s proposed scheme essentially involves capping „the value of claims and the amount of main contracts and sub-contracts which are to be australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 53 subject to the process … with limited or scaled or stepped processes defined‟ (bailey 2009: 3). further, bailey (2009: 3) proposes that: the scheme should be limited only to claims for payment for the value of work performed. this necessarily will include work outside the contractual scope (ie variations). time-related claims, other than those for which there is established entitlement under contractual regimes, ought be excluded. thus, larger and more complex disputes arising in the construction industry would not be subject to statutory rapid adjudication, instead being „dealt with under procedures that are developed specifically for them including commercial arbitration‟ (bailey 2009: 3). proposal for a dual process of adjudication based upon size of progress payment claim using davenport‟s concept of a dual process and bailey‟s concept of claim capping, a hybrid adjudication scheme is proposed for consideration as a harmonised, unifying model. the proposed scheme would be a dual process according to size or value of payment claim. it would employ the east coast model process for small progress payment claims falling below a prescribed cap value, which it is suggested should initially be $25,000, 33 and the west coast model process for all payment claims above the cap value. alternatively, the proposed scheme could be a dual process according to a prescribed contract sum (eg, $100,000) with the east coast model process being used for progress payment claims on all construction contracts below the prescribed contract sum, and the west coast model process for those above. payment claims which could be adjudicated under the east coast process would be strictly limited to payment claims for construction work carried out or supply of related goods and services. payment claims which involve disputes over what davenport terms as „excontractual‟ claims would not be permitted to be adjudicated under the capped east coast process, but would be resolved under the west coast process instead. progress payment claims which are greater in amount than the capping value for the east coast process would be adjudicated under the west coast process. additionally, any payment claims, regardless of size, which involved „ex-contractual‟ claims (eg, a delay damages claim within the scope of the contract, or a liquidated damages claim set off against the certified payment amount by the principal or its agent) would be adjudicated under the west coast process. the case for such a dual process is predicated on the notion that a „one-size fits all‟ approach for the construction industry is inappropriate. several distinct differences exist between the higher and lower ends of the hierarchical contractual chain on construction projects with respect to, inter alia: use of balanced standard forms of contract, inclusion of impartial independent certifying mechanisms for progress payment in contracts, imbalance of bargaining power between contractual parties, and commercial vulnerability to cash flow problems of relatively small amounts. it may be argued that these differences justify the use of the more regulatory east coast legislative approach to protect the more vulnerable smaller businesses in the lower tiers of 33 based upon the observations that the proportions of adjudication applications in queensland are far greater for payment claims up to $25,000 than in wa (see table 3 above), and that adjudication fees for payment claims up to $25,000 are significantly lower in queensland than in wa (see table 4 above). australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 54 the hierarchical contractual chain. further, by confining the use of the east coast model to small claims of a simple nature, any potential negative consequences of its shortcomings with respect to procedural justice are minimised. there are several reasons which support the consideration of this alternative dual process scheme:  it would allow both current legislative models which are operating, and have become established, in several australian jurisdictions to be used in a harmonised model without any significant procedural changes to either existing process. this would not only combine the strengths of both models, but may be more conducive to achieving consensus among all the australian jurisdictions as to its adoption as the basis of a unifying model.  it would satisfy the small business focus of parliament in the eastern states by providing a greater level of regulatory protection to more commercially vulnerable smaller contractors for receiving straightforward progress payment in a timely and fair manner.  the right to freedom of contract would be preserved in larger contracts, whilst not depriving larger contractors of the benefits of a still rapid and inexpensive west coast adjudication process for progress payments albeit one to two weeks slower than for smaller contractors under the east coast process.  it would allow adjudications of a „quasi-judicial‟ nature for large and/or complex claims in order to determine the amount which is actually due under the contract. large and/or complex claims would be subject to the relatively higher levels of procedural justice afforded by the west coast process. accordingly, there would be no possibility for a respondent to a large and/or complex claim to have their fundamental right to be heard by the adjudicator denied, and the adjudicator would be able to adopt a more evaluative approach in determining such claims.  there have been significant uptake rates for adjudication in queensland and nsw , particularly for smaller claims. additionally, there is some evidence that adjudication fees for smaller payment claims (less than $25,000) are several hundreds of dollars lower under the east coast process (see section 7.1 above). the proposed dual process of adjudication would retain the east coast process used in queensland and nsw for smaller claims and, therefore, would be able to capitalise on these successful aspects of the east coast process.  there has been a high volume of litigation challenging adjudicators‟ determinations in nsw. most of this litigation has concerned larger claims, and a significant proportion of such actions have been based upon the east coast model‟s statutory payment system not being duly followed in some way. the volume of litigation challenging determinations of adjudicator‟s under the wa legislation has, to date, been relatively small. the proposed dual process of adjudication would use the west coast process for larger claims. additionally, the proposed dual process does not introduce a statutory system for the serving of claims, defences, counter claims and rejoinders as a preliminary to an „ex-contractual‟ claim, which might potentially encourage further litigation for non-compliance with prescribed submissions procedures. this proposed dual process concept could be further developed to allow the claimant of a progress payment claim which is less than cap value to have the option to apply for australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 55 adjudication under the west coast instead of the east coast process if they so choose. 34 there are two principal reasons as to why a claimant might want to do this which are both related to the preservation of the claimant‟s commercial relationship with the respondent: i. if the claimant did not endorse their payment claim as being made under the act, as is a requirement of the east coast process, it would still be able to avail itself of the west coast rapid adjudication process. this would circumvent the issue of contractors potentially opting not to endorse their progress payment claims for fear that such endorsement would negatively affect to some degree the working relationship between themselves and their employer. 35 ii. it would provide access to the west coast process for a claimant who believes that the west coast process, which allows the adjudicator wider procedural flexibility, may likely result in the resolution of the progress payment dispute in a more conciliatory nature than under the east coast process. thus a claimant would be able to make a judgement call as to whether to sacrifice a faster-track and cheaper east coast adjudication process for its small progress claim in order to access the potentially more conciliatory west coast process. this proposed dual process concept may also accommodate payment claims on construction contracts with resident owners of domestic building works („home owners‟) 36 as currently occurs under the west coast model legislation, but not under the east coast model legislation (s 7(2)(b) of the nsw act) with the exception of the tasmanian act. there is a general view that the east coast model in its current form does not provide the greater degree of protection that is required for consumers as opposed to commercial operators (building services authority (qld) 2010: 5). additionally it is recognised by the building services authority (qld) (2010: 5) that the exemption of home owner contracts: appears to be inconsistent with the bcipa [the queensland act] objectives, to provide better outcomes for the industry, particularly since subcontractors and suppliers may make payment claims under bcipa against a head contractor for domestic building work. under the proposed dual process, payment claims on construction contracts with home owners could be made under the west coast adjudication process only. it is submitted that the west coast process is more appropriate for home owners as it not only provides marginally longer timeframes for the serving of the prescribed documentation, but also provides more procedural justice – of which particularly pertinent aspects are the rights for home owners to also apply for adjudication of payment claims, and to have an adjudication response heard even if an earlier response to the payment claim has not been served. conclusion two distinct models of construction industry payment legislation have been enacted in australia. the east coast model provides a highly regulatory process designed, in accordance with parliamentary intent, for the fast resolution of progress payment claims by an adjudicator 34 as suggested by robert fenwick elliott upon review of this paper. 35 in their survey,which sought to assess the performance of the nsw act by surveying the members of two peak trade associations operating in nsw, brand and uher (2010: 17) found that around half of the sampled contractor and subcontractor firms felt that endorsement of payment claims negatively affects to some degree the working relationship between the parties to a payment claim . 36 as suggested by robert fenwick elliott upon review of this paper. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 56 who assesses the value the construction work carried out and related good or services supplied. the west coast model provides a process, based upon primacy of contract, designed for the resolution of payment claim disputes ranging from those which are relatively simple to those which are complex in nature. the west coast model, therefore, anticipates the adjudication of contractual payment claim disputes other than those involving the straightforward valuation of construction work carried out and related good or services supplied. the scope of both the east and west coast models is similarly wide-ranging, covering any contractor or supplier, regardless of size, who has undertaken construction work or supplied related goods and services falling within the definition of the legislation. 37 in the case of the east coast model, this is so despite its significantly limited scope with respect to types payment claims which may be subject to adjudication. the disparity in the east coast model between wide scope of industry participants and narrow scope of payment claim types covered has led to problems materialising in the operation of the east coast model. these problems seem to be particularly related to its use for resolving larger progress payment claims. for example, seemingly contrary to parliamentary intent, the east coast adjudication process has been used to determine delay damages claims by contractors and claims for set offs by principals. from a procedural justice perspective, the east coast adjudication process is inadequate to deal with such damages claims. further, the numerous procedural justice shortcomings of the east coast model make its adjudication process unsuitable for the resolution of large progress payment claims as well as more complex damages claims. it is perhaps unsurprising, therefore, that the east coast adjudication process has generated a large volume of litigation in nsw, initiated by disgruntled respondents seeking to challenge adjudicators‟ determinations with respect to larger progress payment claims. despite its problems, however, the east coast model appears to have been successful in terms of uptake rates in nsw and queensland particularly for smaller claims. when confined to small, straightforward progress payment claims, it may be argued that sacrificing procedural justice may be an acceptable price to pay in order to protect vulnerable small businesses operating in the construction industry. furthermore, whilst both east and west coast processes provide rapid adjudication and low adjudication fees, the east coast process appears to be significantly cheaper in terms of adjudication fees for claims less than $25,000 38 and is generally around 1 to 2 weeks quicker. this may be significant in the context of a small business struggling for cash flow to survive. the strength of the east coast process, therefore, would appear to be in the quick resolution of small claims. its major weakness lies in the lack of procedural justice it affords, rendering it an unsuitable form of dispute resolution for lager and/or complex claims. the shortcomings of the east coast process, however, may be said to be where the strengths of the west coast process lie. in affording greater respect to procedural justice and parties‟ freedom of contract, the west coast model is more suited to producing adjudication outcomes which the disputing parties perceive as accurate and reliable especially where high-value and complex 37 for a detailed analysis of the types of construction work covered by the various acts, see coggins, fenwick elliott and bell (2010). 38 the analysis of data from queensland and wa carried out in section 7.1 above would seem to suggest indicate between $450-$800 cheaper. australasian journal of construction economics and building coggins, j (2011) ‘from disparity to harmonisation of construction industry payment legislation in australia: a proposal for a dual process of adjudication based upon size of progress payment claim’, australasian journal of construction economics and building, 11 (2) 34-59 57 claims are involved; a requirement which the department of services, technology & administration (nsw) (2010: part 1) viewed as essential in adjudication scheme performance. further, it is suggested that adjudication outcomes which are perceived as more accurate and reliable will lead to far less challenges of adjudicators‟ determinations than are currently being seen in the nsw courts. the present disparity which exists in australian construction industry payment legislation may be turned to australia‟s advantage if there can be consensus reached between the various jurisdictions as to how to combine the strengths of the east and west coast models into a single harmonised model. it is suggested that the consideration of a dual process based upon progress payment claim size as advocated in this paper provides, at least, a starting 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(2009) „why national legislation is required for the effective operation of the security of payment scheme‟, 25 building and construction law journal 376 microsoft word july paper 5.doc defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 53 defining an industry: what is the size and scope of the australian building and construction industry? gerard de valence construction economics, faculty of design, architecture and building, university of technology, sydney, australia introduction the traditional structure-conductperformance approach to industry economics originated in the us in the 1930s with the work of mason (1939) and bain (1959). this is now the standard framework for analysing the dynamics of an industry. however, the size and scope of the australian construction industry at the turn of the millennium may be better understood using an alternative model that highlights the diversity of the industry and the range of actors involved. industry analysis has traditionally focused on groups of firms with similar characteristics in their production processes, goods or services produced, and markets served in the wider economy. the distinction has been between firms and industries, and the analysis has emphasised the importance of economies of scale and scope (sutton 1991) or organisational structure (williamson 1979). one major difficulty in the standard structure-conduct-performance approach has been the definition of industries within the theoretical criteria of product homogeneity. further, some analysts see the construction industry as a manufacturing system, similar to the automotive industry. this view underpins the recommendations in the egan report (1998) in the uk, which emphasises lean thinking in construction. this analogy argues the industry in australia has a few very large key players whose task it is to 'assemble' constructed items, complete buildings or transport facilities for example. these key firms play the same role in both 'production' and innovation as the automotive assemblers, except that they do not have a fixed place of assembly. bjornsson (1998) suggests that in the future these large contractors will also resemble the auto assemblers in that they will be much bigger and fewer perhaps ten in the world in twenty years time. these 'assemblers' are in the process from moving from being 'demand-driven' in the sense of dependency on 'hard money' projects and traditional clients, to being demand-inducing, as they actively create opportunities through equity stakes and new forms of project delivery and finance. it should be said that the analogy with car manufacturers is controversial, and at variance to those with traditional views like raftery (1991: 39-42) and hillebrandt (1984). the australian government's construction industry policy document building for growth analysis had the comment "the industry is in the first stage of a global industrial formation that, by 2010 will see it dominated by perhaps 10 large firms" (isr 1999: 45). for a global consolidation on the scale suggested to take place the structure of the industry would have to undergo one of the most dramatic examples of concentration ever. however, the evidence from similar industries with low r&d intensity does not support that outcome (de valence, 2001). clearly, the future structure of the building and construction industry is becoming a point of debate among researchers and analysts. however, before analysing an industry's structure it is necessary to define the industry and identify its size, scope and scale. this establishes the true economic contribution of an industry. the objective of this paper is to review the current data available on industry size and scope and compare differences between the structure-conduct-performance approach and the alternative industry cluster approach. defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 54 the australian journal of construction economics & building industry clusters in the late 1980s one of the emerging new approaches to industry analysis looked at the role of chains, clusters and complexes of firms (porter 1990, marceau 1994). originally attention was drawn to the fashion cluster in northern italy (bie 1991), which links a large number of highly specialised firms in the textiles, clothing, leather and machine tools industries into a cohesive and globally competitive cluster. more recently the multimedia industry has been the subject of study overseas (braczyk et al 1999) and in australia (searle and de valence 2000). the multimedia research has confirmed that, like other industries based on intensive, rapidly changing knowledge, multimedia activities are centred on networks of clients, suppliers, freelancers and mobile skilled labour, most often organised on a project basis. these networks help multimedia firms to respond to complex, dynamic work situations and rapid changes in the external environment (heyderbrand 1999: 67). in particular, multimedia networks are characterised by strong interindustry relationships, particularly between multimedia, computing, and cultural industries. these relations are not mutually exclusive two or more activities can be successfully carried out in the same firm (brail and gertler 1999: 106). despite the industry's relative infancy, available evidence suggests that global alliances and other global networks are already significant. in toronto, 9% of multimedia suppliers and 18% of multimedia customers were found to be located outside canada, with 5% of customers located outside north america (brail and gertler 1999: 111). all these aspects of the multimedia industry can be found in the construction industry. the cluster approach shows the backward and forward linkages between the building and construction industry and the wider economy. it also captures the scale of the industry, as shown in the discussion below. given the complexity of the industry this approach can be more representative of the industry than the traditional industry structure approach. however, because it is so generalised it is also difficult to use to generate statements about the industry and research questions to be investigated. the construction industry the construction industry in australia accounted for just under 7% of gdp and nearly 8% of total employment in 19992000, under the australian bureau of statistics industry classification, shown in appendix 1. the output of the construction industry is composed of three distinct industry sectors. these sectors are engineering construction, nonresidential building, and residential building. they are not closely related, having their own distinguishing characteristics, and the well-known volatility of the industry cannot be equally distributed across them. engineering the engineering construction sector is divided into six major components. road and bridge construction is the largest industry sector. other engineering comprises electrical generation, transmission, water and sewerage, processing plants including oil and gas pipelines, and miscellaneous engineering construction, which includes railways, harbours, recreational facilities and pipelines. nearly 80 per cent of all engineering construction work is for urban infrastructure, the balance carried out for the mining and heavy industries. residential building although the housing construction share of gdp is not large, at up to 5% its volatility has an impact on the wider economy and contributes to cyclical patterns in other industries, such as consumer durables and building materials. residential building activity includes all dwellings. demand factors affecting the residential sector include: growth in household formation numbers and changes in household types, interstate defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 55 mobility and the level of net immigration the national and state level, and the age of the housing stock. more recently the demands of an aging population have led to changes in residential building types and locations, with support requirements like health and community services also affected. non-residential building in non-residential building, private sector activity dominates commercial construction, and includes offices, hotels, factories, shops and other business premises. the office construction area is particularly volatile. other business premises encompasses a wide range of structures including warehouses, terminals, service stations and car parks, telephone exchanges, studios and so on. public sector activity is mainly educational, health and recreational buildings. general economic activity and urban and population growth are the main determinants of demand in this area. table 1. construction activity, chain volume measures: reference year 1998-99, australia, ($billion). period residential building nonresidential building total building construction engineering construction total construction 1986-87 12.6 13.4 26.1 12.5 39.5 1987-88 13.8 15.4 29.2 11.6 41.8 1988-89 17.7 16.1 33.7 11.4 46.2 1989-90 16.9 17.2 34.0 12.7 47.8 1990-91 14.7 15.4 30.0 12.9 43.5 1991-92 14.8 12.0 26.7 12.0 39.1 1992-93 17.3 10.8 28.1 12.4 40.8 1993-94 18.9 10.4 29.5 13.4 43.5 1994-95 19.7 11.3 31.1 13.7 45.7 1995-96 16.3 12.6 28.9 15.0 44.9 1996-97 16.1 13.8 29.9 15.5 46.6 1997-98 19.2 13.9 33.0 17.4 51.6 1998-99 20.8 14.5 35.3 19.2 54.5 1999-00 24.2 14.2 38.4 19.3 57.4 source: abs construction activity: chain volume measures, australia, cat no. 8782.0. industry size there have been four construction industry surveys (cis) done by the australian bureau of statistics (abs). the fourth and most recent was for 1996-97. table 2 shows three cis for 1984-85, 1988-89 and 1996-97, and the distribution of firms across the industry sectors. the doubling in the number of subcontracting firms is the most notable feature. this reflects the trend toward contract employment, which is cheaper than fulltime employees, and is an outcome of low-bid tendering driving prices down across the industry. all four surveys have found the construction industry is overwhelmingly made up of small firms with under 20 employees, which contribute most of the industry's output and account for almost all of the total number of enterprises. table 3 shows the numerical dominance of small firms in the construction industry. businesses with employment of less than five accounted for 94% of all businesses in the industry, and over two-thirds of all employees. in contrast, less than 1% of businesses had employment of 20 or more. businesses with employment of less than five accounted for slightly less defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 56 the australian journal of construction economics & building table 2. private sector construction establishments: number operating during the year (‘000). 1996-97 1988-89 1984-85 total building construction 33.1 19.6 24.5 total non building construction 3.1 3.9 3.4 total general construction 36.3 23.5 27.9 total special trade construction 158.0 74.5 77.0 source: abs 1996-97, 1988-89 and 1984-85 construction industry surveys. table 3. summary of performance by business employment size. selected indicators units employmen t less than 5 employment 5 to 19 employmen t 20 or more all businesse s operating businesses ‘000 182 11.1 1.2 194.3 employment ‘000 332.2 85.9 66.0 484.1 wages and salaries $m 3 221.7 2 309.8 2 648.3 8 179.8 turnover $m 27 951.2 13 713.7 16 234.0 57 898.8 total income $m 28 202.5 13 801.0 16 591.2 58 594.7 total operating expenses $m 24 123.0 13 288.0 15 987.1 53 398.1 operating profit before tax $m 4 066.5 616.4 781.7 5 464.6 total assets $m 11 330.0 3 487.8 10 747.2 25 565.0 total liabilities $m 6 731.7 2 344.8 7 542.6 16 619.1 net worth $m 4 598.3 1 143.0 3 204.6 8 945.9 capital expenditure $m 9 984.9 226.3 1 120.9 11 332.1 industry gross product $m 8 657.2 3 582.2 3 941.9 16 181.2 source: abs. private sector construction industry, 1996-97. cat. no. 8772.0. table 4. percentage by firm size. selected indicators employment less than 5 employment 5 to 19 employment 20 or more all businesses operating businesses 93.67 5.71 0.62 100.00 employment 68.62 17.74 13.63 100.00 wages and salaries 39.39 28.24 32.38 100.00 turnover 48.28 23.69 28.04 100.00 total income 48.13 23.55 28.32 100.00 total operating expenses 45.18 24.88 29.94 100.00 operating profit before tax 74.42 11.28 14.30 100.00 total assets 44.32 13.64 42.04 100.00 total liabilities 40.51 14.11 45.39 100.00 net worth 51.40 12.78 35.82 100.00 capital expenditure 88.11 2.00 9.89 100.00 industry gross product 53.50 22.14 24.36 100.00 source: table 3. defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 57 than half the total income and expenses, whereas businesses with employment of 20 or more accounted for almost one-third of these items. almost three-quarters of construction industry profit before tax came from businesses with employment of less than five. higher profit margins were reported by smaller businesses, so the numerical dominance of businesses with employment less than five drives the industry average above the profit margins reported by businesses with employment of five or more. when the data on performance is converted to percentages (table 4) the importance of the 0.62% of large firms can be appreciated. their 13.6% of employee earn 32.3% of salaries and wages, generate over 14% of profits and nearly 25% of output. aligning the cis data with the industry activity in table 1 requires some balancing factor. the cis gives figures for turnover in 1996-97 of $57 billion (in 1996-97 dollars) and abs construction activity was $47 billion (in 1998-99 dollars). the difference in base year would account for around $4 billion of the difference and the rest can be attributed to sample composition and extent effects. the construction production chain carassus has developed a model of the construction industry cluster using data on the industry in france. he starts "in the field of industrial economics … the concept of a "sector" usually covers companies which produce construction; it deals with neither the set-up nor the design, nor the management of construction operations" (1998: 1). he used the concept of the "production chain" ("filiere de production" in french) to describe the successive stages in a construction operation: set-up, design, implementation, management. this is a "meso-economic" approach (in greek, "meso" means "median"), intermediate between the micro-economic and macroeconomic levels. carassus defines the "economic mesosystem" of construction as the range of relations between interdependent participants working to produce and manage a type of value of use: the services provided by the structures of the building and civil engineering products throughout their life-cycle. in the more developed countries, the central function of the construction mesosystem gradually becomes the strategic stock management of existing structures. by strategic stock management, we mean the decision-making system, based on technico-socio-economic analyses, which manifests itself in maintenance, renovation, transformation, demolition, purchases, sales, and construction of new structures. (carassus 1999: 35) the analysis by carassus is in terms of the ‘production chain’ of structures, or the sequence of operations necessary to create facilities. this chain has three major stages, each one associated with a type of work: scheduling of operations by the clients design of projects by architects site works by the contractors who obtain supplies from manufacturers of materials, components, facilities and equipment this method is very effective in analysing the construction sector in terms of flows of works ordered by clients (the downstream part of the production chain), executed by contractors (at the centre of the production chain) with material manufactures (upstream of the production chain). however, this approach does not take into account the management and maintenance of structures, the service provided by the facilities to users, and the life cycle of facilities (carassus 1999: 39). the methodology can be seen as a change from analysis in terms of a “chain of production of new structures: to an defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 58 the australian journal of construction economics & building approach in terms of “system of participants producing and managing the service provided by constructions throughout their life-cycle. the four types of process are involved in this system are identified as: an on-site continuous management process of structure service which includes management, operation and running maintenance short-lived on site production processes sites for major repairs, improvements, transformation, demolition and construction the industrial process of manufacturing materials, components, facilities and equipment, without site constraints (apart from the specific case of quarries and sand extraction) the sale and purchase of structures during their life-cycle figure 1. three types of production-management processes in the construction sector. source: carassus (1998: 6) in carassus 1999 the analysis is extended and the similarity with the aegis methodology detailed below is apparent. in each case the outcome is a view of building and construction as an interrelated set of firms that design, deliver and maintain the built environment. aegis' map of the b&c cluster this section extends the discussion of the structure of the building and construction industry by using ‘cluster analysis’ and applying it to the building and construction industry cluster (b&c). the ‘cluster analysis’ approach applied to the building and construction the general framework is the strategic management of the stock of existing construction, decision-making system which manifests itself in the maintenance, renovation, transformation, demolition, purchase, sale, and construction of 1 2 3 a process of continuous on-site management: management-operationmaintenance short-lived on-site production processes: construction, renovation, transformation, demolition industrial production processes without site constraints: the manufacture of construction products and equipment defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 59 industry by the australian expert group on industry studies (aegis) includes the industry sectors that provide services before and after the construction and identifies the flow of services between clients and industry participants. the cluster approach focuses on linkages and interdependencies between firms in a network of production. de valence and lauge-kirstensen (1996, see figure 2) and gann and slater (1998) also developed models used to illustrate the range and types of actors, activities and knowledge flows found in project-based, serviceenhanced production. these include the regulatory, institutional and technological structures in a framework for construction industry firms. figure 2. industry flows of inputs and outputs source: de valence and lauge-kirstensen (1996: 82). the aegis classification divides the industries into five product-system segments: on-site services, client services, b&c project firms, building products and supplies, and building fasteners, tools, machinery and equipment manufacturing. each of these is divided into four product/service classes. aegis argues that mapping the b&c product system in this way provides analytical advantages. firstly, it provides a stepping-stone between inputs: factors capital financial institutions funds labour material plant and equipment industry head contractors architects consultants subcontractors employer associations unions clients public private outputs buildings structures asset management facility management real estate agents built environment community professional institutes defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 60 the australian journal of construction economics & building traditional industry statistics based on hierarchical systems of classification and broader conceptual views of industry activity as depicted in clusters, chains and complexes. secondly, it gives a perspective on the interrelations between segments of the industry, a view of the ‘chain’ of production and a framework on which to base a variant of cluster analysis (aegis 1999: 35-36). the b&c cluster broken into five groups of firms is. 1. on-site services: building completion services – including plastering, ceiling, carpentry, tiling, carpeting, painting, decorating, glazing and related construction services; installation trade services – including plumbing, electrical, air conditioning, heating, fire and security systems installation services; site preparation and landscape services; and building structure services – including concreting, bricklaying, roofing and related services. 2. client services: real estate services – including real estate agent services; professional/technical services – including architectural, surveying, consultant engineering and related technical services; residential property services – including residential property operation services; and commercial property services – including commercial property operator and developer services. 3. b&c project firms, divided into four major areas: house-building non-house residential building; non-residential building – including factory, shopping centre and office building – non-building (engineering) construction – including road, bridge and other engineering construction. 4. building products and supplies: building products and supplies wholesaling and retailing; structural products – including such things as fabricated wood and wooden structures, concrete and aluminum products, structural metal, steel fabrications and prefabricated buildings; and b&c related products and supplies – including ply, veneer and wood products, glass, brick and ceramic products, cement, plaster, concrete, paint, plastics, metal piping and sheeting, electric cabling, etc. 5. building fasteners, tools, machinery and equipment: tools and fasteners – including machine tools, hand tools – and fasteners; construction-related machinery and equipment wholesaling, hiring and leasing; and b&c related machinery and equipment – including such things as construction equipment, lifting and handling equipment, and commercial heating and cooling equipment. when the data in table 3 is compared to that in tables 5 and 6 (from aegis 1999), the size of the industry virtually doubles, both in total income (and therefore share of gdp) and employment. the data is grouped by the product-system sectors. the industry income in table 3, of $58.6 billion, compares with total income of $110.4 billion in table 5, so the effect of inclusion of materials manufacturers and services is clearly seen. a similar result for total employment is found, increasing from 484,100 to 682,000. table 5. total b&c income by industry segment 1995-96 ($ million). defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 61 industry segment total industry income ($m) input-output discounted ($m) on-site services (trade services) 21,898 21,898 client services (engineering, technical, etc.) 8,607 8,607 building & construction project firms 34,250 34,250 materials and products supplies 41,352 18,608 machinery and equipment supplies 4,312 2,803 total 110,419 86,166 data sources: abs private sector construction industry 1996-97, cat no 8771.0. (preliminary). abs real estate agents industry: australia, 1995-96, cat no 8663.0. abs selected technical services: australia, 1992-93. abs consultant engineering services: australia, 1995-96, cat no 8693.0. abs business operations and industry performance: australia, 1995-96, cat no 8140.0. abs manufacturing industry: australia, 1995-96, cat no 8221.0. notes: 1. trade services and construction employment estimated for 1995-96 based on proportions of ‘construction’ in 1996-97. 2. architectural & surveying services income for 1995-96 estimated based on proportions to engineering services 1992-93. 3. excludes wholesale, retail, hiring and leasing. 4. excludes residential or commercial property operators and developers from ‘client services’ due to lack of data. 5. based on total income by industry, not allowing for input-output proportions. source: aegis (1999: 57). table 6. employment in the b&c product system by segment 1995-96. industry segment total employed on-site services (trade services) 220,000 client services (engineering, technical, etc.) 102,000 building & construction 108,000 materials and products supplies 222,000 machinery and equipment supplies 30,000 total 682,000,000 data sources: abs private sector construction industry 1996-97, cat no 8771.0. (preliminary). abs real estate agents industry: australia, 1995-96, cat no 8663.0. abs selected technical services: australia, 1992-93. abs consultant engineering services: australia, 1995-96, cat no 8693.0. abs business operations and industry performance: australia, 1995-96, cat no 8140.0. abs manufacturing industry: australia, 1995-96, cat no 8221.0. notes: 1. trade services and construction employment estimated for 1995-96 set equal 1996-97. 2. architectural & surveying services employment for 1995-96 estimated based on proportions to engineering services 1992-93. 3. excludes wholesale, retail, hiring and leasing. 4. excludes residential or commercial property operators and developers due to lack of data. 5. based on total industry, not allowing for input-output proportions. sources: aegis (1999: 58). policy implications the scale of the difference between the two approaches to defining the size and scope of the construction industry has significant implications for industry policy. there are two policy areas that are affected: competition policy and industry development. the key determinant of the degree of competition in any market is the number of firms that are supplying products and the number of buyers that are the purchasers defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 62 the australian journal of construction economics & building of that output. where there are few firms, competition tends to be less intense and price is higher than in markets where there are many firms and competition is severe. the building and construction market is characterised by a wide range of different products, and some of these products are bundled with services such as installation and maintenance. this makes it a market that often does not fit easily into the framework of the competition authority, in australia the australian consumer and competition commission (accc), and makes the fit with the theoretical structure given to different types of markets also problematic. in theory, where industrial economics specifies product and market characteristics in order to identify the form of market structure, the requirement is typically for either identical products, or for clearly identifiable markets for those products. in industry economics, industries are usually seen in terms of a number of firms which advance along a single technological trajectory, and these firms compete in enhancing the quality of their individual versions of the same basic product (homogeneity of product). in this case, firms make decisions on how much r&d to finance, and apply that r&d to product development. this view fits some industries well, however many industries encompass several groups of products rather than a large number of versions of a single product. the products may be close substitutes in consumption, but embody different technologies, so r&d projects that enhance products in one group may generate spillovers for products in other groups (de valence 2001). such complex overlapping patterns of substitutability have bedeviled industry economics since chamberlin (1932) first developed the definition of an industry as limited by the chain of substitution, where industries were defined by their product. if industries are broken into separate subindustries in order to address this problem, the choice in r&d spending can be between any number of technologies for the development of different groups of products. the products may be close or distant substitutes for products of firms on other technological trajectories. both of these linkages operate on the demand side. when the linkages are strong they reflect the presence of scope economies in r&d; where the linkages are weak these scope economies will be absent and there will be a low degree of substitution across sub-markets. applying this discussion of sub-markets to the building and construction industry raises a number of issues. the first is the general lack of specialisation of firms in the construction industry in terms of their product. the answer to the question "what does the industry produce?" varies from providing services (management, coordination, finance) to producing products (buildings and structures). the former argues that the main task of the industry is one of coordinating site processes while the latter is more concerned with the building itself. secondly, the building and construction industry is typically broken into the engineering, non-residential, and residential building sectors. although some firms cross all of these areas, typically firms work in either the residential or the non-residential sectors. many of the larger firms cover both engineering and non-residential building in their activities. within the non-residential building sector, there are ten or twelve different sub-markets, divided into offices, retail, factories, health, schools and so on. some firms specialize in building particular types of buildings, for example in australia grocon specialises in high-rise office buildings and westfield specialises in shopping centres. however, more commonly a building contractor will apply their management skills to a range of building types, and not limit themselves to specific sub-markets. in this case, for the construction industry, sub-markets are difficult to identify because firms can be highly specialized in one area, or they can be highly generalized and put up a wide range of buildings and structures. in regards to industry development and policy, the 1990s were a decade of defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 63 development and refinement of construction industry policy in australia, with a range of state and commonwealth agencies involved. the industry reform strategy has focused on the lead role of large public sector clients, the introduction of performance standards, rationalisation of contractual relationships, and more effective building management practices. the new south wales (nsw) government established a building industry royal commission (rcbi), which published in 1992 a 10 volume report, implemented by the nsw construction policy steering committee (cpsc), which was made responsible for the development of building and contractual policies and practices for nsw agencies. at the same time a commonwealth government agency, the construction industry development agency (cida), was working with industry and publishing reports on issues identified in the final report. cida's main policy initiatives were pre-qualification criteria, codes of conduct and tendering, and the development of best practice and continuous improvement tools (de valence 1997). in 1997 the australian procurement and construction council (apcc) was established as the national policy advisor on procurement and construction and the peak industry council for the commonwealth, state and territory governments. in 1997, the apcc released building a better construction industry in australia which contained fifteen recommendations to improve industry performance. this was followed by the launch of the building for growth policy and agenda (isr 1999) by the department of industry, science and resources. despite these efforts to promote better performance by the australian construction industry, the industry's performance measured by productivity growth, value of services exported, skill development, innovation and r&d, use of information technology and supply chain integration has be mixed, at best (isr 1999). conclusion this paper has presented data from two different perspectives on the size and scope of the australian construction industry. the first is in the traditional structure-conduct-performance approach to analysing industry structure. the industry activity data from the abs and the construction industry survey data is in this form. the paper then used an extended framework to the construction industry with a "complexes" or "cluster" approach that includes suppliers and manufacturers. this was applied to the australian industry by aegis, and that study produced data on the industry that extended the scale of the industry, doubling the share of gdp and employment. in conclusion, it appears that defining the size and scope of the construction industry depends on the definition of industry products or markets adopted and the sectors of the industry that are to be included. the importance of this finding has implications in two key policy areas. firstly, in competition policy administered by the australian competition and consumer commission, and counterparts overseas, determinations of anticompetitive behavior are based on the definition of ‘market’ and ‘industry’ used. from the data in this paper it is clear that the definition of the industry is far from being a settled issue. both narrow (sector based) and broad (cluster based) definitions are appropriate in certain circumstances. for example, some building materials are widely used (concrete, plasterboard) while others are not (scaffolding, lifts). some services are common (surveying), other are specialised (design, cost and engineering consultants). therefore, the appropriate definition of the ‘industry’ for competition policy will depend on the specific ‘market’ under consideration. secondly, the building and construction industry can be depicted in a variety of ways, but a model showing how the built environment is created through the project initiation, design and construction process is the most representative of the whole industry. the number and range of defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence page 64 the australian journal of construction economics & building participants in the creation and maintenance of the built environment can be seen in this view. from the suppliers to the end users, the number of stakeholders is extraordinarily large. the complexity and number of activities involved in the b&c has, to date, prevented a coherent view of the industry developing. this has, in turn, made efforts to improve the performance of the industry largely ineffectual. despite repeated efforts by governments, both in australia and elsewhere, the performance of the industry, using measurements such as the rate of productivity growth, levels of research and innovation, training and process improvement, is often seen as poor. an important part of the explanation for the failure of industry policy in the past is the misunderstood extent of the industry, due to the failure to adequately determine the size and scope of the building and construction industry, and the implications of that for policy initiatives. references abs (1996-97, 1988-89, 1984-85). construction industry surveys. australian bureau of statistics, cat. no. 8772.0. aegis, (1999). mapping the building and construction product system in australia. australian expert group on industry studies, department of industry, science and resources, canberra. apcc, (1997). building a better construction industry in australia, australian procurement procurement and construction council, canberra. bain, j. s. (1959). industrial organisation. wiley, new york. bureau of industry economics (1991). networks: a third form of organization. discussion paper no 14, bureau of industry economics, agps, canberra. bjornsson, h. (1998). “it revolutionises construction.” building innovation and construction technology 2. braczyk, h. j., fuchs, g. and wolf, h. g. (1999). multimedia and regional economic restructuring. routledge, london. brail, s. g. and gertler, m. s. (1999). "the digital regional economy: emergence and evolution of toronto's multimedia cluster." in multimedia and regional economic restructuring (edited by braczyk, h. j., fuchs, g. and wolf, h. g.), pp. 97-130. routledge, london. carassus, j. (1998). “production and management in construction. an economic approach.” les cahiers du cstb, centre scientifique et technique du batiment. livraison 395, paris. december. carassus, j. (1999). “construction system: from a flow analysis to a stock approach.” in macroeconomic issues, models and methodologies for the construction sector workshop, cib publication 240 (edited by ruddock, l.), pp. 17-29. capetown. chamberlin, e. h., (1932). the theory of monopolistic competition, 1st ed cambridge, massachusetts, harvard university press, massachusetts. de valence, g., (2001). trends in procurement and implications for innovation and competitiveness of australian building and construction, cib w65 world building congress, wellington n.z., cib publication. de valence, g. and searle, g., (2000). "the multimedia industry in nsw". form/work, vol. 1, no. 5, pp. 46-60. de valence, g. (1997). construction industry reform strategies in australia: cida and the cpsc. first international conference on construction industry development, national university of singapore, vol. 1, pp. 124-31. de valence, g. and lauge-kirstensen, r. (1996). “the structure of the australian building industry.” form/work, no. 2, pp. 7789. defining an industry: what is the size and scope of the australian building and construction industry? by gerard de valence the australian journal of construction economics & building page 65 egan report (1998). rethinking construction. department of environment, transport and the regions, london. gann, d. m. and slater, a. (1998). “learning and innovation management in project-based firms”. paper for the second international conference on technology policy and innovation. lisbon, august. heyderbrand, w. (1999). "multimedia networks, globalization and strategies of innovation: the case of silicon alley." in multimedia and regional economic restructuring (edited by braczyk, h. j., fuchs, g. and wolf, h. g.), pp. 49-80. routledge, london. hillebrandt, p. (1984). economic theory in the construction industry. macmillan, london. isr (1999). building for growth: an analysis of the australian building and construction industries. department of industry, science and resources, canberra. marceau, j. (1994). “chains, cluster and complexes: three approaches to innovation with a public policy perspective.” in the handbook of industrial innovation (edited by dodgson, m. and rothwell, r.), pp. 1-12. edward elgar, cheltenham. mason, e. s. (1939). “price and production policies of large-scale enterprise.” american economic review, 29, march, 61-74. porter, m. e. (1990). the competitive advantage of nations. free press, new york. raftery, j. (1991). principles of building economics. bsp professional books, oxford. sutton, j. (1999). technology and market structure: theory and history. mit press, cambridge, mass. sutton, j. (1991). sunk costs and market structure: price competition, advertising, and the evolution of concentration. mit press, cambridge, mass. williamson, o. e. (1979). “transaction– cost economics: the governance of contractual relations." journal of law and economics, 22, 233-61. 502 bad gateway 502 bad gateway nginx 502 bad gateway 502 bad gateway nginx 502 bad gateway 502 bad gateway nginx 502 bad gateway 502 bad gateway nginx microsoft word ajceb vol.2 no.1 compiled sized.doc the australian journal of construction economics and building vol.2 no.1 i editorial adlai stephenson was fond of saying that “an editor is someone who separates the wheat from the chaff and then prints the chaff.” while this was originally aimed at newspaper editors, it is sometimes extended to include editors at large. we have gone to great lengths to avoid the possibility that it will include us as well, by securing the services of an editorial board comprising some of the leading academics of today and tomorrow, an international panel representing nine different countries and the major branches of our discipline. together with the staff of uts they have reviewed every paper offered to us, a large number of contributions on a wide range of subjects. they have recommended the best and suggested ways in which they could be further improved. like the editorial board, the contributors represent the truly international nature of our discipline and the contributions cover an even wider range of countries and topics than it has been possible to include in this issue. a journal can probably survive well without editors and referees, but not without good authors, and we have been lucky in terms of both quality and diversity of interests. we hope that we will continue to enjoy their support and that their example will inspire others to share their research with us. we trust that you will find the papers selected for inclusion in this issue of interest, and we think they make, collectively, a worthy addition to the body of knowledge related to construction economics and building; in other words, pure ‘wheat’ with no ‘chaff’. the topic areas covered in the selected papers are varied, and range from a discussion of the experiences of a group of academics using a problem-based learning approach to teaching construction to some detailed statistical analysis and modelling of the impact of contractor performance on levels of client satisfaction. the end result is a collection of papers that address a number of fundamental concerns that are influencing many aspects of our work in the realisation of construction projects worldwide in the early part of the new millennium including health and safety (a prime concern in the recent uk report, accelerating change), expansion into globalised markets, the bundling of goods and services in the construction industry, the balancing of work and family, and some more sternly practical considerations such as the use of capital budgeting techniques and the criteria used in selecting project procurement systems. our thanks must go to a number of people: the editorial board plus the other referees (all on the staff at uts) who donated their time and expertise, the authors who accepted our decisions and suggestions with good grace, and sally beech, who has done a marvellous job in putting the final journal together. we look forward to our readers’ response to this issue and to completing our commission by producing, in due course, the second issue for 2002. goran runeson rick best july 2001 editorial assoc. pro f. peter stewarl head, deparlment of building and construction economics rmit university welcome to the first issue of the australian journal of construction economics and building for 2003. it's encouraging to see the quality of papers submitted . i believe this is testimonial to the willingness and enthusiasm of our members to undertake and share research that makes value contributions to the development and enhancement of the industry. this edition holds a series of papers on topics ranging from procurement methods to education. the first paper sees jackson examining the need to apply cost control techniques for capital works projects , finding that budget performance relies on the implementation of formal cost control processes. griffith , knight and king then examine the benefits of novating design and build projects. this approach has grown in popularity, however, they find the process can be disadvantageous for construction contractors. rameezdeen and gunarathna then explore the development and nature of organisational culture in design and construction groups, raising a number of interesting issues and finding significant cultural differences between the two groups. in the following paper, haupt examines differences in student experience and proposes a number of approaches that can improve this experience . while the data is drawn from experiences in south africa , he provides a discussion on work-based learning that will be of particular interest to construction professionals in australia. the final paper, presented by lam , chan and chan , discusses the advantages of the design and build procurement system when used in the hong kong public sector. our thanks go to all members of the editorial board who provided their valuable time and expertise in reviewing the submissions and to our contributors. i'd also like to personally thank the production staff from rmit. i hope that you find this edition interesting and are encouraged to share your research and knowledge in future editions of the journal. ~ assoc. prof. peter stewart july 2003 the australian jou rnal of construction economics and building i vol 3 , no 1i the australian journal of construction economics and building i vol 3 , no 1 i information feedback and learning in construction bidding information feedback and learning in construction bidding bee lan oo, (university of sydney,australia) abdul rashid abdul-aziz and yoke mui lim, (universiti sains, malaysia) abstract information feedback in recurrent construction bidding is an important variable in optimal procurement design. contractors tend to optimize their bids in recurrent bidding with positive reviews of historic bids. our experiment examines the effects of no and partial information feedback on the bidding trends of (inexperienced) student bidders’, and the extent to which their bidding tends to agree with the behavioural patterns proposed by learning theory. the results show that the variations in bids over time for both information feedback levels are statistically significant. although the bidders with partial bidding feedback are more likely to vary their bids as indicated by learning theory, their bids are less competitive than those with no bidding feedback information. construction clients would need to consider the information feedback in their procurement of construction services to achieve efficiency in construction bidding. keywords: bidding, experiment, feedback, learning introduction generally, construction procurement practices are a matter of choice for both public and private sector clients. one particular procurement policy that may affect competition in descending first-price sealed-bid construction bidding (i.e. lowest bidder wins at the lowest price) is the availability of information about bids submitted in preceding bidding competitions. although the level of feedback information on historic bids varies across clients, in many cases, clients do not provide feedback information or provide insufficient feedback to contractors (drew and fellows 1996). ockenfels and selten (2005) claim that information feedback in repeated auctions is an important design variable in optimal procurement design, since it can substantially affect outcomes, even when the feedback has no strategic information value. at worst, irrelevant bidding feedback information can be ignored by the bidders. it follows that information never has a negative value to the decision-maker (milgrom and weber 1982). there is a large number of studies in the conventional economics literature that have used experiments to explore the effects of information feedback in sealed-bid auctions. they provide a substantial amount of evidence that varying information feedback affect bidders’ competitiveness to different degrees in sealed-bid auctions, thereby affecting the revenues of those accepting bids to buy or sell (e.g. issac and walker 1985; dufwenberg and gneezy 2002; engelbrecht-wiggans and katok 2008). in the context of construction auctions, only recently soo and oo (2010) examined the effects of two information feedback conditions (full and partial) on student (inexperienced) bidders’ bidding behaviour in an experiment. over the eight bidding rounds in their experiment, they found that the variations in bids over time for full information feedback are statistically significant, but not for bids from bidders with partial bidding feedback. also, bidders with full bidding feedback are more competitive than those with partial bidding feedback. if such evidence is found to be robust, it has important policy implications for construction clients’ procurement practices. however, the state of knowledge in this area remains woefully inadequate, and more research is needed. australasian journal of construction economics and building oo,b l et al. (2011) ‘information feedback and learning in construction bidding’, australasian journal of construction economics and building, 11 (3) 34-44 35 in this paper, we investigate the effects of no and partial information feedback on construction bidding. our study overlaps with soo and oo (2010) on the partial information treatment, and the results should be viewed as complementary. the experiment of the present paper is analogous to that of soo and oo, with the following differences. first, the reported experiment was extended to ten rounds rather than eight and therefore provides additional insight into learning in recurrent bidding. second, there were only four rather than five bidders. in addition, the investigation of learning effects in the paper proceeds along a different dimension. to theoretically explain the observations, it examines the extent to which the subjects’ bidding trends agree with the behavioural patterns proposed by learning direction theory in selten and stoecker (1986) and selten and buchta (1999). information feedback conditions the information feedback adopted by construction clients in sealed bid auctions can be broadly classified into full, limited and no information. in the full information feedback condition, bidders were informed at the end of each auction about all bids and the identity of the bidder making each bid. in the partial information feedback condition, bidders were provided only with the winning bid and the identity of the winning bidder at the end of each auction. these two information feedback conditions are more common among public sector clients that must maintain public accountability. for example, while the government in singapore adopts full information feedback in their public procurement (see www.gebiz.gov.sg), many government agencies opt for partial information feedback only (e.g. public agencies in hong kong, malaysia, and australia). no information feedback, on the other hand, is prevalent in private sector procurement of construction services. the high degree of post-bid negotiation in private sector procurement may explain the clients’ unwillingness to provide feedback information to bidders. nonetheless, drew and fellows (1996) detected that contractors in their survey obtained historic bidding data from a variety of sources, including: competitors, subcontractors, friendly acquaintances, suppliers and newspaper. although the above information feedback conditions have been found to elicit behavioural effects among bidders, the experimental findings in the economics literature seem to be mixed. it is also noted that the experiments on sealed bid auctions were designed in different settings, namely predominantly ascending first-price sealed-bid auction (i.e. highest bidder wins at the highest price) as compared to this experiment with descending first-price sealedbid auction (i.e. lowest bidder wins at the lowest price). for example, the classic paper by isaac and walker (1985) found that the bid prices in partial feedback condition are higher than those generated in full feedback condition in ascending sealed bid auctions with four bidders, thereby raising the revenues for those agents accepting bids or accepting offers. more recently, neugebauer and perote (2008) examine the order effect of feedback information in bidding behaviour. they ran the experiment in both orders: no-to-partial information order and the reverse, partial-to-no information order. their findings suggest significant order effect and the feedback information on winning bids triggers an immediate response in bidding behaviour, leading to higher overall bid prices. dufwenberg and gneezy (2002), in a descending sealed-bid auction, compare three levels of information feedback and conclude that full information feedback leads to higher bid prices compared to partial and no information feedback. other studies that provide overviews of experimental studies on the effects of feedback information include ockenfels and selten (2005), and neugebauer and selten (2006). learning in construction bidding according to drew and fellows (1996), contractors use feedback on historic bids for four different purposes: (i) for deciding on whether or not to bid for future projects, (ii) for determining mark-up for future projects, (iii) for analysing their bidding performance; and (iv) for analysing bidding performance of their competitors. in competitor analysis, information on http://www.gebiz.gov.sg/ australasian journal of construction economics and building oo,b l et al. (2011) ‘information feedback and learning in construction bidding’, australasian journal of construction economics and building, 11 (3) 34-44 36 historic bids could be used to estimate the probable range of competitors’ bids, and to differentiate the less serious competitors from the more serious, thus allowing a contractor concerned with bidding strategies to target key competitors (oo et al. 2010). fu et al. (2002) suggest that bidders tend to optimize their bids in recurrent construction bidding process with positive reviews of previous bidding results, suggesting feedback plays a key role within the experiential learning process in bidding (i.e. learning from experience, see kolb (1984)). they found that experienced contractors who bid more frequently submitted more competitive bids than contractors who bid only occasionally. a conceptual framework of learning in recurrent construction bidding was proposed in fu et al. (2004) in which a contracting firm is seen as an interpretation system. the learning process activates the interpretation process that transforms a flow of data (i.e. previous bidding results and data derived from completed and ongoing projects) into information, and that interpreted information is incorporated into next bidding decision to enhance competitiveness. in their examination of a bidding dataset covering six years, there is evidence of behavioural regularity among experienced contractors when an optimal bidding strategy has been reached in what they refer to as steady-state learning phase in recurrent construction bidding. however, their analysis only partially supports the existence of rapid learning during the start-up phase among inexperienced contractors. in an attempt to link observed sensitivity of bids to information feedback, a learning direction theory in repeated first-price sealed-bid auction has been proposed by selten and stoecker (1986) and selten and buchta (1999). learning direction theory is a qualitative behavioural theory about learning in repetitive decision tasks. as an illustration of the theory, selten and buchta (1999) used an example of a marksman who tries to hit a trunk. if the arrow misses the trunk to one side the marksman shifts the bow in the direction of the other side when he gives it another try. the behaviour of the marksman in the example is based on a qualitative causal relationship: if he misses to the right, for instance, then he tends to aim more to the left. this line of reasoning links to ex-post rationality, one looks at what could have been better last time and makes qualitative adjustment (i.e. the direction of the change rather than its size) in this direction, in which the right kind of feedback plays a key role therein. this theory has been supported by the data of diverse experiments (for a review, see selten 2004). in neugebauer and selten’s (2006) experiment, for example, 92% of their experiment subjects conformed to the behavioural patterns proposed by learning direction theory. it is noted that a possible quantification of learning direction theory using impulse balance theory to account for different information feedback conditions has also been proposed in selten et al. (2005) and neugebauer and selten (2006). in principle, the impulse balance theory weighs the foregone payoff upon losing against the foregone payoff upon winning, in which the impulse balance point is the bid where the probability of weighted foregone payoffs from losing and winning are equal. however, only the idea of learning direction theory is applicable to the experiment of the present paper. we examine the extent to which the subjects’ bidding trends agree with the behavioural patterns proposed by the theory in the experiment. experimental design the experiment was conducted at the university sains malaysia between august and november 2010. the design used between-subjects variation and involved information feedback as the treatment variable. in total, all eighteen final year students in the quantity surveying degree participated in the experiment. the use of student subjects is appropriate in an experiment for which the level of experience is not a moderator variable (i.e. the level of experience is controlled inexperienced bidders). the student subjects were randomly assigned to one of two treatments with ten bidding rounds (one round per week) per treatment. each of the two primary groups were further split into four subgroups (two to three students in each subgroup) to emulate a bidding competition of four competing bidders. in treatment p (partial information feedback), subjects were provided the winning bid and the identity of the winning bidder in the preceding round at the beginning of each bidding round. australasian journal of construction economics and building oo,b l et al. (2011) ‘information feedback and learning in construction bidding’, australasian journal of construction economics and building, 11 (3) 34-44 37 in treatment n (no information feedback), subjects received no information about previous bids (i.e. winning and losing bids). in weekly meetings (between 30 – 60 minutes), the groups were given a list of six hypothetical projects and the subjects were required to decide which project to bid for, and the bid price if deciding to bid. the general instruction to the subjects was that their ultimate aim was to survive and prosper in a competition where the lowest bidder wins the job, but how this can be achieved was left to them. this reflects the strategic nature of the construction pricing problem. the sixty hypothetical projects were conventional buildings, such as schools and institutional buildings that involve conventional designs, and do not require any unusual construction technologies. this was done to control the effect of project type on bidders’ bidding decisions. apart from the project information (location, duration, client and contract type), the subjects were also given an unbiased cost estimate for each hypothetical project, which is the net project construction cost that includes site overheads and project preliminaries (i.e., total of direct cost estimate + site overheads). here, identical hypothetical projects were given to both treatment p and n groups to enable direct comparisons. in an attempt to make the experiment more realistic and to maintain the subjects’ interests over ten rounds, it was conducted in an environment in which experiences (learning) could be gained and bankruptcy could occur. each subject was given a start-up capital of rm 400,000 1 to sustain the operating expenses (capital charges, general overheads, etc.) estimated at rm 40,000 per bidding round, and profit/loss was generated for each hypothetical project they won in the experiment. the profit/loss was determined by deducting a randomly assigned final cost (ranging from 90% to 110% of unbiased cost estimate) from the winning bid. in this way, subject whose losses exhausted their start-up capital and profit gained from projects would be declared bankrupt and no longer allowed to bid. similarly, failure to win job to pay for operating expenses (fixed costs such as capital charges, general overheads, etc.) would eventually force the group out of the ‘market’a reality in the ‘real’ construction industry. also, the subjects have limited working capacity and would have incurred a cost penalty (for the added costs of securing additional resources) if they had to operate beyond their optimal capacity (maximum five projects on hand at a time). after each round, subjects in both treatments were informed privately of their capacity utilization and the profit/loss generated from the projects they won in previous rounds. the subject that generated the biggest profit in the respective treatment at the end of the experiment was declared the winner and received a mystery prize (i.e., a prescribed textbook for their course). although the practicality of an experimental approach in construction bidding research has been demonstrated in previous studies (e.g. dyer et al. 1989; drew and skitmore 2006, oo et al. 2007, 2008), the quality of experimental data is obviously related to subjects’ seriousness when bidding in the experiment. therefore, for every project for which the subjects decided to bid, they were asked to indicate the estimated chance of winning with their bid. this provided a means for gauging their seriousness using a correlation test. in addition, after each round, the subjects were asked to indicate how they used the feedback in formulating their bidding strategies. at the end of the experiment, the following questions were also asked:  how did you learn and improve your bidding performance?  how long did it take to learn about the bidding trends of your competitors? 1 myr 1 = aud 0.355 or eur 0.248 at the time of the experiment. myr 400 000 is approximately aud 140 000 australasian journal of construction economics and building oo,b l et al. (2011) ‘information feedback and learning in construction bidding’, australasian journal of construction economics and building, 11 (3) 34-44 38 experimental results the unbiased cost estimate provides a common baseline from which to measure the subjects’ competitiveness and for comparing bids between two treatment groups. correspondingly, the two measures of competitiveness between bids adopted in the analysis are given below: bcp = 100 (xi – x)/ x (eq. 1) where bcp is the bid competitiveness percentage, xi is the i th subject’s bid and x is the value of lowest (winning) bid entered for a project. lower bcp indicates greater competitiveness and vice versa, with minimum and maximum competitiveness being constrained between infinity and zero, respectively. mucr = xi / x (eq. 2) where mucr is the mark-up competitiveness ratio, xi is the i th subject’s bid and x is the unbiased cost estimate for a project. a mucr of 1 indicates that a bid is at the unbiased cost estimate (i.e., zero mark-up), and below 1 indicates a bidder has submitted a bid lower than the unbiased cost estimate that leads to a lower bid. lower mucr values indicate greater competitiveness since the lowest bidder wins at the lowest bid price. consistency in bidding can be gauged from the resultant standard deviation. subject id no. of bidding attempts no. of winning bids average markup % average bcp s.d. of bcp bidding success rate (%) market share (%) profit/loss ($) partial information feedback group (treatment p) a1 60 28 7.29 3.33 5.96 46.67 43.73 2,647,900.99 a2 58 3 11.34 7.69 7.28 5.17 5.53 1,592,900.00 a3 47 13 7.51 4.40 3.58 27.66 22.57 3,299,650.00 a4 46 16 4.49 1.84 2.47 34.78 28.18 3,425,394.00 no information feedback group (treatment n) b1 38 22 4.22 1.36 2.97 57.89 40.45 2,739,350.00 b2 36 21 4.68 1.83 3.30 58.33 33.40 2,790,550.00 b3 49 6 5.72 2.52 1.81 12.24 8.83 808,450.00 b4 60 11 4.93 1.71 1.38 18.33 17.32 2,066,700.00 table 1 the breakdown of bid data according to experimental treatment table 1 shows the breakdown of the bidding data from both treatment groups. a total of 211 and 183 bids were obtained from treatments p (subjects a1 to a4) and n (subjects b1 to b4), respectively. the range of average mark-up % applied to the unbiased cost estimate varied between 4.49 and 11.34 for treatment p, while a lower range between 4.22 and 5.72 was recorded in treatment n. a further examination of the dataset revealed the presence of three outliers (i.e. bids that are 25% above the winning bid) in treatment p, which may explain its variations in average mark-up %. these outliers were removed in subsequent statistical tests. the bidding performance of individual subjects is further examined in terms of number of winning bids, average mark-up %, average bcp, bidding success rate, market share and profit/loss. it is interesting to note that the winners (i.e. subjects a4 and b2) recorded the lowest number of bidding attempts in their respective treatment group, suggesting they were selective in their bid/no-bid decision. also, they are very close to each australasian journal of construction economics and building oo,b l et al. (2011) ‘information feedback and learning in construction bidding’, australasian journal of construction economics and building, 11 (3) 34-44 39 other in terms of their average mark-up% (4.49% and 4.68%) and average bcp (1.84% and 1.83%), even with different treatments. seriousness of bidding we begin the statistical analysis of the bidding dataset with a test on the subjects’ seriousness of bidding. notwithstanding the experimental treatment, if a subject has submitted a serious bid (i.e. with low mark-up %), it follows that the corresponding estimated chance of winning should be high and vice versa. the pearson correlation coefficient between the subjects’ mark-up % and their estimated chances of winning has the expected negative sign, r = 0.072, significant at p < 0.10 level. this would indicate that the subjects had bid seriously in the experiment. however, the correlation is rather weak. a further examination on the dataset shows that the corresponding correlations are -0.164 (p < 0.05) and 0.032 (p > 0.05) for the bids from round 1 to 5 and 6 to 10. although the latter is not statistically significant, the presence of high bids which were associated with high estimate for chances of winning at the later stage of the experiment could possibly due to the fact that, as the experiment proceeded, the relatively experienced subjects were more confident in their ability to win bids. first bids it is especially interesting to examine the subjects’ first bids because they were submitted before the subjects were exposed to different experimental treatments. in addition, no experience could be gained at this first bidding round. using the 36 bids obtained in first bidding round, a mann-whitney u test was performed to test the difference in bidding competitiveness in terms of mucr between the two treatment groups. the results show that the first bids from the two treatment groups do not differ significantly (u = 137.5; z = -0.775; p > 0.05). this means that, in round 1, different experimental treatments in different groups do not influence the subjects’ bidding behaviour. between treatments comparison when comparing the development of the subjects’ bids in later periods, the means of mucr for the p and n treatment groups are 1.0732 and 1.0495, respectively. a mann-whitney u test shows that the difference is statistically significant (u = 13142.00; z = -5.282; p < 0.01). this suggests that the bids from partial information feedback group are less competitive on average with a higher mean mucr compared to those in the no feedback group. in addition, the standard deviation for the partial information feedback group is higher (i.e. 0.0494 as compared to 0.0321 in treatment n), indicating a lower degree of consistency in their bidding attempts. the higher average bids with lower consistency in the partial information feedback group is consistent with the subjects using the winning bid as a bench mark in their decision making as if it was the market price, in their attempts to maximize their profits. to examine the bidding trends in p and n treatments, figures 1(a) and 1 (b) plot the corresponding mucr over the rounds of the experiment. lowess curves were fitted to the scatter plots to allow for bidding trends to be observed from the dataset. it can be seen that the mark-up for treatment p is continually decreasing over the ten bidding rounds, while it is rather flat from round 3 onwards in treatment n. these decreasing trends in mucr provide a strong indication of continuous learning leading to more competitive bids generally over time. for treatment p, however, the mark-up decreases steadily moving from round 1 to round 8, in which the mucr decreases from 1.12 in round 1 to 1.05 in round 8. apparently, information about the winning bids is of great importance for subjects in treatment p. as revealed in the questionnaire, they were able to assess their bids relative to winning bids, and to review their performance and adjust their bidding strategies accordingly. in treatment n, with no information about previous bids, the relatively flat bidding trend from round 3 onwards suggests a high consistency in bidding among the four subjects. however, australasian journal of construction economics and building oo,b l et al. (2011) ‘information feedback and learning in construction bidding’, australasian journal of construction economics and building, 11 (3) 34-44 40 it appears that the subjects had experienced a short adjustment phase from round 1 to 2 as demonstrated by the steeply decreasing trend, before they were provided with feedback on profit or loss of the jobs they won in preceding rounds. the profit and loss statements provided to the subjects were not available until the end of round 2 since the hypothetical projects have minimum project duration of two rounds. indeed, the release of profit and loss statements did trigger an immediate response in the subjects’ bidding trend, given the slight increase observed between round 3 and 4. further evidence of the upward adjustment can be found by considering the mean ranks of mucr in the subsequent subseries analysis on changes in bidding (table 2). (a) partial information feedback group (b) no information feedback group (treatment p) (treatment n) figure 1 mucr scatter plots for partial and no information feedback groups round subseries mean rank n chi-square df p partial information feedback group (treatment p) 1 3 3.44 26 26.24 3 0.000 4 5 2.63 6 7 2.27 8 10 1.65 no information feedback group (treatment n) 1 2 2.13 23 9.63 3 0.022 3 4 3.17 5 6 2.52 7 10 2.17 table 2 friedman test results for partial and no information feedback groups from the lowess curves in figures 1(a) and 1(b), it can be seen that there are disjointedness in bidding trends over the ten rounds of experiment. the disjointed trends in the respective lowess curve form subseries of bids for checking statistically differences in a1 a2 a3 a4 lowess curve b2 b3 b4 b1 australasian journal of construction economics and building oo,b l et al. (2011) ‘information feedback and learning in construction bidding’, australasian journal of construction economics and building, 11 (3) 34-44 41 bidding using a friedman test. as shown in table 2, there are four subseries of bids in treatments p and n, respectively. the mean ranks were calculated for all subseries (i.e. a higher mean rank indicates a higher mucr overall) and the results show that there is a significant overall difference among the four mean ranks in both treatments p (χ 2 (3) = 26.24, p < 0.01) and n (χ 2 (3) = 9.63, p < 0.05). this suggests that the variations in bids over the bidding rounds in response to the experimental treatments are statistically significant. the subjects do apply different bidding strategies (mark-ups) based on the given set of feedback information, although the subjects in treatment n were only informed privately about their capacity utilization and the profit or loss generated from the projects they won in preceding rounds. in this, the mean rank of mucr for rounds 3 to 4 subseries is higher than the subsequent two subseries, suggesting they had adjusted their bids (i.e., with high mark-ups to maximize profit) in response to the information received at the end of round 2. confirmation of learning direction theory in both treatment groups, it appears that learning does occur at different rates, with statistically significant variations in bids over the rounds of the experiment. the questionnaire survey reveals that the majority of the subjects learnt about the bidding trend by experimenting with their bids for improving their bidding performance. they were particularly concerned with the cost penalty for operating beyond the optimal capacity in their bidding decisions. the quoted period for learning about their competitors’ bidding trends ranges from two to ten rounds of the experiment. consider now the application of learning direction theory to this experiment. as the subjects’ ultimate aim is to win and make a profit, conditional on the allowable capacity utilization (maximum five projects on hand at any particular bidding round), it follows that the subjects would be in one of the following two conditions at the end of the preceding round: high level of capacity utilization: number of projects on hand ≥ 3 low level of capacity utilization: number of projects on hand < 3 where three projects on hand (the mid-point of five) were used as the cut-off point in determining the level of capacity utilization. a high level of capacity utilization means that a subject won a number of projects in the preceding round. this doesn’t necessarily mean a high profit. he might have received a greater payoff by submitting higher bids and winning fewer contracts. similarly, with a low level of capacity utilization the subject could have won more projects by submitting lower bids and winning more projects in the preceding round. therefore, the learning direction theory implies that after experiencing a high level of capacity utilization a subject tends to increase his bids, while after experiencing a low level of capacity utilization the subject tends to decrease his bids. table 3 shows the number of bid changes in terms of mean mucr, i.e., increases or decreases of the bids from one round to the next. changes are listed separately according to the experimental treatment and the subjects’ condition of high or low level of capacity utilization in the preceding round. a first observation reveals that in 100% of the observations there was an increase or decrease from one bidding round to the following, suggesting the subjects had in general adjusted their mark-ups. in treatment p, the bid changes that go in the predicted directions after experiencing high and low levels of capacity utilization are about 60% and 80%, respectively. however, the corresponding percentages in treatment n are only about 40% and 65%. this suggests that bid changes in the predicted direction occurred less often in treatment n. a chi-square test of independence was performed to examine the relationship between bid change and experience condition in the respective treatment. the results show that the relationship is significant in treatment p (χ 2 (1) = 5.386, p < 0.05), but not in treatment n (χ 2 (1) = 0.125, p > 0.05). the test statistic provides further evidence that the subjects in treatment n were less likely to vary their bids as indicated by australasian journal of construction economics and building oo,b l et al. (2011) ‘information feedback and learning in construction bidding’, australasian journal of construction economics and building, 11 (3) 34-44 42 learning direction theory than were those in treatment p. in both experience conditions, a subject in treatment n had limited information whether he could have performed better than preceding round by increasing or decreasing his bids; in hindsight, the subject did not receive information on historic bids. treatment experience condition mean mucr increase (%) mean mucr decrease (%) row total (%) p ≥ 3 jobs on hand 10 (59) 7 (41) 17 (47) < 3 jobs on hand 4 (21) 15 (79) 19 (53) n ≥ 3 jobs on hand 7 (41) 10 (59) 17 (50) < 3 jobs on hand 6 (35) 11 (65) 17 (50) column total (%) 27 (39) 43 (61) 70 (100) table 3 frequencies of bid changes in rounds 2-10 discussion the insignificant difference in first bids between the two treatment groups provides evidence that the student subjects’ level of experience is not a moderator variable in the experiment. that is, the level of experience is controlled – they were all inexperienced bidders before the experiment. in addition, the quality of the experimental data has been demonstrated as the test results show the seriousness of the subjects’ bidding, which justifies the use of student subjects in this kind of experiment. it should be noted that the use of student subjects is very common in experimental auctions and business decision making studies (e.g. remus 1986, depositario et. al 2009). in contrast to soo and oo’s (2010) experiment on full and partial information feedback that suggests the more limited the feedback the higher the bid prices, our results show that bids from the partial feedback group are higher on average than those in the no feedback group. this would be in line with another notion in which the more limited the feedback the lower the bid prices (isaac and walker 1985). these contrasting findings warrant further experimental studies in this area. in examining the subjects’ learning in the experiment it is apparent from the variations in the bids the observed learning in treatment p supports the conclusion that the release of the winning bids trigger an immediate response in bidding behaviour, similar to that found by dufwenberg and gneezy (2002). indeed, the observed learning in both treatments p and n are in line with neugebauer and perote’s (2008) findings that subjects learn to bid on the basis of winning bids when provided with this information, and reflect on their bids when information on winning bid is unavailable. in treatment n, it seems that the subjects learn to bid on the basis of repeated reflection on their bids, where fewer bids go in the direction predicted by learning direction theory. despite this finding, it is clear that the learning direction theory has the potential to provide qualitative predictions about bidding trends, without a fully-fledged behavioural model. the basic principle of ex-post rationality in learning direction theory is also in line with the logic behind mccaffer and pettitt’s (1976) cusum curve that predicted changes in contractors’ bids in response to need of work. conclusion information feedback is an important design variable in optimal construction procurement designs. feedback plays a key role in contractors’ learning process in recurrent construction bidding. our experiment examined the effects of no and partial information feedback on construction bidding, and the extent to which inexperienced bidders’ bidding trends agree with the behavioural patterns proposed by learning direction theory. the results show that the variations in bids over time for both levels of feedback are statistically significant. the bidders with partial bidding feedback are more likely to vary their bids as indicated by australasian journal of construction economics and building oo,b l et al. (2011) ‘information feedback and learning in construction bidding’, australasian journal of construction economics and building, 11 (3) 34-44 43 learning direction theory, but their bids are less competitive than those with no bidding feedback. the fact that different information feedback does elicit a statistically significant behavioural effect among bidders has implications for construction clients. they would need to consider the feedback in their procurement practices. however, in order to determine the point at which feedback can be regarded as ‘sufficient’ to generate efficiency in construction bidding, exploration of pricing practice in response to different feedback conditions is required along three dimensions: empirical work on contractors’ pricing regarding the three possible levels of feedback, empirical work on contractors’ learning in decision making on pricing; and empirical work on order effects of feedback on contractors’ bidding behaviour moving from no-to-full information feedback condition and the reverse. the latter is of special importance for construction clients to examine the impacts of changes in policy on information feedback in their procurement practices. references depositario, d.p.t., nayga jr, r.m., wu, x. and lasude, t.p. (2009) ‘should students be used as subjects in experimental auctions?’, economics letters, 102 (2), 122-124 drew, d.s. and fellows, r.f. (1996) ‘feedback in construction contract bidding’, construction modernization and education: proc., cib int. conf., october 21–24, chang w.p. (ed.), china architectural & building press, beijing, china. drew, d.s. and skitmore, m. (2006) ‘testing vickery's revenue equivalence theory in construction auctions’, journal of construction engineering & management, 132 (4), 425428 dufwenberg, m. and gneezy, u. (2002) ‘information disclosure in auctions: an experiment’, journal of economic behavior & organization, 48 (4), 431-444 dyer, d., kagel, j.h. and levin, d. (1989) ‘a comparison of naive and experienced bidders in common value offer auctions a laboratory analysis’, economic journal, 99 (394), 108-15 engelbrecht-wiggans, r. and katok, e. (2008) ‘regret and feedback information in first-price sealed-bid auctions’, management science, 54 (4), 808-19 fu, w.k., drew, d. and lo h.p. (2002) ‘the effect of experience on contractors’ competitiveness in recurrent bidding’, construction management and economics, 20 (8), 655-666 fu, w.k., drew, d. and lo h.p. (2004) ‘start-up and steady-state learning in recurrent bidding’, building research & information, 32 (6), 484-496 isaac, r.m. and walker, j.m. (1985) ‘information and conspiracy in sealed bid auctions’, journal of economic behavior & organization, 6 (2), 139-159 kolb, d.a. (1984) experiential learning: experience as the source of learning and development, nj: ptr prentice hall mccaffer, r. and pettitt, a.n. (1976) ‘bidding behaviour in project management’, the project manager, 1 (5), 5–8 milgrom, p. and weber, r.j. (1982) ‘the value of information in a sealed-bid auction’, journal of mathematical economics, 10 (1), 105-114 neugebauer, t. and perote, j. (2008) ‘bidding 'as if' risk neutral in experimental first price auctions without information feedback’, experimental economics, 11 (2), 190-202 neugebauer, t. and selten, r. (2006) ‘individual behavior of first-price auctions: the importance of information feedback in computerized experimental markets’, games and economic behavior, 54 (1), 183-204 australasian journal of construction economics and building oo,b l et al. (2011) ‘information feedback and learning in construction bidding’, australasian journal of construction economics and building, 11 (3) 34-44 44 ockenfels, a. and selten, r. (2005) ‘impulse balance equilibrium and feedback in first price auctions’, games and economic behavior, 51 (1), 155-170 oo, b.l., drew, d. and lo, h.p. (2007) ‘applying a random-coefficients logistic model to contractors’ decision to bid’, construction management and economics, 25 (4), 387-398 oo, b.l., drew, d. and lo, h.p. (2008) ‘a heterogeneous approach to modelling the contractors’ decision to bid’, journal of construction, engineering and management, 134 (10), 766-775 oo, b.l., drew, d. and runeson, g. (2010) ‘competitor analysis in construction bidding using mixed model’, construction management and economics, 28 (12), 1321-1329 remus, w. (1986) ‘graduate students as surrogates for managers in experiments on business decision making’, journal of business research, 14, 19-25 selten, r. (2004) ‘learning direction theory and impulse balance equilibrium’, in: friedman, d. and cassar, a. (eds.), economics lab—an intensive course in experimental economics. ny: routledge, 133–140 selten, r. and buchta, j. (1999) ‘experimental sealed-bid first price auctions with directly observed bid functions’, in budescu, d., erev i., and zwick r. (eds.), games and human behavior: essays in the honor of amnon rapoport. nj: lawrenz associates mahwah selten, r. and stoecker, r. (1986) ‘end behavior in sequences of finite prisoners’ dilemma supergames: a learning theory approach’, journal of economic behavior and organization, 7, 47–70 selten, r., abbink, k. and cox, r. (2005) ‘learning direction theory and the winner’s curse’, experimental economics, 8 (1), 5–20 soo, a. and oo, b.l. (2010) ‘the effect of information feedback in construction bidding’, australasian journal of construction economics and building, 10 (1/2), 65-75, available at: http://epress.lib.uts.edu.au/ojs/index.php/ajceb/article/view/1589/1731 http://epress.lib.uts.edu.au/ojs/index.php/ajceb/article/view/1589/1731 property and construction professions: the views of industry leaders anthony mills, (senior lecturer, department of architecture, building and planning, university of melboume,australia) abstract the role of professionals has changed significantly, and so too should the role of professional societies. the future is very unclear, and it is likely that professional societies will continue to change and adapt. but what is their role today; is it to provide leadership, serve their members, or promote their professions? these questions were put to a number of construction industry leaders to seek their views. the presidents of three professional institutes and a government regulator for the construction industry were approached and their opinions recorded. each interviewee was chosen because of their leadership role within the property and construction industries. using an informal exploratory interview approach each respondent discussed issues facing their professional society. the results show that indemnity insurance, continuing professional development, and public recognition were key concerns. keywords : professions, property, construction, australia, professional societies. introduction' what is a profession? history has shown that a profession is a type of occupation that has particular characteristics. eccles (2002) cites millerson who defines a profession as 'a type of higher grade non-manual occupation with both subjectively and objectively recognised status, possessing a well defined area of study or concern and providing a definite service after advanced education and training'. according to eccles (2002) it is generally accepted that there are four differing methods of attempting to define and describe the concept of a profession: by trait; by process; by usage; and as a labour market phenomenon . the most obvious means of definition is by universal definition achieved by describing a set of characteristics that delineate a profession. criteria such as ownership of a body of knowledge, a code of ethics and (self-) regulation are typically included within such a definition, but the extent to which it is possible to develop such universally applicable ideals has become regarded as increasingly problematic. eccles (2002) believes that a more appropriate approach has been to investigate the process, or history, of 'professionalisation' in the assumption that the desire to become a professional is more important than conforming to a simple series of characteristics. similarly, the concept of professionalism can be regarded as one of self-definition and the usage of the term by the parties themselves in a context becomes the centre of investigation. the last school of thought sees the professions as a phenomenon of the labour market, a simple labour aristocracy or group of workers provided with an advantage by some twist of fate or quirk of capitalist economics. according to hughes (2003), since the introduction of the restrictive trade practices act of 1982 (in the uk), which outlawed mandatory fee scales, professionals could undercut each other and bid competitively for work. hughes believes that professional institutions now occupy themselves as qualifying bodies, providers of career development courses, and writers of standard procedure manuals. this paper is primarily concerned with the views of industry leadership engaged in property and construction-related professions. the objective of the research was to determine what industry leaders consider the most important function of their professional institute, or role as the industry leading regulator. the following research aims were considered appropriate: the perception of public standing of the professions, including the role professional societies have in promoting services of their members; mechanisms used to ensure professions remain relevant to the community; and the way in which professional societies benefit their members. while it is acknowledged that the above list of aims is not exhaustive, each point was raised to focus their attention on a manageable number of issues. the role of professional societies should be most clearly understood by their presidents who are directly involved in the day-to-day running of an institute. it became obvious that each industry leader recalled particular initiatives that responded to one of the above questions. for instance, one of the mechanisms commonly used by professional societies to ensure their members remain relevant to the community is through a continuing professional development program. research methodology the purpose of this section is to determine the methods available to examine the aims mentioned above . there are two distinct generic philosophical research approaches: positivist, and phenomenological or interpretative. in its purest form, the main assumption of the positivist approach is that there exists an objective truth that can be revealed through the use of scientific methods. this type of research starts with a hypothesis and then data is collected to test its validity. the australian journal of construction economics and building [vol 3 , no 21 i 9 the interpretative approach is different; instead it uses detailed observation in order to explain why there are different outcomes or experiences. this method focuses its attention on observing outcomes , and is often used in social research . the most important purpose of this style of research is to generate theory, based on observing or interpreting situations or occurrences (easterby-smith et al. , 1991). the research in this paper follows the interpretative approach ; which often involves the collection of qualitative data. interviewing is often the best approach to obtain exploratory information, as the respondents' responses can be probed more fully (fowler, 1984). due to the depth of information required in this research the use of interviews was justified . both semi-structured and unstructured interviews have been postulated as suitable techniques for obtaining exploratory information (mrs , 1973). in this case , semi-structured interviews were considered more appropriate for this research. during the interviews, each respondent was asked a similar set of questions, and then given the opportunity to expand and/or develop their thoughts on the factors affecting their views. this was considered the most appropriate mechanism for eliciting the knowledge of the industry leaders. a group of four people was selected for the interviews; all were obtained from personal contacts. the participating organizations were all from property and construction related organizations and therefore are exposed to similar external environments. the persons approached were: president, royal australian institute of architects, victoria (raia) president, australian property institute, victoria (api) president, engineers australia , victoria chapter, (ea) the building commissioner, government of victoria (bc) all interviewees were given a similar set of open-ended questions designed to investigate the role of professional societies, the questions were related to the following: how does your organization promote recognition and status of the profession to the community? what is your organization's role in maintaining the ongoing credibility of members? what does your organization do to demonstrate the benefits of membership? the interviews were each approximately forty to fifty minutes in duration. interviews were tape recorded, and transcripts were produced . the transcript of each interview was returned to the interviewee for validation . once validated the transcript was printed in a professional journal (see table 1). prope rty and construction professions: th e views of ind ustry leaders by anthony mills analysis of the transcripts showed that each interview transcript was approximately the same length. the results (table 1) show that that the average transcript contained 2,275 words. the transcripts were then coded to reflect three themes: public recognitions and status , continuing professional development, and professional indemnity insurance. results and discussions the word count for each interview is shown intable 1. each interviewee was asked a similar set of questions but the emphasis that they placed on the questions varied. consequently, each person tended to focus on only one or two aspects of 'professionalism'. the full interview transcript of each interview was published in the official journal of the australian institute of quantity surveyors, the building economist, at the dates shown in table 1 (mills, 2002a; mills, 2002b; mills, 2003a; and mills, 2003b). interviewee oraanization word count transcript reference' elli gianni royal australian 2,200 september, institute of architects 2002 barry brakey australian property 2,000 december, institute 2002 john wilson engineers australia 2,300 march , 2003 tony arnel building commission 2,600 september, 2003 average 2,275 table 1: analysis of interview transcript * full interview transcripts published the building economist on the dates stated public recognition and status the interviewees all spoke about the need for public recognition and status. this resulted from the perception that professional societies seemed to be dependant on maintaining high levels of educational and professional experience of their members. the institutes represented in this paper all require at least a degree level qualification and a number of years professional work experience from applicants for membership. in addition , government registration in victoria requires that professionals in designated professions contain a level of professional indemnity (pi) insurance and maintain an ongoing program of continuing professional development (cpd) . this was expressed very clearly by the president of the raia who stated that 'most of all i think the membership has always wanted the institute to be active in the public sphere, to represent the benefits of architects to the community... that is what the institute is there to do!' she went on to suggest that: 10 i believe we try to say to the public: here is a profession that has high skills, high level of education, high level of practical experience, and a profession that has a humanist and broad social knowledge base. so, we are not just technical people we have a bit of professionalism, and we understand a lot about many things. the best way we can serve the community, and clients, is to be the best that we can be. a similar view was expressed by the building commissioner who believes that: registration establishes a minimum level of qualification and experience that provides a reasonable guarantee of a good service being provided. this in turn delivers satisfaction to the consumer of (professional) services. it's a three-way link between the quality of practitioner, quality of product (professional service), and the level of satisfaction experienced by the consumer. the largest of the institutes interviewed was engineers australia (ea), which has a total of 69,000 members nationally. according to their president, ea have recently invested in a trial television advertising campaign in adelaide. the campaign comprises a series of short fifteen­ second television advertisements, which are followed up by newspaper advertisements in the daily papers aimed at providing more detailed information. the aim of the advertising was to educate clients, and the community at large, about the quality and skills of engineers. the president mentioned that the brand recognition campaign was designed to inform the public of quality standards by which engineers should be recognised. he believed that there was a link between community recognition and professional status. each institute president concluded that promotion of the profession was an important component of what professional societies are supposed to do. the objective of the promotion was to establish credibility and status for the professional members of the institute. maintenance of professionalsc.uta:llnjl.ldj.i::au.>r..ud.u.s____ one of the aims of this paper was to examine the mechanisms used by professional societies to ensure that their members maintain their professional credibility and relevance to their clients. all the respondents spoke about the need to provide cpo for their members. for the purposes of this research cpo is considered to be approved post-qualification training for people engaged in the construction industry. training required to obtain initial qualifications is not considered to be cpo. according to a recent report (building commission, 2003): cpo is expected to yield important benefits in terms of improved overall productivity within the building industry as well as reducing the cost of building disputes and the associated need for rectification work to be undertaken . it is also expected to improve the public standing of affected building occupations. according to the building commission (2003) the cpo requirements are expected to yield important benefits in terms of reduced incidence of building disputes, as well as general productivity gains within the industry. in addition, the government regulator intends to make cpo a compulsory legal requirement for all registered building practitioners in victoria. all professional societies encourage ongoing maintenance of cpo for their members. the role of cpo is considered very important to the practice of any professional discipline. this research demonstrates that cpo is central to the operation of professions today, and this was fully supported by the interviewees. according to the api president, 'the point we have made to our members is that it's not about which seminar is offered by api , it's about what an individual member does to maintain their own professional competence'. the results show (table 2) that all interviewees consider that compulsory cpo was an important aspect of being a professional person, and all are prepared to enforce it. organization comment royal australian the view of many is that it should be institute of architects made compulsory for architects because it is another way that the profession can demonstrate its commitment to excellence. australian property as an institute we remain committed to institute our (compulsory) cpd policy. engineers australia we have a policy to undertake a random audit (of cpo) of about 10% of all chartered professional engineers each year and any person who does not complete the minimum level of cpo can lose their title . building commission cpo will be a requirement of the law (in victoria) , and therefore we expect registered building practitioners to comply. table 2: support for compulsory gpo the cost of compliance with cpo however, represents an impost on professional people. hence, the issue is whether the cost of compliance with cpo is likely to produce sufficient benefits to the profession as a whole. it was obvious from the interviewees that the benefits of mandatory cpo may not be appreciated by some of the members of professional societies . a number of negative comments were advanced which show that the compulsory cpo is likely to be a contentious issue for many institute members the australian journal of construction economics and bu ilding [vol 3 , no 2j i 11 the quotes shown in table 3 suggest that the industry leaders perceive that in some cases their members may be doubtful about the benefits of cpo. this seems to indicate that mandatory cpo may cause some dissatisfaction to some to professionals. oraanization comments royal australian institute i think we need to broaden what of architects is understood by cpo by making it something that is multi-faceted and something that a lot of people can get benefit and indeed can contribute to. australian property institute i would hope that the counselling process, which goes along with the discipline procedures, helps members to see the importance of cpo engineers australia the cpeng (professional) title includes a requirement for maintaining cpo of 50 hours per year. this ... is a national initiative and signifies that any person who achieves this status is qualified and competent to practice independently as an engineer. building commission the building commission is committed to an education process to inform the industry of the new requirements before it becomes mandatory. ladle j : keservatlons ana negative comments aoour compulsory gpo it has become obvious that the industry leaders interviewed believe that the cpo issue is sufficiently important for the president to take a strong 'leadership' position on the matter. this seems to have occurred in spite of the perceived reservations of some of their members. in addition, all professional institutes supported the position taken by the government regulator to mandate compulsory cpo as part of registration . it is worth noting that all institutes offer low cost cpo seminars to their members; this benefit has the effect of improving the value of membership of a professional society. .bajefits of membership the third objective of this research was to probe interviewees' beliefs about the way in which they provide direct benefits for their members. it became obvious in the discussion with the presidents of the australian property institute and engineers australia , that their members perceived profession indemnity (pi) insurance is an issue that impacts on their professions. almost without exception professionals operating in a commercial environment must have some form of pi insurance. in addition, pi is mandatory for registered building practitioners in victoria, so each registrant must be insured in order to participate in the industry. property and construction professions: the views of industry leaders by anthony mills all interviewees made the link between pi insurance and quality of professional service provided. although pi insurance is a legal requirement, there was a belief that professionals that maintain a high level of professional competence are likely to provide their clients with better quality advice and therefore are less likely to be sued by their clients they serve. in addition, the president of the api suggested that failure to provide competent services on the part of a few undisciplined members has the potential to increase pi premiums for all members. the api quote in table 4 demonstrates that he perceives that members would like the institute to act forcefully on those who provide services which are less than what would be considered as professionally acceptable. this demonstrates that professional societies have an incentive for maintaining and enforcing ethical standards on their members. organization comment australian property the biggest issue that we have at institute the moment is professional indemnity insurance. (some of our) ... members are under enormous pressure because they are considered to be a high-risk category. i think our members are looking to the institute to be harder on people who are not acting in a professional way. they would like to see the api act on discipline matters more quickly, and more vigorously. engineers australia pi insurance is an extremely important and relatively complex issue. in the long-term we are suggesting to insurers that members who have attained cpeng (professional) status represent a lower risk than others. we are hopeful that the cpeng status will reduce the cost of insurance and therefore benefit our clients and the community. building commission we are mindful of insurance issues and this is something that the building commission has been working on for some time and takes very seriously. it is important that the building industry has reasonable access to insurance services in order to keep it functioning properly. table 4: attitude to the increasing cost of pi insurance the results of the interviews also show that the professional institutes perceive a role in negotiating on behalf of their members with the insurance industry. both the building commission and engineers australia have been in lengthy discussion with the insurance industry in order to reduce premiums for selected groups of their members. it would seem logical to suggest that negotiations are likely to be more successful if individual institutes can join forces with other kindred organizations. in addition, the government regulator stated that their 'role was one that encourages the 12 building industry to continue without undue encumbrance. this requires us (building commission) to intervene when a crisis develops in the industry, in this case the lack of supply of insurance'. conclusions this research sought the views of several leaders in the property and construction industry. it records the attitudes of a group of people who are in a strong position to understand the complexity of professional societies. in many respects their attitudes are similar; all support the maintenance of high levels of education, training and cpd. there was a perception that these were all essential characteristics of what has been termed 'professionalism' by eccles (2002). this is based on the notion that the community needs confidence in the integrity of professionals. each of the industry leaders concluded that the public status of their profession was important. public recognition is a significant part of the responsibility of professional societies , at least in the minds of their presidents. it was summed up neatly by the engineers australia president: i think members see profile raising as an important aspect of what the institution does for its members ... if the profile can be raised it has a number of positive effects, including more demand for university courses, and our members are in a stronger negotiating position with employers over pay and conditions. the industry leaders suggested that professionals need to keep up-to-date and relevant to their clients and the community. it was suggested by the building commissioner that cpd is 'expected to improve the public standing of building occupations' . results of the interviews showed that cpd was an important component of maintaining community confidence in the professions , and that the institutes should be seen to be actively promoting its benefits. one of the aims of this exploratory research was to determine how institutes provide benefits to their members. the issue of the rising cost of pi insurance premiums has forced professional societies to act in the interests of their members. the building commission and engineers australia have been negotiating directly with insurance providers on behalf of their members. the objective has been to broker exclusive deals for their members that would not have been possible for individual members. in addition, the president of the api mentioned that one of the roles of the institute was to 'act on discipline matters more quickly and more vigorously' in the interest of other members. this was seen as necessary to ensure that insurance premiums remain as low as possible , and to give the impression that their members have professional credibility. the greatest imperative of institutes is their long-term role to ensure the community rece ives value in the provision of professional services. what is concluded in this paper is that public status , maintenance of skills , and ethical standards, will remain the main objectives of professional societies. however, it may be reasonable to suggest that in the future institutes will need to be more strategic in their operation and rely less on reactive approaches. in future it is suggested that professional societies wi ll need to discuss their roles more actively their members and the community than they have in the past. references building commission (2003). continuing professional development for the building industry practitioner survey report, building commission , government of victoria. easterby-smith, m., thorpe, r. and lowe , a. (1991) . management research: an introduction . sage publications , london. eccles, t. (2002). professional development: balancing globalism , sustainability and tradition . icec world congress, environmental and economic sustainability: cost engineering down under. melbourne. fowler, f. (1984). survey research methods: applied social science methods series. sage publications, london . hughes, w. (ed) (2003). de-professionalised, automated construction procurement, building futures, commission for architecture and built environment, and royal institute of british architects , london . mills, a. (2002a). the architects. the building economist, september, 32-34. mills, a. (2002b) . rules of conduct and practice standards. the building economist, december, 18-20. mills, a. (2003a) . the engineers: the role of professional institutes today, the building economist, march, 29-32. mills, a. (2003b) . the role of the government regulator. the building economist, september, 9-13 . mrs (1973) . a handbook for interviewers. market research society, hobbs the printer, london . the australian journal of construction economics and building [vol 3 • no 21 i 13 the australian journal of construction economics and building [vol 3, no 2j 14 book review modern construction economics gerard de valence (ed), routledge, london, 232 pp. hardcover, isbn978-0-41539706-3, usd 115.00 gbp 70.00 the editor, gerard de valence, points out in the preface, this book is neither a textbook nor a guide to what is done by construction managers and construction economists – read quantity surveyors and the like. rather, de valence notes it comprises a collection of chapters each of which focus on matters at the industry level and, in doing so, illustrates that a substantially improved understanding of the building and construction industry can be gained beyond the economics of delivering projects. before giving some thought to how far each of the chapters achieve this, it‟s worth reflecting on the virtues of developing construction economics as its own discipline or sub-discipline in general economics and the bold manner by which de valence is proposing we do this. that is, de valence proposes partitioning industry and project economics as explained in the preface and in chapter 1. de valence‟s view that “the time seems right” for these developments is also worthy of some consideration. george ofori in his article in construction management and economics (cme) in 1994 held the view that construction economics cannot be described as a bona fide academic discipline. towards developing this view, ofori indicates some frustration that we‟re practically ignored as a discipline in general economic textbooks and just glancing through a few more recent general economic texts that i have to hand, i find some evidence that this continues to be the case today. with regard to why we might seek to change this situation and develop construction economics as a sub-discipline of general economics, de valence offers essentially a business case based on construction related factors that contribute to gross domestic product. as important as we know this is, i suspect that this is insufficient motivation for many researchers who are prioritising the desire for an autonomous learning environment and other benefits associated with academe over any serious commercial rewards. in his cme article, ofori goes on to give a rationale for establishing our own discipline comprising benefits from legitimacy in terms of attracting the best minds and research funding. this rationale for change resonates more than de valence‟s business case for change – at least to me. however, ofori‟s rationale may still be seen as falling short in terms of inspiring individual academics to make a real contribution to developing our discipline and in turn our industry if various updates on our progress towards this goal are anything to go by. for example, graham ive and chen-yu chang in their review of cme articles at the cme 25 conference in 2007, concluded cme contains a small number of articles with theory references solely to economic literature. given this lack of progress, it might be that de valence‟s the time seems right statement is perhaps more clearly interpreted as the time is up on allowing more practical and project-based work to dominate our journals. moving construction economics away from projects to industry level analysis and onto more theoretical ground is, therefore, an ambitious suggestion given that updates on ofori‟s article indicates that a number of our researchers may struggle to make this transition – as things currently stand. beyond proposing our future direction and domain in construction economics, more fundamental thought might usefully be given to developing the culture and entire infrastructure surrounding research activity in our field, in order to increase the number of our academics that emphasise articulating problems over solutions; the long term over the short term; and the impact of output over the number of publications. all involved in construction economics have a role to play – not least of which our journals. for example, i was pleased to hear news of recent developments in the editorial policy of cme and which complements the direction proposed by de valence. these developments include australasian journal of construction economics and building bridge, a (2011) book review, australasian journal of construction economics and building, 11 (2) 101-105 102 encouraging papers that incorporate theory and draw more widely than the construction literature, as well as papers that engage more thoroughly with methodological issues and allow a longer discourse. if all of our key journals follow suit, then this could be a step towards changing the nature of reward regimes and selection criteria. in turn, this might more readily encourage academics to invest time in engaging theory from economic literature and which may allow a better understanding of the nature of many problems in construction that have been faced and addressed in other sectors. as the editor of ajceb is also a chapter author, he is likely to sympathise with these developments and view as well. i move on now from de valence‟s preface and his first chapter, to look at the other chapters in terms of how much these other chapters focus on matters at the industry level and how much these chapters show the way in which an industry level approach can yield an improved understanding of building and construction activity beyond the economics of delivering projects. in chapter 2 jan bröchner also develops a critique of project-based economics and, in particular, towards cost and time prediction. this time, however, the focus for change is not such much the issue of domain but rather the conceptual framework. more specifically, and in the face of technological advance and deregulation, bröchner considers that the new institutional economics (nie) based on some key departures from neoclassical economics including a semi-strong form of rationality (bounded rationality) can extend the reach of conventional neoclassicism and deliver new insights into how incentives for firms and individuals affect issues such as innovation and quality. bröchner goes on to illustrate this in terms of three topics that he feels should be given more attention, namely: integration and innovation, signalling in real-estate markets and developing public procurement. for example, with regard to integration and innovation bröchner rightly notes that two microeconomic theories, firstly transaction cost economics (strongly associated with nie) and secondly resource-based theory (that has much in common with nie including bounded rationality) can be used to explain how construction firms integrate vertically and to explain the extent of subcontracting. my view is that bröchner is spot-on here. being able to understand and more fully explain these sorts of fundamental business decisions and in the context of construction projects that comprise a temporary coalition of independent firms, will unlock significant savings in reducing both transaction costs and production costs. this advanced understanding also holds the potential to prompt improvement in the delivery of projects and, therefore, increase the overall value of the constructed project from the client‟s perspective. it‟s interesting to link bröchner‟s chapter to chapter 5 by lauri koskela. bröchner‟s message and approach obviates much of koskela‟s concerns with mainstream or neoclassical economics. moreover, i‟m sure many of us have gained a great deal from the forum and exchange between koskela; glenn ballard and graham winch in building research & information in 2006 and for me koskela is not adopting a forward looking view in the context of this book and in terms of the issue being considered, by ignoring advances made by nie and by focusing on limitations in the mainstream neoclassical economics. moreover, of all the chapters in the book, i feel koskela‟s chapter is the furthest away from de valence‟s call for the development of theory to explain industry level phenomena, as the three-part theory of production is being advocated by koskela on the basis that each part has produced practical methods, tools and production templates. chapter 3 by christian brochman also picks-up on nie and this time applies the principal/agent relationship on the issue of collusion but with an interesting twist given that ex ante the contractor suffers from information asymmetry and assumes a role closer to the principal during the process of the client establishing/selecting the price whereas ex post the client then assumes the role of principal and may suffer from information asymmetry that favours the contractor. brochman‟s comment that zarkada-fraser and skitmore‟s work “has serious flaws” on the basis that estimators are the chosen group in the study when, as brochman asserts, the players are the business unit managers, may fall short of australasian journal of construction economics and building bridge, a (2011) book review, australasian journal of construction economics and building, 11 (2) 101-105 103 appreciating the full complexity involved in making the mark-up decision and in other cases may simply be incorrect when estimators and other site-based operational staff for example, engineers and quantity surveyors make these decisions particularly in remote locations within the business unit. in the end, brochman concludes that strong incentives exist in the construction industry to engage in collusion and a change in institutional arrangements is required to avoid collusion as legislation is not sufficient. derek drew gives an easy introduction to his chapter 4, with some simple examples, of the advanced topic of auction theory with some comments on its possible application to construction tendering. quite correctly, he distinguishes between the standard independent private values (ipv) theory and common value (cv) theory and their contrasting assumptions. in short, the ipv assumption is that each bidder‟s cost estimate is exactly correct, while the cv assumption is also that each bidder‟s cost estimate is inexact, being a random variable with a mean value that is common to all bidders. in the celebrated ipv revenue equivalence theorem the ipv second price equilibrium result is to bid “at cost” – making this form of auction very attractive to the auctioner in theory. cv theory, on the other hand, gives rise to the „winner‟s curse‟ and the need to make some contingency allowance for its effect. for me, the most interesting aspect of this chapter concerns the extent to which the two theories apply to the auctioning of construction contracts. as is intimated, most industry practitioners would not accept the ipv assumption of exact estimates, while the assumption of a common value also seems inappropriate. bearing in mind also the other economic and statistical assumptions of both standard ipv and cv theories – including exclusive profit maximisation, sufficient information, symmetry, randomness and stationarity – it seems there is a long way to go yet before any serious applications can be anticipated in the construction world. de valence‟s chapters 6 and 10 provide us with a detailed account of market structures and, in doing so, de valence develops a useful insight into the particular nature of barriers to entry in construction and across two stereotypical market structures. one of the interesting points that de valence does not dwell on in these chapters concerns an observation de valence has previously made concerning the existence of different market structures in a supply chain in the same construction project. i investigated this further in a building services maintenance supply chain and i think de valance‟s work has great significance in terms of allowing decision makers to configure supply chains to minimise transaction costs. for example, consideration may be given to avoiding allowing powerful firms to be placed upstream and the same supply chain/contract as a less powerful firm at the head of this supply chain/contract. instead, the client might engage these powerful firms directly and reduce the extent of information asymmetry it may face. i would have also liked to see some exploration of the connection between the structure-conduct-performance (scp) model with more fundamental theory concerning the generation of sources of competitive advantage and their relationship with barriers to entry. and it would also have been interesting to consider the current state of play in terms of empirical work on the correlations between the three scp components including empirical work that shows some interesting unconventional relationships between these components. for example, a u-shaped relationship between market share and profitability. in chapter 7, rick best gives a comprehensive account of the relative merits of different approaches to comparing construction costs between countries and develops his own approach, nicknamed the “building bloc” approach. the building bloc approach has the advantage of using real projects; identifying cost significant items and assigning weights to these items. on the other hand, best notes that a number of problems need to be addressed in this approach including the incorporation of contractors‟ margins in pricing; the establishment of labour ratios and the whole approach which requires some significant analysis. the biggest issue though, seems to lie in best‟s comment in his conclusion that “we have no correct” answer to judge the various competing alternatives. best indicates that australasian journal of construction economics and building bridge, a (2011) book review, australasian journal of construction economics and building, 11 (2) 101-105 104 this cannot be solved objectively. i think that this comment needs to be challenged most robustly by all concerned and towards its resolution in order for real progress to be made in selecting better comparative approaches. for example, perhaps there may be ways to externally validate the accuracy of comparisons generated by each of the methods in best‟s paper by reference to key performance indicators or other composite measures of client satisfaction that exclude costs. as such, i feel best‟s conclusion does not live-up to the rest of his chapter. karen manley and stephen kajewski‟s chapter 8 develops a conceptual framework of firmlevel determinants of innovation and in conjunction with a postal survey of key organisations in the australian construction industry and which generates 383 usable responses. from this largest construction innovation survey conducted to date in australia, a set of interesting results are presented and discussed including: adoption rates for advanced practices; business strategies; reasons for undertaking innovation; sources of innovation; and blockers and encourages of innovation – by industry group; sufficiency of innovation to cope with international competition; suggestions for improving the international competitiveness of the australian construction industry; and innovation profitability impact. in the context of this book, it i think it would have been useful if manley and kajewski could have explained more clearly how their conceptual framework was developed and, in turn, how their framework contributes back to extant theory. chapter 9 bee-lan oo gives us an overview of the application of an experimental approach and illustrates this with respect to a bidding experiment including participants in hong kong and singapore. the main problem with theory testing in tendering is that the „real-world‟ of construction tendering is vastly complicated and uncertain. it makes the task of the ancients to work out the movement of heavenly bodies relatively simple – at least you can see the heavenly bodies regularly and record their movements. with tendering, all you see are the bid prices and maybe a (probably unbalanced) priced bill of quantities from time to time. you may have little idea as regards to how the prices were devised or what the bidders took into account at the time. tendering is so important and competitive that we struggle to collect data/records on past bids, costs and profits and to interview people to get reliable information. an analogy might be to ask an alien to build a model of the workings of a television by letting the alien look at a plasma screen for a few seconds occasionally! apart from that, oo does a good job in explaining the relevance of experimental work in economics and an excellent job in going through many of the criticisms of the method (including lack of validity) and her own experiences. for me, the point is that opportunities for experimental work do exist in construction economics. it‟s very appropriate that göran runeson has the final chapter and proceeds to anchor us in his inimitable style. there is no doubt in my mind that runeson is a master at his craft and on the methodology of economics research. runeson has helped me yet again improve my understanding of methodological matters and on this occasion, i think i‟ve progressed my understanding of the significance of motivations with the lead-in runeson takes in this chapter towards making the point that there is no “right” response, such that motivational assumptions cannot be falsified. however, i don‟t completely share runeson‟s observation that our field is “in total confusion”. in one sense, it‟s the opposite, as we have adapted to the nature of research in our discipline and become very clear and skilled at generating a decent number of articles deemed acceptable by our highest ranking journals without seriously connecting with economic literature as noted by ive and chang and mentioned previously. the issue then may go beyond considering how much room there exists for our academic community to increase their understanding of methodological issues to how do we provide sufficient incentives for our academic community to fully engage methodological issues and in order to help sustain a robust debate about alternative/conflicting methodologies. and in this sense, i completely agree with runeson. that is, such a debate is critical but also how australasian journal of construction economics and building bridge, a (2011) book review, australasian journal of construction economics and building, 11 (2) 101-105 105 we evolve this debate is equally critical to help move construction economics beyond a project and practical level concern, towards an industry and explanatory orientation. in summary and in terms of scope, i was a bit surprised that there was not more treatment given to more broader aspects of the behaviour of firms and public policy and regulation. it‟s also apparent that not all of the chapters represent full explanatory research including some room to deploy economic theory more clearly and to contribute back to extant theory. in particular, the low lying fruit here is the opportunity to learn something new about the theory itself as a result of working with it in construction. there is no doubt our industry is very special and exciting. with its extreme conditions on many fronts, our industry gives us very fertile ground within which to research including adapting and contributing to theory. on the other hand, i think all the chapters avoid the charge of being prescriptive and each of the chapters has something important to say in their own right. such that, overall i agree with de valence‟s comment in the preface that all of the authors are contributing towards understanding our industry. finally, returning to ofori‟s 1994 article and using a few key criteria that ofori referred to in order to briefly help update our progress towards becoming an academic discipline in construction economics, it can be seen that runeson‟s chapter connects closely to the “mode of enquiry” criterion; bröchner‟s chapter speaks very clearly to the “conceptual structure” criterion; and de valance has, through his book, advanced a bold direction for construction economics at an industry level and, in doing so, has progressed the “domain” criterion. in total, i think this book is achieving its purpose and contributing towards establishing construction (industry) economics as a field of research. as such, i congratulate and applaud gerald de valance and his colleagues for their collective efforts in helping to keep the progress of our field alive and kicking. adrian bridge brisbane may 2011 microsoft word paper 6 dec.doc the influence of flooding risk on infrastructure development in western sydney by professor alan p jeary and ian p m jeary the australian journal of construction economics & building page 57 the influence of flooding risk on infrastructure development in western sydney professor alan p jeary and ian p m jeary, school of construction, property and planning university of western sydney, new south wales, australia introduction the city of sydney boasts one of the greatest natural harbors in the world, and perception of the city tends to center on the business and harbor areas. however, the city limits are bounded to the west by the blue mountains, and to the north by the hawkesbury river which flows out into the tasman sea through a narrow opening between tall cliffs some 40 km north of the central business district. rapid expansion has led to development of the western areas and in particular the vast flood plains that were previously used as arable or farming land. it has recently become apparent that the risks to the new populations were rising to unacceptable levels, and various limits on development were initiated. as part of the new south wales government’s strategy for disaster mitigation, in the event of a flood, great emphasis was placed on informing residents of areas likely to suffer inundation, and to prepare them for safe evacuation. the safe development of the greater western sydney relies on the success of such plans. in this study the authors have investigated the effect of the government initiatives on the local population, and have re-analysed the flood data for the last 200 years using the lieblein best linear unbiased estimator (blue) technique. the results obtained have established more reliable estimates of the yearly flood probabilities and have highlighted the need for a greater effort from the new south wales authorities to inform the residents of the area of the hazards posed by likely floods. the context in the united states, in 1968, the national flood insurance act was passed that required the president to report to congress on progress towards achieving a "unified national program for floodplain management"(johnston associates, 1992). this was probably the first recognition worldwide that the management of floodplains, and their development for human usage, should combine development with an appreciation of natural resources and the importance of ecological resources. such a wise recognition of the importance of natural resources was also appreciated in australia, and in particular the approach was used in the sydney basin. the hawkesbury river flows onto the western sydney basin from the south, and is contained, just before the town of wallacia, by the warragamba dam. construction on the dam commenced in 1946 and was completed in 1960. in 1986 the new south wales state government decided that, as a matter of policy, the flood plain “should not be unnecessarily sterilized and development should not be unreasonably restricted” ( hawkesbury-nepean flood management committee, 1997). in 1993 the state government decided that the flood hazard would be significantly mitigated by raising the height of the warragamba dam by 23 meters. however, a subsequent environmental impact study resulted in that plan not being carried through. instead a new spillway was introduced together with usage plans intended to offset the effect of flooding. this spillway now assures the safety of the dam from collapse by overtopping, but does not significantly affect the risk of severe flooding in the downstream plains. the topography of the area implies that it is highly likely that in the event of an extreme flood, towns in the area would first be isolated and then completely inundated. under such a circumstance the influence of flooding risk on infrastructure development in western sydney by professor alan p jeary and ian p m jeary page 58 the australian journal of construction economics & building knowledge of the potential hazard by residents of extreme importance it is clear that the chosen strategy is one in which, in the balance of competing risks, the requirements of the natural environment have gained ascendancy over the safety of human inhabitants of the greater western sydney region. under this circumstance the understanding of the risks involved, by the inhabitants, is of paramount importance. indeed the strategy of the state government of new south wales includes the introduction of information channels to residents. additionally some development control measures have been introduced into areas controlled by individual local councils. as a result of this background it was decided that a study of a town in the middle of the region would be undertaken to ascertain whether or not the residents were fully aware of the issues involved in the potential for flooding of the area. the area of the study situated near the center of the region under investigation is the town of windsor. this is one of the five macquarie towns initiated by one of the first governors of the new settlements in the late 18th century. the builders of the town recognized the danger of flooding and sited the new dwellings atop an outcrop near a bend in the hawkesbury river. this outcrop rises to a height of a little more than 20 meters above the australian height datum (ahd). windsor, today, is still mainly located on the outcrop, although the town now counts a population of approximately 6,000 and has spread somewhat from its’ early establishment. areas of low-lying land, much of which is often under water, surround the town. the bridge at windsor crosses the hawkesbury river and represents a datum for the measurement of the height of flood waters. the bridge is 7 meters above the normal river level. theoretical studies of flooding risk over a period of several years’ studies of rainfall runoff and stream flow computer models have been built up and used to model flooding behaviour in the region. these studies have concentrated on benchmarking the 1867 flood. this was a major event in which water rose to 19 meters above the normal river level. this was 12 meters above the bridge at windsor and 3.7 meters above today’s urban development control level at windsor it is important to recognize that the 1867 event, though extreme, does not represent the maximum credible threat. an analytical study reported that the probable maximum flood (pmf) would result in floods to a depth of approximately 26 meters ahd, and that such an event would be likely to result in 60,000 evacuations and many deaths. the entire area would be disrupted for a period in excess of two years. the report estimates the annual probability of such an event as 1 in 100,000. a record of the depths to which flooding has occurred in the windsor area is presented in table 1, with depths noted relative to the australian height datum. the statistics of flooding at windsor the data in table 1 were subjected to a lieblein blue analysis (lieblein, 1974). the results of such an analysis give a predictor for the event which has an annual probability of occurrence of 1 in 50. the blue analysis gives more weight to the main body of the data, so that the estimates will not be unduly biased by an extreme event that occurs during the data collection period. for this particular data set, it is widely agreed that the pmf level approximately represents the 1 in 250 event. the data set has been collected for only 200 years and so the use of the blue analysis is favored here. the influence of flooding risk on infrastructure development in western sydney by professor alan p jeary and ian p m jeary the australian journal of construction economics & building page 59 table 1 floods recorded at windsor (nsw) year month height (m) 1799 3 15.25 1800 3 12.2 1806 3 14.64 1806 8 14.33 1806 10 9.15 1809 5 14.64 1809 8 14.49 1816 6 13.88 1817 2 14.03 1819 2 14.03 1819 6 14.03 1857 7 9.91 1857 8 11.44 1860 2 8.16 1860 4 11.21 1860 7 10.45 1860 11 10.98 1861 4 8.31 1864 6 14.64 1864 6 9.91 1864 7 10.98 1866 6 7.93 1866 7 8.31 1867 4 6.4 1867 6 19.26 1869 5 11.21 1870 4 13.72 1870 5 10.83 1871 5 11.21 1873 2 12.66 1875 6 11.82 1877 5 9.15 1878 2 8.08 1879 9 13.91 1879 9 10.52 1889 5 11.74 1890 3 12.12 1890 3 10.52 1890 6 6.79 1891 6 10.85 1892 9 8.08 1893 3 8.62 1894 3 9.68 1895 1 9.3 1897 7 6.86 1898 2 9.61 1899 8 8.08 1899 8 6.71 1900 7 14.08 1904 7 12.22 1910 7 6.4 1911 1 7.85 1912 7 6.71 1912 8 7.32 1913 5 8 1915 1 7.62 1916 10 10.83 1922 7 9.45 1925 5 7.62 1925 6 11.36 1934 2 9.15 1942 3 6.25 1942 10 7.37 1943 5 10.11 1949 1 7.32 1949 6 11.97 1950 3 9.2 1950 4 9.2 1950 4 8.54 1950 5 7.32 1950 6 9.45 1950 6 7.55 1950 6 7.34 1950 6 7.32 1951 1 8.97 1951 6 7.17 1951 9 6.71 1952 6 9.35 1952 7 11.61 1952 8 9.71 1952 8 8.77 1955 5 9.76 1956 2 13.7 1956 2 11.56 1956 2 8.95 1956 3 9.81 1956 3 7.44 1956 5 7.01 1956 6 9.53 1961 11 15.1 1963 4 8.54 1963 5 7.93 1963 6 8.79 1963 8 9.43 1964 6 14.51 1967 8 8.76 1969 11 10.06 1971 2 5.64 1972 1 6.8 1974 1 6.6 1974 3 7.24 1974 4 8.53 1974 5 10.28 1974 6 7.82 1974 8 9.39 1975 6 11.1 1975 7 6.48 1976 1 9.22 1976 3 7.92 1977 3 8.8 1978 3 14.31 1978 6 9.55 1984 7 8.01 1984 11 7.01 1986 8 11.3 1988 4 12.65 1988 7 10.74 1989 4 9.07 1990 4 9.8 1990 8 13.36 1992 2 11 the influence of flooding risk on infrastructure development in western sydney by professor alan p jeary and ian p m jeary page 60 the australian journal of construction economics & building table 2 statistics relating to the depth of inundation at windsor annual probability of occurrence blue conventional h50=16.0 conventional h50=17.6 1 10.2 5.4 5.9 10 15.0 12.8 14.0 20 16.2 14.2 15.7 50 17.6 16.0 17.6 100 18.6 17.2 18.9 200 19.5 18.3 20.2 500 20.7 19.7 21.7 1000 21.6 20.7 22.8 10000 24.2 23.7 26.1 100000 26.6 26.4 --- in column 2 of the estimates (in table 2) the conventional approach has been fitted to the data published in a previous study. in this case the data fit the estimates for the 20,50,100 250 and 100,000 year events. this estimate also gives a more realistic estimate of the short duration events. data for return periods other than that for 50 years are calculated using a conversion factor of the form: 50ln ln + + = n rn st where st is the factor by which the 50year event has to be multiplied to obtain the estimate for the once in r years event. “n” is a factor determined by experiment. it’s value lies between 0.5 and 5. in column 2 the data have been fitted using an appropriate value of ‘n’. whilst, the estimate for the 1 in 50 year event is likely to be more precise using the blue analysis, it appears to overestimate the flood risk at very short return periods. accordingly, the conventional methodology has been used to produce the return period risks in column 3 of table 2, using a starting point of the 50 year prediction from the blue statistic. this column gives the estimates that are preferred by the authors because it combines the precision of the 1 in 50 year estimate with the lower level flooding for short return periods that correlate well with observation. the data from column 3 indicate that the inundation level for the 250-year event is greater and the risk of occurrence for the pmf is higher than had been previously thought. these values should be considered in the light of the deck of the bridge at windsor being 7 meters above the normal river level, and the limit of urban control of development being at 15.3 meters above the normal river level. no flood that has risen above the deck of the windsor bridge has occurred since 1990. recent events in which the flood level was greater than 12 meters above the normal river level occurred in 1990, 1988, 1978 and 1964. governmental response to the risk as increased analysis capabilities have become available it has become apparent that the warragamba dam could suffer damage or even collapse in the event of a very large flood. the implications for downstream populations are dire. the new south wales (nsw) government has proposed many solutions to this problem. in 1989 the dam height was increased by 5 meters and additional strengthening work was carried out. after the influence of flooding risk on infrastructure development in western sydney by professor alan p jeary and ian p m jeary the australian journal of construction economics & building page 61 the proposal to raise the height of the dam by a further 23 meters (referred to above) was turned down on environmental grounds the nsw government set up the hawkesbury-nepean flood management committee to advise on how best to deal with the risk. that committee produced a major report in 1997 and one year later work on an auxiliary spillway was started. this is due for completion in november 2001. the objective of the spillway is to allow sufficient run-off of flood water in the event of an extreme event, such that the dam would not be breached. this water would be released onto the floodplain. the committee reported on a number of issues including engineering aspects, flood emergency plans, likely damage in floods and a review of public awareness. in its’ report the hawkesbury-nepean flood management committee stated: “heightened public awareness is essential to generating the best public response to evacuation. studies have shown that such public awareness `reduces evacuation time, reduces actual flood damages (particularly commercial and industrial) and helps to reduce the post flood trauma of the affected population” the cost of implementing such a strategy of communication was estimated to be between $0.5 million and $1 million annually. the investigation clearly, one of the main issues involving the security of residents of the floodplain in western sydney is the awareness of residents of the risk associated with flooding. indeed the hawkesbury-nepean flood management advisory committee identified this factor as one of the most important for an effective community response to a large flood. as a result a survey was carried out in the windsor area. the objective was to test the hypothesis: “residents of windsor are not generally aware of the flood risk in the area.” the survey was applied by delivering questionnaires to a selection of houses in the area bounded by the 10 and 20 meter height (ahd) contours. the 20 meter height contour represents the limit of the area of inundation by the maximumrecorded flood in 1867. the surveyed properties were therefore restricted to areas that would be inundated by levels of flooding up to 10 meters. stamped addressed return envelopes were included with the questionnaire. 100 questionnaires were delivered and the response rate was 33%. the purpose of this survey has been to see how effective the administration’s efforts to raise public awareness of the flood risk have been. for this purpose three questions were asked. the first question asked, “on average how often do you think your property might be affected by flooding”. the purpose of this question was to determine what proportion of the population thought that flooding would never affect their property. note that the recipients were asked if the flooding would affect their property. in fact properties would be affected by more than just water. the hawkesbury-nepean flood management committee estimated that in the event of a repeat of the 1867 flood, properties would be subjected to loss of the electricity and water supplies, the appearance of raw sewage in the water and long-term disruption to the surrounding areas. notwithstanding this scenario, the maximum credible flood for the area is a further 6.4 meters depth at a total of 26 meters ahd (australian height datum). the second question was intended to test the resident’s knowledge of the height to which flood waters could rise. no reply of a flood level greater than 2 meters was received. the third question asked whether the respondents were aware of floods having occurred in the area. the influence of flooding risk on infrastructure development in western sydney by professor alan p jeary and ian p m jeary page 62 the australian journal of construction economics & building it was assumed that the present community’s experience was limited to the floods of 1964 (14.5 meters) and 1978 (14.3 meters). however, one 87-year-old respondent mentioned floods dating back to 1922. reference was also made by several respondents to the floods in 1964 in which the waters of the hawkesbury river and south creek (on opposite sides of windsor, met in the main street of windsor (george street). residents gave much helpful information, and the authors are extremely grateful for their contributions. the replies to the questionnaire and their significance are detailed below: question 1: on average how often do you think your present property might be affected by flooding? respondents replied as follows: table 3 summary of responses about perceived flood risk recurrence frequency % cumulative percentage no. of replies never 36.4 36.4 12 every 1 year 0.0 36.4 0 every 2 years 6.1 42.4 2 every 10 years 12.1 54.6 4 every 50 years 9.1 63.6 3 every 100 years 27.3 90.9 9 every 250 years 9.1 100.0 3 the hawkesbury-nepean flood management committee estimates that for the windsor area electricity would be disrupted for 2 days to one week for a 1 in 10 year flood. at the 1 in 50 year level of flood both telecommunications and gas would be lost and electricity would be lost for up to six months. for the 1 in 500 year flood raw sewage would appear in the water. the implication of the results of the survey is that 54.6% (+/6.6%) of residents in windsor are aware of the true risk of disruption caused by flooding. probably of even more significance is that more than 1 in 3 residents do not appear to think that there is any risk of disruption whatsoever. question 2 this question asked: how high up your house would you expect the water to rise? 23 replies were received. 10 respondents gave no reply to this question. 19 respondents thought that the flood waters would rise to less than 1 meter, whilst 4 thought that the waters might rise to as much as 2 meters. for the maximum credible flood the flood waters would rise to inundate all of windsor. the level of flooding in some of the surveyed houses would be as much as 8 meters (e.g. mileham street). however, residents clearly associated the maximum risk with a level of flooding that is a risk level somewhere between the 20 and 50 year return periods. interestingly, this would correlate with the memory of current residents. question 3 asked: the influence of flooding risk on infrastructure development in western sydney by professor alan p jeary and ian p m jeary the australian journal of construction economics & building page 63 are you aware of any floods in the history of your area? all 33 respondents replied to this question with 29 indicating that they were aware of floods and 4 people not being aware of any floods in the area. this represents 12% (+/1.4%) of the surveyed population not being aware of historical floods in the area. the last major flood was in august 1990 when the height of flooding was 13.4 meters (approximately the 1 in 10 year return height). other comments to come out of the survey were as follows: one respondent had been sensitized to the risk of flooding by having been resident in katherine when the australia day floods occurred there. one resident reported this as being the longest period without flooding in their memory. this was a period of greater than 8 years. the average was reported as being one every three years. one resident helpfully noted the height of their curb above the mean water mark of the river. one long term resident of the region supplied detailed lists of floods through the last 200 years and a cutting from a newspaper dated june 16th 1995 detailing the flood evacuation plans for the area. this particular person phoned and supplied a great deal of extremely useful information. one respondent living in south windsor reported that the 1964 flood came close to that particular residence. they reported that as far as they knew they were out of the flood area. one respondent reported that in the 1964 flood when the waters met at the bottom of george street their property on higher ground was not affected. this respondent also reported that the 1867 flood was the only one known to affect their property. significance 33 replies were received. the population of windsor is approximately 6,000 (source: australian bureau of statistics 1996 census). this means that at the 95% confidence level results are accurate to within 12% for results evenly split between positive and negative replies. results in which there is other than a 50-50 split give a slightly better accuracy. comments the implications from the study are the following: approximately half of the population of windsor is unaware that flooding in their area is likely to affect them with a 10% probability of occurrence each year (1 in 10 year event). residents of windsor are generally unaware of the risks posed by the maximum credible flood in the area (at the 99% confidence level). approximately 60% of residents were aware of the risk of flooding, but assumed that the level of flooding would be restricted to the same as in the flood of 1867. a worryingly large percentage of respondents (12%) think that there is no risk of flooding at all in the windsor area. it is clear from the study that government campaigns for public awareness of the risks posed by flooding in the windsor area have not yet had the required effect. whilst there is a considerable amount of knowledge within the windsor community about the risk of flooding and of the historical effects of flooding (including the 1867 flood), there is almost no perception that greater floods are possible. (such flooding may even become more probable with more human development of the land). conclusions the hypothesis tested has been accepted at the 95% confidence level. this implies that the main governmental strategy for the influence of flooding risk on infrastructure development in western sydney by professor alan p jeary and ian p m jeary page 64 the australian journal of construction economics & building mitigating flood damage through passing information to residents has not been effectively implemented. additionally, whilst there is considerable knowledge about flooding within the community at windsor, the limit of resident’s memories tends to limit the perception of risk. finally, there is almost no perception of the risk of the maximum credible flood (tested at the 99% confidence level). put another way, any attempts by government to make the public aware of the flood risk in windsor have not been completely effective. in particular approximately 10% of the population is completely unaware of the risk of any type of flooding, approximately half of the population is aware that flooding (even at lower levels) may affect their, and all of the population is unaware of the risk posed by the maximum credible flood. discussion residents, in the windsor region, appear to be working on the same assumption as did governor macquarie when he founded the settlement, in that they assume that the siting of the town on a ridge gives complete protection against flooding. the new south wales government response has followed the model developed in the usa in attempting to use a wider concept towards the mitigation of risk. this concept adopts a wide view of human settlement and addresses concepts of humankind’s place on the planet. as a result risks are taken that would be avoided using the older style of engineered approach. however, a vital constituent of this approach is to inform those at risk of the dangers. indeed the nsw government’s approach recognized this factor and assessed its implementation cost. it is apparent from this study, that the government information schedule has been ineffective in making residents of the windsor region aware of the risks run by living in the area. as a result, the risk to the settled population is greater because the lack of an appreciation of risk would be likely to lead to a slower response time in the event of danger. in turn this would be likely to lead to greater injury and loss of life than is achievable when the extreme events occur. it is recommended that authorities should revisit the question of sensitizing the population to the risk and to means of escape in the event of a flood that exceeds the community memory. acknowledgements the authors gratefully acknowledge the information supplied by several people. in particular, maps and information supplied by ms. j. stephens is gratefully acknowledged. a small grant to enable the survey to be carried out from structural survey hong kong ltd. is gratefully acknowledged. references 1. l.r. johnston associates, 1992: floodplain management in the united states: an assessment report. contract no. tv-72105a for the interagency floodplain management taskforce. 2. hawkesbury-nepean flood management committee, 1997: achieving a hawkesbury-nepean floodplain management strategy. isbn 0 7313 0342 3. 3. lieblein j., 1974: efficient methods of extreme value methodology. national bureau of standards, washington. technical analysis division. nbsir 74602. the australian journal of construction economics and building [vol 5, no 1] �� 5 capitalising experiential knowledge for guiding construction procurement selection s. thomas ng (department of civil engineering, the university of hong kong, hong kong), chris d.t. luu (lahey constructions pty ltd., new south wales, australia) and r. martin skitmore (school of construction management and property, queensland university of technology, brisbane, australia) abstract capitalising useful knowledge for construction procurement selection (cps) decisions would provide a valuable asset to client organisations, as the successful/unsuccessful experience would help decision-makers avoid the occurrence of similar errors and ensure the most suitable procurement system is employed for a construction project. as a result, there is a need to examine the potential for developing a knowledge management model to capture and reuse experiential knowledge to guide cps decisions. this paper begins by identifying a suitable approach for managing cps knowledge. this is followed by a discussion of the knowledge required for cps decision support. a prototype knowledgemanagement model is developed, using the case-based reasoning (cbr) approach, and a mechanism for the retrieval and reuse of knowledge for guiding cps decisions is elucidated. the results indicate that cbr is a suitable tool for formulating the procurement selection parameters and selecting a suitable procurement system for a construction project. this is primarily because the cbr approach is flexible enough to allow closely matching historic cases to be retrieved as well as enabling the decisionmaker to adapt the proposed solution based on the predominant characteristics of the client, project and external environment pertinent to the current project. keywords: case-based reasoning, construction procurement, knowledge management, procurement selection parameters. introduction industry is becoming more enthusiastic about the use of multifarious alternative construction procurement systems, and choosing an appropriate method of procurement to satisfy the unique client and project requirements is recognised as one of the most important activities involved today (naoum, 1994; sharif and morledge, 1994; rwelamila and meyer, 1999). over the last two decades, researchers have attempted to develop a reliable decision tool for construction procurement selection (cps). these include the procurement path decision chart (nedo, 1985); procurement rating (franks, 1990); multiattribute (bennett and grice, 1990; singh, 1990; ambrose and tucker, 1999); multivariate analysis (chan et al., 2001); multicriteria/multiscreening (alhazmi and mccaffer, 2000); analytical hierarchical process (cheung et al., 2001); discriminant analysis (skitmore and marsden, 1988); decision support system (kumaraswamy and dissanayaka, 2001); and knowledge-based system (brandon et al., 1988; mohsini, 1993) models. although these research models could improve the transparency and objectiveness of cps decisions, there are still problems to be resolved before they can become credible enough for practical usage. one major concern is to cater for the implicit interrelationships among the procurement selection parameters (psps) and their corresponded importance weightings instigated by diverse client’s characteristics and needs, project features, and external environment (ireland, 1985; nahapiet and nahapiet, 1985; hamilton, 1987). besides, as there are hardly any hard and fast rules/guidelines, the suitability and likely outcomes of a particular procurement system are hard to envisage. ward et al. (1991) and masterman (1992) advocate cps decisions being realistically founded on experiences of previous similar examples, coupled with intuitive evaluations of the distinctive requirements of the current situation. however, it would be virtually impossible for decision-makers to acquire and/or recall all the experiential knowledge needed, as there is a diverse continuum of procurement options in practice (kumaraswamy and dissanayaka, 2001). successful or unsuccessful experiences pertinent to each cps decision should be systematically encapsulated and managed (cf: storey and barnett, 2000) to ensure useful knowledge being retrieved for strategic/tactical decision support (silver, 2000). the concept of knowledge management has been introduced to construction project risk management (tah and carr, 2001) and selection of construction methods (udaipurwala and russell, 2002), and there is a need establish the extent to which knowledge management techniques can be effectively applied to cps. this paper aims to develop a knowledge management model for capturing and reusing experiential knowledge to guide cps decisions. a suitable approach for managing cps knowledge is first identified. this is then followed by identifying the knowledge to be captured for cps. finally, the mechanism for the retrieval and reuse of knowledge is elucidated for guiding cps decisions. selection of knowledge management approach the principle role of a knowledge management system is to capture and disseminate relevant knowledge. however, to enhance performance and to increase the chance of project success (ofek and sarvary, 2001; kamara et al., 2002; mansell, 2002), it is desirable to create new (better) solutions based on the knowledge thus far accumulated (cf: o’leary, 1998). this requires the incorporation of reasoning and justification mechanisms (hsieh et al., 2002). more importantly, the distinctive characteristics of cps should be considered when selecting an approach for managing knowledge. these include: (i) the existence of diverse characteristics, requirements and conditions unique to the project; and (ii) an implicit interrelationship of the psps that describe the distinctive characteristics of the client, project and external environment. the notion of framing “a contextualised piece of knowledge representing an experience” in a case (kolodner, 1993, p.13) has rendered the cbr approach an attractive option for managing cps knowledge, as recalling incident (i.e. constraint ® solution ® outcome) by case and reusing/adapting the solution of a similar case to suit the current situation is a frequently applied approach to solving practical problems (aamodt, 1990; barletta, 1991). furthermore, by storing and retrieving cases in a mega-knowledge format (aamodt and plaza, 1994), cbr approaches should have a high potential for modelling the procurement selection decisions under a complex dynamic environment. the australian journal of construction economics and building [vol 5, no 1] �� knowledge to be captured to identify a process of cps and knowledge required for supporting cps decisions, semi-structured interviews were conducted with five experts with experience in this domain. the experts interviewed included managers of major client (including four governmental and one private) organisations in australia. the results of the interviews indicated that the cps process involved: (i) the formulation of psp’s; and (ii) the selection of an appropriate procurement system, and the knowledge required is different for each of these two stages. knowledge pertinent to psps formulation stage since the aim of this stage is to establish a set of psps that would adequately represent the characteristics and requirements of the client, project and external environment (cf: ambrose and tucker, 1999), the knowledge required should be composed of both the problem and solution parts (figure 1). the problem part should encapsulate the knowledge regarding: (i) the features of all existing projects for which various procurement systems were employed; (ii) the characteristics and needs of the clients; and (iii) the properties of the external environment that encountered by clients. luu et al. (2003) summarised the factors that could influence the choice of the psps (table 1). the solution part focuses on the knowledge pertinent to the psps, their weightings adopted in previous cps evaluations, and reasons/justifications for previous solutions. problem part external environment client’s characteristics & needs project’s features solution part psps & weightings figure 1: knowledge pertinent to psps formulation stage client’s characteristics & needs project’s features external environment experience experience level of the client and his or her organisation in the construction domain, i.e. primary experienced, secondary experienced type nature of the client’s organisation in reference to this particular project; i.e. government bodies, investors, developers, occupiers, etc. in-house capability client’s capability to use their own resources in this particular project and client’s wishes to be directly involved in this particular project. time limitation does the client require any restrictions on time in this particular project? financial limitation does the client have any restrictions on finance in this particular project? project scale size of the project measured by its estimated value building type type of the proposed building in this particular project, i.e. commercial, residential, industrial, etc. construction type type of the construction method in this project, i.e. new construction, refurbishment, combination of both site conditions relative assessment of conditions of various site factors having impact on the project procurement such as site access and egress, foundations, etc. site location geographical location of site market competition level of competition in the market with regards to this project environmental impact the impact of natural environment on the project procurement process, i.e. inclement weather, natural disasters, etc. cultural impact the impact of cultural differences on the project procurement process political impact the impact of political activities on the project procurement process resource availability availability of contractors and subcontractors who have enough expertise to fulfil the requirements of project specifications availability of technology to carry out a certain construction techniques required by the project specifications availability of materials as required in the project specifications i) ii) iii) table 1: factors influencing the formulation of psps the australian journal of construction economics and building [vol 5, no 1] �� knowledge pertinent to procurement selection stage during the procurement selection stage, the set of psps formulated during the preceding stage need to be used to establish the relevance and appropriateness of each procurement system. in addition to comparing the benefits and weaknesses of each procurement system against the predominant characteristics and requirements of the client, project and environment, decisionmakers have to recall the outcomes of previous similar examples. therefore, the knowledge related to this stage should consist of three major components – problem, solution and outcome (figure 2). the problem part should represent the knowledge of the psps used in the previous cps processes these psps being related to time certainty, cost certainty, speed, flexibility, responsibility, complexity, price competition, risk allocation and quality as illustrated in table 2 (see sidwell, 1984; nedo, 1985; nahapiet and nahapiet, 1985; skitmore and marsden, 1988; walker, 1989; hughes, 1989; masterman, 1992; masterman and gameson; 1994; love et al., 1998; rowlinson and mcdermott, 1999; ambrose and tucker, 1999; alhazmi and mccaffer, 2000; chen, 2000; kumaraswamy and dissanayaka, 2001). procurement selection parameters (psps) & weightings problem solution outcome procurement system & sub-managerial system adopted with justification successfulness or failure of the procurement system chosen figure 2: knowledge pertinent to procurement selection stage psps description speed a,d,e,f speedy procurement process, e.g. a desire to have the project completed as soon as possible. cost certainty b,c,d,e,f price and the stipulated time and knowledge of how much the client has to pay at each period during the construction phase. a reduction in unanticipated extra cost over-run time certainty b,c,d,e,f degree of certainty that the project will be completed on the date, which is agreed by client and contractor when signing the contract. a reduction in unanticipated extra time over-run. flexibility a,b,d,e,f ability to accommodate design changes during both design and construction periods responsibility a,b,c,d,e,f an involvement in, and a need to be kept informed about, the project throughout its life complexity a,d,e,f client may specify innovative design/ high technology building and require particular subcontractor, or constructability analysis quality level a,d,e,f contractor’s reputation, aesthetics and confidence in design. a building which reflects the clients activities and image risk allocation/avoidance a,d,e,f a wish to identify risks and uncertainties during the procuring process price competition a,c,d,e,f covering such issues as value for money, maintenance, costs and competitive tendering. note: a bennett and flanagan (1983); b hewitt (1985); c masterman and duff (1994); d nedo (1985); e skitmore and marsden (1988); f singh (1990) table 2: common psps the australian journal of construction economics and building [vol 5, no 1] �� the knowledge in the solution part should, however, contain the procurement system used, and its sub-managerial systems, such as the tendering method and contractual arrangement, etc. as for the outcome knowledge, feedback detailing the successfulness of the procurement system adopted in a particular project would be beneficial. according to kumaraswamy and dissanayaka (2001), the successfulness of a construction project can be measured in terms of the reduction in capital and lifecycle costs, greater cost and time certainty, shorter procurement duration, better quality, more effective and efficient decision-making and communication, and minimisation of disputes. it would be useful if both successful and unsuccessful construction projects are recorded in the knowledge-base, as the failure examples can alert decision-makers to the potential problems that may occur should a particular procurement system be used under certain constraints (cf: sycara and miyashita, 1994). retrieving and reusing knowledge for decision support the basic procedure of retrieving and reusing cps knowledge through the cbr engine is illustrated in figure 3. in essence, the underlying mechanism of cbr is to retrieve “similar” historic cases and knowledge based on the characteristics of the new scenario. as with any other real-world domains, it is difficult to have a historic construction project that fully resembles the current case. therefore, not only is it necessary to establish whether the new and retrieved cases are similar enough to provide decision-makers with the relevant and reliable knowledge, but it is also desirable to have a high level of flexibility when the cases/knowledge are retrieved and reused. therefore, during both the psps formulation and procurement selection stages, cases are retrieved according to a similarity matching concept known as nearest neighbour retrieval. once the new solution is adopted, the knowledge is stored automatically for future use in the case repository. becomes historic knowledgebecomes historic knowledge client’s characteristics & needs, project’s features, external environment knowledge retrieved from previous case solutions for comparison amended solution to meet current situation previous knowledge on construction procurement selection represented as cases in cbr psps and recommended weighting for current project adapted solutions based on the outcomes and characteristics retrieved knowledge on solutions & outcomes of previous case procurement system for the project & justifications psps formulation stage procurement selection stage figure 3: basic mechanism of retrieving and reusing the stored knowledge psps formulation stage an interface, as shown in figure 4, is designed to capture the characteristics and requirements of the client, project and environment pertinent to a new project. to minimise data inputting time and errors, a list of possible values is provided through a pull down menu against each input item. for instance, the decision-maker can classify his/her organisation as a “primary inexperienced” or “secondary experienced” client (figure 5). the system also accepts blank entries when the decision-maker is unsure of the most appropriate answer to describe certain client/ project characteristics. the predominant characteristics of all stored cases can be compared with the data entered by the decision-maker, and the similarity of each attribute computed based on the following formula: similarity score = attribute score x 100 maximum presented score where: attribute score = the sum of matching scores between attribute values of the stored and presented cases. maximum presented score = attribute score when the stored case is exactly identical to the presented case. the australian journal of construction economics and building [vol 5, no 1] �� figure 4: interface for extracting the characteristics of client, project and environment figure 5: possible values for the attribute of “client experience” once the individual scores are generated for all attributes, a final similarity score for each case (figure 6) can be derived for cases to be rank-ordered. the five cases with the highest similarity scores are then presented through the user interface for consideration. as shown in figure 6, preliminary information about the most similar historic case, i.e. the case features and client’s satisfaction, are highlighted. depending upon the project performance, the decisionmaker can decide whether to further examine the particulars of the most similar case or to browse the preliminary information for the next most similar case. further details on the psps used (figure 7) can be obtained by pressing the “view details” button. if the knowledge of the most similar case is applicable to the current project, the “accept recommendation and move to the next module” button (figure 7) can be checked and a screen as shown in figure 8 presented to initiate the procurement selection stage. figure 6: cases retrieved during psps formulation stage figure 7: solution adopted in the previous case during psps formulation stage the australian journal of construction economics and building [vol 5, no 1] �� figure 8: interface for altering the psps and weightings at procurement selection stage procurement selection stage the knowledge extracted through the preceding stage provides an initial but valuable guideline to the decision-maker for establishing which psps should be used for the procurement selection stage. nevertheless, the decision-maker might still wish to modify the psps to reflect the inherent discrepancies between the new and old cases; and this can be achieved by making the necessary adjustments to any of the items as illustrated in figure 8. like the preceding stage, the nearest neighbour retrieval approach is used to compute the similarity score for each case based upon the input features. the decision-maker can also request the system to display the details of the most similar case for further evaluation. as depicted in figure 9, knowledge regarding the procurement system, tendering method, contract type, and client’s overall rating is disseminated through the user interface. those not familiar with the proposed procurement option can simply click on the “system details” button to view the features, advantages and disadvantages of the recommended procurement system. when users are convinced that the solution and possible outcomes are suitable for the current project, they can adopt the previous solution for the new project. figure 9: solution and outcome of the retrieved cases at procurement selection stage however, since the intrinsic characteristics and requirements of the new and retrieved cases may still differ slightly, modifications to the historic solutions would be inevitable. as a result, a technique known as critic-based adaptation (brown and lewis, 1993) is built-in to allow users to go through the retrieved solutions sequentially and modify the solution corresponding to a particular step to suit the predominant situation. the “adaptation strategy” section in figure 10 outlines all the details used in arriving at the recommended solution, and these include the details of the new and historic cases. driven by pre-determined rules/formulae, and based on the extent of difference between the new and retrieved cases, the model will prompt the user to consider modifying certain psp(s), such as “speed” as in the case illustrated in figure 10 (refer to the “yes/no” status in the “to be adapted” column). by clicking the “actions to improve” button, the user is presented with different alternatives to modify the solution and the revised recommendation is made to the decisionmaker for final consideration. this not only allows for ‘what-if’ scenarios, but also provides a more relevant and reliable solution to improve the chance of project success. the australian journal of construction economics and building [vol 5, no 1] �� conclusions this paper has examined some methods for capturing and reusing cps knowledge. as the characteristics and requirements of the client, project and external environment differ from one project to another, and therefore give a diverse continuum of procurement options, the approach to managing the knowledge must be very flexible. cbr is considered a suitable approach for storing cps knowledge, as not only can it retrieve close matching cases based on the nearest neighbour retrieval mechanism, but it can also allow users to adapt the solution of the retrieved case to suit the predominant characteristics of the current project. knowledge to be captured will be specific to the two main cps stages. during the psps formulation stage, the knowledge related to the client’s characteristics and needs, project features, and external environment (the problem part) as well as the psps and weightings (the solution part) will be encapsulated. knowledge pertinent to the procurement selection stage includes the features of the psps and weightings (the problem part). furthermore, the procurement option, tendering method, and contractual arrangement (the solution part) together with the client’s satisfaction (the outcome part) should also be considered. clients and consultants should consider developing and maintaining a knowledge repository for cps to capture useful knowledge such as factors governing the selection of procurement method, the reasons for selecting a procurement approach, as well as the project outcomes caused by the procurement method selected. such knowledge would serve as a reference to clients and consultants when selecting a procurement method for a project of similar characteristics and requirements. a prototype knowledge management model for cps was developed in accordance with the cbr concept, and the functionality of the model has been elucidated in this paper. the prototype shows that psps and weightings can be formulated by referring to the solution of similar historic cases, and that this knowledge can then be used for retrieving a project with similar characteristics to the current one. by examining the procurement option adopted by the most similar project (and its outcome), decision-makers would have an idea as to which procurement system to opt for (and its potential outcome). the provision of an adaptation strategy also allows for ‘what-if’ scenarios, which would be 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(1991), ‘objectives and performance in construction projects’, construction management and economics, vol.9, pp.343-353. editorial assoc. prof. peter stewart head, department of property, construction and project management rmit university welcome to the december 2003 issue of the australian journal of construction economics and building. this edition holds an interesting series of papers on topics ranging from the role of the professions to education . the first paper sees loosemore discuss the difficulties of implementing reform within our industry. he argues that to achieve these reforms then we will need to fundamentally change the way that construction projects, construction companies and the government-industry interface are managed. given the fragmentation of the industry and the project based nature of our work, one can only foresee a significant challenge for our industry leaders. in the second paper, mills provides the views of industry leaders on challenges for the professions. the results of this research highlight that public status, maintenance of skills, and ethical standards, will remain the main objectives of professional societies. these findings underline the operational focus of professional groups in responding to the needs of their members and the leadership role each of these groups could take in tackling the reforms outlined in the previous paper. in the following paper, lingard and lin examine the work experiences of women in the construction industry. this paper is well written, and it encourages the reader to refiect on how rigid work practices create difficulties for some groups in our workforce. they conclude that there is a need for cultural and attitudinal change if women are to encouraged to take up site based roles in construction. oyedele, jaiyeoba and fadeyi then identify the five most important design factors influencing the quality of building projects. while the research outcomes are clearly specific to building projects in nigeria, their findings do provide interesting reading for others concerned with improving the quality of our building products. the next paper by liu, lyle and langston examine the demolition costs of projects, and make cost comparisons of demolition and deconstruction approaches. they find that the lower costs of deconstruction and the reduced levels of waste entering land fill make this a viable approach for demolition. the final paper, presented by mclaughlin and simpson discusses how teamwork and consulting skills can be developed by students undertaking tertiary study. students have found that the focus on developing these skills has enhanced their learning experience and created a more professional approach to their work. my thanks go to all members of the editorial board who provided their valuable time and expertise in reviewing the papers submitted by our contributors. i would also like to personally thank the production staff from rmit, particularly mary tomsic who has worked closely with reviewers and contributors. i hope that you find this edition as interesting as the last, and that in 2004 you will continue to publish and share the outcomes of your research with your colleagues. tftr assoc. prof. peter stewart december 2003 the australian journal of construction economics and building [vol 3, no 2j errata the incorrect figure 1 was printed on page 55 in the last edition , please see below for the correct figure, from lam , edmond , chan , albert and chan , daniel , (2003) . why is design-build commonly used in the public sector? an illustration from hong kong . australian journal of construction and building economics, 3(1) , 53-62. 12 ti ~ 10 e 0 u 8 "" ~ 6'0 !!j 01 4l!l e c: 2 !!j c::. 0 1992 1993 1994 1995 1996 1997 1998 1999 ye ar fig. 1: the trend ofthe use of d&b projects in the asd over the past 8 years (source: chan et al. , 2001) the australian journal of construction economics and building [vo l 3 , no 2] microsoft word ajceb vol.2 no.1 compiled sized.doc valerie francis and helen lingard 28 the australian journal of construction economics and building vol.2 no.1 the case for family-friendly work practices in the australian construction industry valerie francis and helen lingard faculty of architecture, building and planning, the university of melbourne introduction kanter (1977) suggests that the fate of both men and women is inextricably bound up with workplace structures and processes. the construction industry provides a hard and demanding work environment. companies operate in a highly competitive market with relatively low profit levels and pressure to complete construction projects within tight dead lines. with the threat of significant penalties for time overruns, professionals and managers need to ensure their availability while work on site continues. thus, work hours are often long and sometimes irregular. research suggests that participation in work, reflected in work hours, is negatively related to family participation and positively related to divorce rate (aldous et al., 1979). irregularity of work hours has also been identified as the most important variable affecting low marital quality among shift workers (white and keith, 1990). construction industry professionals are also responsible for the delivery of projects that could cost lives or their company's reputation should the requisite quality, planned budget or specified completion date not be met. negative work experiences, such as stress, are associated with marital and family dysfunction (barling, 1990). each project poses unique challenges and may involve the use of new construction techniques and methods. continuity of employment is dependent upon successful tendering for new projects in a highly competitive environment. in this context, employees may feel concerned about their long-term job security or may be required to relocate frequently in order to remain in employment. previous research has found job insecurity to be negatively related to marital and family functioning (larson et al., 1994) and frequent relocation is likely to place pressures on the increasing number of dual-career couples (kamerman and kahn, 1981). research evidence suggests that employees’ work experiences can have a detrimental effect on aspects of their family life, including parenting behaviour (grimmthomas and perry-jenkins, 1994), perceived conflict between work and family (o’neil and greenberger, 1994) and marital quality (hughes et al., 1992). there is growing evidence that having a supportive close relationship is positively associated with life expectancy and negatively correlated with experience of psychological distress (cramer, 1998). many employees today are finding it increasingly difficult to balance family and work commitments, particularly when long hours and unresponsive organisations are involved. managers may feel that balancing family and work should be a private matter for the individual employee. however, families are a fundamental part of society, and traditional management theory, which presupposes a lifestyle which segregates family and work spheres, is being challenged in many industries and by legislation. societal attitudes and work values are changing. we now have higher expectations of family relationships and parenting. for organisations to succeed they need to be cognisant of the needs of workers with family responsibilities. they will be compelled to from two standpoints. firstly, by changes in legislation, which stem from a social justice base, and secondly, from an organisational effectiveness perspective. this paper explores changing demographic trends and societal attitudes and discusses issues occurring at the work/family interface. some suggestions as to how the construction industry could begin to tackle these issues are provided and the paper concludes that construction companies need to change in order to recruit and retain an effective and motivated work force in the future. changing workforce characteristics one major reason for the need for change is that the nature of the australian workforce is changing in several ways. the case for family-friendly work practices in the australian construction industry the australian journal of construction economics and building vol.2 no.1 29 increased number of women in the workforce over the past 30 years the employment participation rates of men and women in australia have converged (abs, 1997 and 1994). the extent of this trend is indicated in table 1. this convergence has substantially changed the profile of the australian workforce, with many more employees now fulfilling family responsibilities in addition to working. in australia, at present, in 59% of two-parent families, both parents are in paid employment (abs, 1998). there has also been an increase in the number of lone parents in the workforce. in 1999, 47% of all female lone parents and 63.1% of all male lone parents were in the paid workforce (abs, 2000a). family responsibilities influence an individual's participation in the work force and the employment participation rate of women increases dramatically when the youngest child reaches school age (glezer and wolcott, 2000). however, many young married women, who may be considered in the child bearing and early child rearing age group are also now in employment. for example, employment among women in the 25 to 34 years of age group has risen from 30% in 1960 to 66% and is predicted to rise to 79% in 2011 (abs, 1994, 1995 and 1998). many mothers work part-time in order to better manage work/home issues, particularly when children are young, however, mothers are found to work less overtime than their male counterparts, reflecting their preference for part-time work. half of all fathers and one third of all mothers, however, regularly work overtime (glezer and wolcott, 2000). women are also more available for employment due to declining birth rates, which currently averages 1.75 (abs, 2000b). professional women tend to have fewer children than non-professional women with an average of 1.6 and also bear children at an older age. the average age of the mother at the birth of their first child is 30.6 years for professionals and 27.6 years for all mothers (various sources cited in bourke, 2000). professional women also return to work more quickly after the birth of their first child than non-professional women. it is possible that professional couples may be forgoing or delaying child bearing in order to pursue fulfilling careers (bourke, 2000). increase in the number of aged dependants the recent change from institutional aged care to home and community-based care means that responsibility for caring for elderly relatives now rests with family members. with australia’s aging population and increasing life expectancy, the number of workers with elder care responsibilities is likely to rise. in fact it is predicted that between 1996 and 2041 the aged dependency ratio will double from 18.1 to 34.8. this means that for every 100 workers there will be 34 aged dependents (gorey et al., 1992). currently 70% of all providers of personal care and home help for the aged, terminally ill or disabled persons are also in the work force (abs, 1994). this may be partly due to the fact that the employment rate of older women has increased due to increased attachment to work and for financial reasons. furthermore, together with the trend towards delayed child-bearing and the increasing employment rate among older women, the aging population is likely to reduce the availability of grandparents to provide informal childcare. table 1: employment participation rates of men and women in australia 1966 1998 men's overall employment participation rate 84% 73% women's overall employment participation rate 36% 54% valerie francis and helen lingard 30 the australian journal of construction economics and building vol.2 no.1 meeting family responsibilities these demographic changes pose challenges for individuals who must now balance their responsibilities as employees with those of parents or carers. perhaps unsurprisingly, a recent report prepared by the abs found that in dual income couples 70% of all mothers and 56% of all fathers reported that they always/often felt rushed or pressed for time. only 25.2% of couples without children reportedly experienced this feeling with the same frequency (abs, 1999a). the changing workforce has also forced some changes to work practices to accommodate those with family responsibilities, most notably by taking time off work. it has been reported that, during 1998, 58% of people with dependent care responsibilities took time off to meet family responsibilities. the average duration of this absence was 9.4 days in a 12 month period (glezer and wolcott, 2000). furthermore, it appears that both men and women take time off work for this purpose. for example, a recent tasmanian study found that 13% of all employees reported taking time off in the previous three months to care for another person, 75% of which related to the care of a sick child. of these, 43% were men and 57% were women (abs, 1999b). changing attitudes about the men’s and women’s roles the roles and expectations of women and men have changed significantly over the past 50 years. one consequence has been a shift in the importance of work relative to family and leisure. more women than ever before are in the workforce, reflecting rising educational levels, changing societal attitudes and declining birth rates. whilst we have seen wide acceptance that childless couples both work, attitudinal and institutional barriers to women’s employment resurface upon child bearing (bourke, 2000). there has been an increase in divorced, blended, defacto and single parent families which has changed the way we view family as well as the work structures that have developed from the assumption of a traditional nuclear family. although women now reach similar education levels to men and nearly equal men in employment participation they are still found in more supportive lower paid roles (squirchuk and bourke, 2000). the percentage of women managers is rising. yet, in spite of this, few workplaces have developed adequate strategies to accommodate parttime managers with family responsibilities (squirchuk and bourke, 2000). whilst mothers have traditionally spent more time with children than fathers, their increasing participation in the workforce means the time they spend is decreasing. although fathers are not spending any more time on family, child activities or domestic duties they are spending more time alone with their children. while working women still do more domestic work than men (demo and acock, 1993), a coping strategy for mothers appears to be to do less domestic work than in the past, work part-time, have fewer children and bear these children later in life. managing work and family responsibilities can therefore be very difficult for mothers in dual income families and for lone mothers. the trend to delay child bearing means that an increasing proportion of couples will face the additional responsibility of dependent children and care of elderly parents either simultaneously or sequentially. although very few studies have looked at the effect of paternal employment demands on children it would appear that work hours and job stress have an indirect effect by increasing the parenting burden on the mother and decreasing the perception of fathers in a nurturing role. however, there has been a substantial shift in the expectation of fathers’ involvement in parenting. an unpublished study by russell (reported in russell and bowman, 2000) showed that fathers now spend more time with and are closer to their children than they were 15 years ago. however, 68% of fathers said they did not spend enough time with their children and 53% felt that job and family interfered with each other. interestingly, 57% of fathers identified work-related barriers, such as expectations of longer hours and inflexibility, as being the critical factor preventing them from being the kind of father they would like to be. with the increasing acceptance of gender equity among the current and future generations, family is being seen more as a joint responsibility. a survey of men under 35 with young children who also have partners in the work force, reported that they the case for family-friendly work practices in the australian construction industry the australian journal of construction economics and building vol.2 no.1 31 were feeling more stress and were keen to change the corporate world to enable them to better balance work/life issues (russell and bowman, 2000). in another still to be published survey by russell (also reported in russell and bowman, 2000), 63% of young men said they would refuse a job or promotion that had a negative impact on their family or their partner’s career or they would refuse to transfer for the same reason. a us study of older teenagers found that 80% had mothers who work and 86% had fathers who work and 79% said they want a job that allows for personal and family activities (family and work institute, 2000). it is increasingly likely that organisations will need to address these changing expectations in order to attract good graduates and retain a motivated work force. the need for non-traditional management approaches traditional management theories and practices presuppose a lifestyle that segregates family and work spheres. dual income couples, whether as spouses or parents, participate in many roles simultaneously. managers may live with family responsibilities themselves, yet are taught that successful managers must remain detached and rational, not concerning themselves with the family concerns of employees. for example, widely accepted theories of motivation focus on employees' individualistic needs for self-actualisation, achievement and power with scant regard for employees’ needs outside the workplace (bruce and reed, 1994). this approach was largely predicated on the view that the workforce is homogeneous, comprising males of european ancestry married to full time homemakers, who would take on the sole responsibility for child-care and domestic duties. in most developed countries this presumption no longer holds true (popenoe, 1993), as the demographic characteristics reported earlier in this paper suggest. in many industries the male-centred attitudes that structure the work place are being challenged and it is women employees that are driving the changes (bourke, 2000). however as women are still highly underrepresented in the traditionally maledominated construction industry this has prohibited any widespread reforms. attitudes still exist that promote the image of the ‘ideal’ worker as a person who is able and willing to put work first, within an everexpanding time-frame. male middle managers who exercise control over many of the human resources management issues at a project level have demanded that women comply with male-oriented work practices (dainty et al., 2000). within this context, women are forced to adopt career-focused life-styles or forego professional success. however, companies should take heed of legal precedent set in hickie v hunt and hunt where it was found that the termination of a legal partner’s contract on the basis of her part-time work status amounted to indirect sex discrimination (bourke, 2000). the case is critical to professional women as it declares a new stage in equity – that is the accommodation of difference – without disadvantage. however, it is not just women whose altered requirements must be met. the increasing numbers of dual income couples mean that men and women now share, to some degree, parenting and family responsibilities. traditional management practices fail to recognise this diversity for example, management activities, such as staff allocation, that have little regard for employees’ personal needs. changes in workforce characteristics require a shift in management approach to re-examine the values, roles and stereotypes and to meet the increasing expectation that a balance between work and family life be achieved. peter senge writes, "the artificial boundary between work and family is anathema to systems thinking" (macgregor, 1999). the two must be seen as interactive in that what is positive or negative in one affects the other. in order to achieve greater equity and diversity, there is a need to challenge career structures and work practices that favour full time workers with minimal family responsibilities. however, this cultural change will not come easily in the construction industry. indeed, it has been noted that, however accepting of change they may be at the start of their career, male entrants to the construction industry inadvertently reinforce current attitudes and practices by emulating the behaviour of the managers who influenced their own career development (dainty et al., 2000). given the strength of the influences that perpetuate the status quo at middle management level, it is likely that the adoption of the non-traditional management approaches that are required valerie francis and helen lingard 32 the australian journal of construction economics and building vol.2 no.1 to accommodate the needs of the workforce in the 21st century will have to be driven from the top down. why should construction firms care about workers' families? arguments for providing a workplace that is supportive of workers' family lives are numerous but can be broken down into two main categories relating to legal requirements and organisational performance. legal requirements laws now exist at the federal level and in most australian states and territories that impose requirements on employers in respect of the family responsibilities of employees. such laws fall under the categories of industrial relations laws, antidiscrimination laws and affirmative action laws and were stimulated by domestic and international trends (squirchuk and bourke, 2000). they present compelling reasons for organisations to address the concerns of employees with family responsibilities. in 1979, australia adopted the convention on the elimination of all forms of discrimination against women and, in 1990, ratified ilo convention 156, dealing with workers with family responsibilities. both conventions have resulted in legislative reforms. the sex discrimination act (1984) and its amendment in 1994 prohibit dismissal on the basis of family responsibility. in the past decade australian organisations have moved from centralised wage fixing to a system of enterprise bargaining. it is possible that this has resulted in greater disparity between workplaces, with some employees of leading organisations achieving better conditions to help balance their work and family commitments. it would appear that australian policy and practice does lag behind that of other oecd countries. this is evidenced by the fact australia is one of the only two oecd countries that does not have paid maternity leave (sex discrimination unit, 2002). unfortunately the reality is that even when work-family provisions exist they are often grossly under-utilised as the benefits are not accepted as part of the workplace culture (lewis, 2001). while the female employees are “allowed” to use such provisions for family reasons, they are often then disadvantaged in their professional careers (apesma, 1994). furthermore, it is often considered unacceptable for male employees to use such provisions and doing so may result in them suffering severe career penalties. organisational performance both men and women have been found to experience home-to-work 'spillover' effects, whereby subjective experiences in one context impact upon performance in the other arena (barnett, 1994; eckenrode and gore, 1990). the impact of home events on behaviour in the workplace has implications for organisational performance. research suggests that the implementation of familyfriendly work policies and practices leads to enhanced organisational efficiency, morale, productivity and company citizenship and lower absenteeism and staff turnover (cass, 1993; butruille, 1990; fernandez, 1986; baden and friedman, 1981). research suggests that the quality of family and marital life moderates the impact of job role quality on psychological distress (barnett et al., 1992). thus, workers with positive subjective experiences of family and marital life are less likely to suffer mental health problems as a result of work-related stress. providing a work environment that is supportive of workers' family roles can therefore help to alleviate work-related mental health problems. dual-income couples are increasing in number (paden and buehler, 1995) and family-friendly work practices are increasingly valued and used by men as well as women (pleck, 1993; butruille, 1990; fernandez, 1986; burke, 2000). furthermore, male managers who report working in an organization that allows them to achieve a satisfactory work/family balance also report experiencing less job stress, a greater joy in work, a lower intention to quit, enhanced career and life satisfaction, fewer psychosomatic symptoms and more positive emotional and physical well-being (burke, 2000). employers should also recognise the expenses of training staff in the workplace to the point where they are sufficiently productive to generate income — us estimates suggest that, after 10 years of service, an employer will have invested a minimum of $us600, 000, in terms of salary, benefits, recruitment and training costs, for an employed engineer (maskell-pretz, 1997). employers who recognise the needs of their employees are more likely to retain staff and retention is likely to yield extensive cost benefits to an organisation. the case for family-friendly work practices in the australian construction industry the australian journal of construction economics and building vol.2 no.1 33 women are under-represented among construction industry professionals (court and moralee, 1995; agapiou et al., 1995; dainty et al., 2000). increasing the numbers of professional women in the construction industry is consistent with policies on equal opportunity but is also recognised to be an important facilitating factor in changing the construction industry's traditional adversarial culture (court and moralee, 1995). in addition, proponents of diversification argue it leads to a more responsive organization (dainty, 2000) furthermore, there is evidence that the construction industry will need to recruit more women if its future labour demands are to be met (agapiou et al., 1995). research suggests that, regardless of employment status, women perform two to three times more household work than their partners (demo and acock, 1993). therefore it is likely that women will be more likely to remain in employment that is supportive of their family responsibilities. so what can construction companies do? there are many ways companies can assist employees with family responsibilities. some of the options are presented below. the needs of individual employees will differ and change over time. it is therefore important that companies examine the needs of their employees and ensure that policies address these needs. consultation with employees through surveys, focus groups, newsletters, notices or workshops is recommended. furthermore, implementing such policies is often not enough. an organisational culture needs to be fostered within which family-supportive policies are understood to be a right instead of a benefit. employees must feel comfortable about utilising these options without being branded as being lacking in commitment to their work. child care australian companies' provision of child care surpasses that available in most other oecd countries (cass, 1993) but company sponsored child care is still rarely available to construction industry employees. while it may be difficult to provide on-site child care centres due to the limited space and temporary nature of construction work, other options for child care provision which construction companies may be able to provide include employer contributions towards employees' child care fees. provision of assistance for care of children outside school hours, during school holidays and when they are sick should also be considered. elder care an ageing population will have a serious impact on the workplace. filial obligations may actually come to eclipse child care obligations in the number of employees affected. if elder care is a need then support in the form of special family leave or an information and referral service may be helpful. flexible work practices flexible work arrangements are one of the most frequently used ways to assist employees with family responsibilities (fernandez, 1986). flexible work arrangements cover a range of practices including flexible work hours, job sharing or working from home or telecommuting. while there will always be the need to have supervisory personnel on site, advances in the capabilities and use of information technology mean that working remotely is now feasible for many professionals. permanent part-time work part-time work can assist employees in maintaining a balance between work and family. squirchuk and bourke (2000) note that amp consider their flexible work practices and part-time work options to have greatly increased their employee retention rate after maternity leave and reduced their overall staff turnover. from a company's point of view part-time work can provide flexibility to cater for peak periods (napoli, 1994). this flexibility may help construction organizations to cope with the cyclical nature of construction demand. permanent part-time work differs from casual work in that employees have a "permanent" contract of employment with the company and retain benefits such as annual leave, sick leave, parental and long service leave. however, it is important part-time workers are valued, not marginalised, and that they enjoy access to identified career paths. parental leave parental leave allows employees with a new child, either natural or adopted, to care for their child at home on a full time basis in the child's first year and still retain employment and accrue entitlements. in australia, the valerie francis and helen lingard 34 the australian journal of construction economics and building vol.2 no.1 workplace relations act of 1996, the primary legislative instrument at the federal level which regulates employee entitlements, provides employees with the opportunity to take 52 weeks of unpaid combined paternity and maternity leave, where an employee has had 12 months' continuous service with the same employer. however, australia and the united states are the only two oecd countries that do not provide paid maternity leave (sex discrimination unit, 2002). the provision of at least twelve weeks paid maternity leave is typically only available in public sector jobs (cass, 1993). some private sector firms attempting to recruit and retain female employees are reported to offer between six and twelve weeks paid maternity leave and a lesser amount of paid paternity leave (ilo, 2001). construction firms serious about attracting and retaining staff may consider the provision of paid parental leave or offering parttime work to their male and female employees. other initiatives companies that actively seek to support employees with family responsibilities do not limit themselves to meeting employees' immediate needs for child care and leave. other initiatives intended to elicit commitment and loyalty from employees include, but are not limited to: salary packaging of child care costs, school fees or elder care costs to provide a tax benefit to employees family related phone calls to enable employees to check on children or elderly relatives employee assistance programmes offering counselling for employees with personal or family difficulties. construction firms should identify their employees' priorities and be creative in formulating ways to respond to employees' work and family situations. this is likely to result in a committed, motivated and satisfied workforce. conclusions the relationship between family life and work has dramatically altered over the past sixty years, however, these changes have not been reflected in the work patterns of professionals in the construction industry. in this context, the construction industry must be careful that its professionals do not leave to pursue careers in alternative industries that provide greater benefits and more appeal. the availability and perceived quality of employment alternatives is recognised to be a key factor in job commitment and turnover. already construction is dropping in career appeal, and shortage of skills has been highlighted as an issue (agapiou et al., 1995). in the 1999 edition of the jobs rated almanac, civil engineering fell from 18th to 70th position in expressed job preference and 14 construction trades were rated in the bottom ranks. construction, above all, is a people industry and managing its human resources should be paramount if it is to remain competitive. alternative working patterns, such as job sharing, flexible working hours and parttime work have proved successful in other professions, both in australia and overseas. these initiatives could benefit many construction professionals as well. not only those employees with family responsibilities, but also those who do not wish to work full-time, for example, as a ‘lead into’ retirement, would benefit. the advantages to employers are likely to be seen in terms of higher productivity, increased retention rates and enhanced morale. however, the provision of benefits delivered through work-life human resources policies is not sufficient in itself. a workplace culture must exist within which employees feel comfortable taking advantage of alternative work options. in order to achieve such a culture, change must be driven from the top down and sensitivity training for middle managers and supervisors may also be required. the authors are currently undertaking research work to develop a better understanding of the extent to which tension exists between work and family demands among white-collar construction industry workers. the study will enhance our understanding of the value of implementing work-family and work-life employment practices in this environment and also formulate recommendations to help the construction industry to meet the expectations of professional employees. references agapiou, a., price, a. and mccaffer, r. 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(2000) from equal opportunity to family-friendly policies and beyond in: hass, l. l., hwang, p. and russell, g. (eds) organisational change and gender equity: international perspectives on fathers and mothers at the workplace. sage publications, california. white, l. and keith, b. (1990) the effect of shift work on the quality and stability of marital relations. journal of marriage and the family, 52, 453–462. microsoft word paper 1 dec.doc optimisation of construction process inspection rates using a learning approach by swapan saha et al the australian journal of construction economics & building page 1 optimisation of construction process inspection rates using a learning approach swapan saha, colin j greville and trevor a mullins, the university of western sydney, new south wales, australia introduction in a construction process, inspection/tests are an important activity. without inspection a task cannot be completed successfully. inspections/tests are normally carried out before and after the execution of a task. to prevent occurrence of errors in a construction process inspections are considered as an essential activity. the construction industry development agency in australia (cida, 1995) has estimated the direct cost of rework in construction to be grater than 10% of project cost. blyth (1995) comments in a compilation of existing case studies, that construction company, sinclair knights merz’s, rough estimate of quality system cost is 2% of turnover. blyth’s (1995) study also suggested that actual cost incurred on the quality system is difficult to determine. davis et al. (1989) reported that the cost of providing quality assurance and quality control in engineered construction was estimated to be approximately up to 5%. therefore total cost of quality, including rework, can be up to 15% of the total project cost. according to love and li (2000), cost incurred on appraisal in construction (eg. inspection and testing cost) is approximately 30% of the total quality cost or approximately up to 4.5% (30% of 15% of total project cost) of the total project cost. the total value of the annual turnover of the australian construction industry was estimated, in 1996, to be $43.5 billion (dist 1998). thus, if a 4.5% of the appraisal (inspection & testing) value applied to this total annual turnover, then the approximate cost of inspection and testing could be estimated to be $2.0 billion per annum. according to above findings a significant proportion of the project cost savings can be achieved with the optimisation of inspection policy. to achieve a 100% quality level for a constructed facility, effort and time spent on inspection may not be cost effective. therefore, optimisation of inspection costs based on certain quality levels would be valuable. the 100% inspection is the common practice in the construction industry. with the modernisation and repetition of the construction activity a lower inspection rate (the less than 100% inspection) in a construction is more realistic and cost effective. there are a number of sampling methods which are utilised to optimise the inspection cost in the manufacturing industries. methods that are available include the single sampling plan, double sampling plan, multiple sampling plan, acceptance sampling, operating characteristic curve, and attribute proportional sampling (aps) (grant and leavenworth 1988, hines and montogomery 1990 and chan and hsie 1995, dhillon 1985 and leitch, 1988). in this paper suitable sampling plans for the construction industry are briefly discussed. for a stable process, acceptance-sampling plan is invalid because the number of defectives in a sample is not correlated with the number of defective items in the remainder of the lot. a proof of this theory is given by gitlow et al. (1987). for a cost effective inspection policy acceptance sampling does not include the calculation of optimum sample size. minimum cost method is discussed in this study to overcome this limitation. the minimum cost model (mcm) is developed using different categories of quality costs, namely prevention cost, appraisal cost and failure/rectification cost. a systematic breakdown of these costs is given in this study. an example is presented to clarify how the number of tests, or inspections to be performed per construction task is dependent on the cost optimisation of construction process inspection rates using a learning approach by swapan saha et al page 2 the australian journal of construction economics & building of inspection/test and the probability of occurrence of defects. determination of sample size this section discusses the number of samples that need to be inspected to establish the level of confidence that the owner is seeing. in order to limit sampling errors the average proportion of defective constructed products which the owner is willing to accept will have to be specified. this will be in the form of p ± z()s where p is the average proportion defective (error rate), z() is the value found in normal distribution table for a specified confidence interval and s is the standard deviation for a binomial distribution expressed as follows: s = p(1 − p) n (1) where, n is sample size this will help set the minimum value of n required and, if the desired defective values are not obtained, indicate the maximum value of n required. the limits of accuracy on the number tests can be calculated using the equation (2): ul = p ± z()s (2) where, ul is the limits of acceptable proportion defective. the calculation of sample size depends on a number of factors including criteria of acceptance and rejection and cost of inspection and rejection. criteria of acceptance and rejection in the construction industry inspection/testing of every item is often done. this however is not always possible, particularly when inspection/testing is expensive and time consuming. in the case of batch construction, the inspection/testing of a few items that are selected randomly can minimise the overall construction cost including the project duration. in this case there is a degree of risk attached to both the contractor and the owner. the accept/reject criteria for the batch under inspection/testing can be based on the following hypothesis. if p ≤ q accept if p> q reject where, p is the estimated average proportion defective and q is the allowable maximum proportion defective for the lot, p and q can be defined as below: p = r/n q = c/n where r the number of non-conforming items in a sample and c is the maximum allowable non-conforming items in the sample. the sample size, n and acceptable number of defective items has to be agreed by the owner and the contractor. there are a number of sampling plans available to determine the sample size including single sampling plan, double sampling plan, multiple sampling plan, & attribute proportional sampling plan. the sampling plans are pictorially represented by the operating characteristics curve (oc curve). the characteristics of an oc curve are outlined below. operating characteristics curve in an oc curve the probability of accepting the batch, pa is plotted against the proportion of defective items (p). the distribution for p can be selected based on the sample size. the popular probability distributions available for the calculation of p include the hyper-geometric, the binomial and the poisson's distributions. further details about the oc curve can be found in hines and montogomery (1990) and grant and leavenworth (1988). optimisation of construction process inspection rates using a learning approach by swapan saha et al the australian journal of construction economics & building page 3 there are several parameters for a typical oc curve as represented in figure 1. these parameters are defined as below: • the contractor's risk (α): α is the risk of rejection of a lot where the proportion of defective is p1, • the owner's risk (β):β is the risk of acceptance of a lot where the proportion of defective is p2, • the lot tolerance proportion defective (ltpd): proportion defective in a lot of items is at unacceptable quality level, at which the acceptance probability is very low. it is associated with the principal's risk, and, • the acceptance quality level (aql): the maximum proportion of defective items. figure 1 typical oc curve p a p a q l l t p d α = c o n tra c to r's ris k β = o w n e r's ris k if p1, p2, α and β are known then n and c can be calculated using poisson's and binomial distributions. from the oc curve it is clear that a high probability of acceptance means high quality. selection of the values of n and c are important here. values of n and c must be chosen in a way which will satisfy both principal and contractor. the contractor's risk is the chance that a high number of good quality products will be rejected. the principal 's risk is the chance that a high number of poor quality products will be accepted. the oc curve is plotted based on particular values of n and c. a higher c value gives rise to a higher risk for the principal. on the other hand higher n value introduces higher cost for the contractor. in order to satisfy both the principal and the contractor it is necessary to set optimum values for n and c, which will result in minimum risk for both the principal and the contractor. the following section will describe the suitable sampling plans which can be used in the construction industry specifically the double sampling plan and the attribute proportional sampling plan. double sampling plan the double sampling plan is considered to be more appropriate and cost-effective for the construction process in comparison to the single sampling plan. an example is presented below clarifying the double sampling plan. the example also discusses the concept of average outgoing quality (grant and leavenworth, 1988) and demonstrates that the double sampling plan is more cost effective and reliable than the single sampling plan. figure 2 outlines the details of the double sampling plan. in the double sampling plan a random sample size of n1 is taken from the lot size, n, and the number of defectives is say r1. if r1 ≤ c1 the lot is accepted without further sampling. if optimisation of construction process inspection rates using a learning approach by swapan saha et al page 4 the australian journal of construction economics & building c1<r1<c2 a second sample size of n2 is taken and the number of defectives, is say r2. now, if (r1+r2) ≤ c2, then the lot is accepted, otherwise the lot is rejected figure 2 schematic diagram for double sampling plan (adapted after dhillon, 1985) lot size n sample size n1 if total defective items r1 r1>c2 r1<c1 or r1 = c1 c1<r1<c2 sample size n2 combined defective r1+r2 r1+r2>c2 r1+r2<c2 accept reject example in this example a double sampling plan involving large lots, uses n1 = 5 and r1 = 0, n2 = 5 and c2 =1. calculations for probability of acceptance (pa) using the binomial distribution and average outgoing quality (aoq) for three sampling plans are given in the table 1 table 1 probability of acceptance and aoq for three sampling plans p pa pa pa aoq aoq aoq n=5, c=0 n=5, c=1 n=10, c=1 n=5, c=0 n=5, c=1 n=10, c=1 0 1 1 1 0 0 0 0.05 0.773784 0.9774 0.9138 0.03868905 0.04887 0.04569 0.1 0.59049 0.9185 0.7361 0.059049 0.09185 0.07361 0.15 0.443701 0.8352 0.5443 0.0665558 0.12528 0.081645 0.2 0.32768 0.7373 0.3758 0.065536 0.14746 0.07516 0.25 0.237309 0.6328 0.244 0.059327 0.1582 0.061 0.3 0.16807 0.5283 0.1493 0.050421 0.15849 0.04479 0.35 0.116026 0.4284 0.086 0.0406107 0.14994 0.0301 0.4 0.07776 0.337 0.0463 0.031104 0.1348 0.01852 0.45 0.050324 0.2562 0.0232 0.0226478 0.11529 0.01044 0.5 0.03125 0.1874 0.018 0.015625 0.0937 0.009 as mentioned previously there are two stages in the double sampling plan. these stages are: stage 1: take first sample n1 = 5 • if 0 defective items are found accept the lot • if more than 1 defective items are found reject the lot • if more than 0 and less 1 defective units are found the lot is of doubtful quality, then go to stage 2 for a decision stage 2: take additional sample n2=5 • if the total number of defectives found in both samples is less than or equal to 1 accept the lot optimisation of construction process inspection rates using a learning approach by swapan saha et al the australian journal of construction economics & building page 5 • if the total number of defectives found in both samples is greater than 1 reject the lot. in the case of single sampling plans involving n=5, c=0 and n=10, c=1, figure 3 shows that the difference in average outgoing quality is negligible, but has twice the sample size compared to the double sampling plan. when using the double sampling plan for a particular lot, if the lot is accepted in the first stage then sampling size is automatically reduced by 50%. thus by choosing the double sampling method, the total cost of inspection or test can be reduced without affecting the reliability of the product. figure 3 operating characteristics curves and average outgoing quality for different sampling plans 0 0.2 0.4 0.6 0.8 1 1.2 0 0.1 0.2 0.3 0.4 0.5 0.6 p pa 0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 aoq n=5, c=0 n=5, c=1 n=10, c=1 n=5, c=0 n=5, c=1 n=10, c=1 attribute-proportional sampling (aps) method the attribute-proportional method is a simplified method to calculate the acceptable sample size when percentage defective, p is known. aps is a modification of the error-margin method (chang and hsie, 1995). for a sample size n, the binomial distribution of p of the sample is given in figure 4: µ(p) =p (3) s = √[p(1-p)/n] (4) figure 4 standard deviation of p for a binomial distribution σ n pp )1( − =σ e optimisation of construction process inspection rates using a learning approach by swapan saha et al page 6 the australian journal of construction economics & building if the error margin e is known then the upper and lower limits of p can be calculated for the confidence level (1-α). therefore, the proportion defective (error rate) for a randomly selected sample should be within p±e with the probability of �. according to the binomial distribution error margin, e becomes: e = z(1− α / 2)σp = z(1 − α/ 2) p(1− p) n (5) from equation (5) n can be derived as follows: n = z 2 (1 − α / 2)[p(1 − p)] e2 (6) from equation (6) it is clear that the smaller the error margin (e), the higher the sample size. for a quality control system, the error margin (e), an acceptable proportion defective, p and the confidence level, � are specified by the owner. after knowing all the above parameters the sample size n can be calculated. if the resultant proportion defective, p (p=r/n) is smaller than the specified limits the lot will be accepted, otherwise it will be rejected. however, the error margin method has two limitations (chang and hsie, 1995): i) assumption of p in calculating n is not correct; ii) the proportion defective (error rate) is unknown before inspection or testing. figure 5 distribution of p with respect to aql and ltpd for a performance based contract it is necessary to incorporate owner's risk (β) and contractor's risk (α). the aps method includes � and � and needs no assumption of p. to derive the attribute-proportional sampling method two control points are utilised to determine the sample size and decision parameter q. here, q is the limit of percentage defective used to check against the estimated p, which must satisfy the following conditions: (1) the products with the aql have the chance of α to be rejected; and (2) the products with ltpd have the chance of β to be accepted. if a sample size n is taken and r is the number of non-conforming items found in this sample, the proportion defective (p) is estimated by r/n. the distribution of p using binomial distribution is given in the figure 5: aoq ltpd α β q optimisation of construction process inspection rates using a learning approach by swapan saha et al the australian journal of construction economics & building page 7 µ(p) =r/n (7) s = √[p(1-p)/n] (8) if p is less than or equal to q, then accept; and if p>q then reject. the probability of accepting ltpd quality is z(β) = (q − ltpd) (ltpd(1 − ltpd) n (9) the probability of rejecting aql quality is given in equation (10) z(α) = (q − aql ) ( aql(1− aql) n (10) z() can be found from a normal distribution table available in any statistics text book. by solving equations (9) and (10) the value of n and q can be derived using equation (11) and (12): n z aql aql z ltpd ltpd aql ltpd = − + − − [ ( ) ( ) ( ) ( ) ( ) ] α β1 1 2 (11) n )ltpd1(ltpd )(zltpdq or n )aql1(aql )(zaqlq − β−= − α+= (12) where, q is the limits of average proportion defective, which is governed by the minimum value obtained from equation (12) example assume the owner would like to set the following conditions for a construction task: aql = 10%, ltpd=30%; control of the contractor's risk (α), = 5%; and the owner's risk (β) = 5%. in this task the owner has specified lot size, n is quite large compare to n, where n, the sample size is 30. applying equation (12) the upper limit of percentage defective (q) is found to be 19.04%. as we know the percentage defective (p) is calculated by r/n, (r = non-conforming items); if p is smaller or equal to q then accept and if p>q then reject. say, r =5 for the above task, therefore, percentage defective is (5/30)*100 = 16.67% which is lower than q = 19.04% and is acceptable. limitations of acceptance sampling plan acceptance sampling plans do not minimise the following: i) the total cost of inspection/testing of incoming and intermediary constructed items or services plus the cost to repair (rework) and inspect/test of these items or services in process or ii) the total cost of inspection/testing of final constructed products or services that fail to meet the specifications because of defective goods or services used in production. acceptance sampling plans place an emphasis on inspection/testing, not on process improvement, in order to remove the need for inspection/testing when the process is stable. if the process involves the inspection/testing of a stream of lots, ie. the population sampled is infinite, then the binomial distribution can be used to determine p. in the case of an isolated lot or if quality is important, then the use of the hyper-geometric distribution is appropriate. optimisation of construction process inspection rates using a learning approach by swapan saha et al page 8 the australian journal of construction economics & building for a stable process, acceptance sampling is invalid because the number of defectives in a sample is not correlated with the number of defective items in the remainder of the lot. a proof of this theory is given by gitlow et al. (1987). for a cost effective inspection policy acceptance sampling does not include the calculation of optimum sample size. minimum cost method is discussed in this paper to overcome this limitation. using this method by knowing a defective proportion and ratio of cost of inspection to cost of failure, optimum sample size can be calculated optimal inspection policy another consideration in determining the number of tests/inspections is the cost of inspection and the cost of replacement of defective products in the future. it is obvious that, the larger the number of inspection, the greater the confidence in the quality of the product. however, if the inspection cost is high compared with the replacement cost, then the number of inspections needs to be minimised. the number of inspections should be limited to the extent that gives the owner enough confidence that the product is of a desired/specified quality. the term ‘enough confidence’ can be expressed in statistical terms as the confidence interval. the owner will have to be satisfied with a lesser number of inspections as the ratio of ct/cf increases, where ct and cf are the cost of prevention/appraisal and the cost of failure, respectively. a model is developed below to determine the optimal inspection policy. this model establishes a relationship between cost parameters, the sample size (n), the lot size (n) and the percentage defective (p). the minimum cost method (mcm) model there is a minimum total cost for a certain quality level. this is illustrated in the classic quality cost trade-off model (ittner, 1992) and is shown in figure 6. total cost represents the sum of prevention and appraisal (conformance) costs and failure/rectification (non-conformance) costs. this concept can be applied to determine the optimum sample size at which the total cost is minimised. figure 6 the classic quality cost trade off model c ost failure c o st o f pre ve nti o n t o ta l c o s t q u a lity l e v e l c o s t optimisation of construction process inspection rates using a learning approach by swapan saha et al the australian journal of construction economics & building page 9 table 2 different elements of inspection and rejection costs prevention costs appraisal costs failure/rectification costs • quality system development • quality system management • assessment of suppliers and subcontractors and maintenance of master lists • quality consultant's fee • fees of certifying agent • audit planning • quality circles and other system improvement initiative • development and management of job description • personnel selection • all training and professional development • preparation of project quality plans including inspection and test plans • all costs associated with fulfilling the requirements of procedure which are extra-over those carried out before the quality system was in place. • internal generic audits (eg of training or auditing), including attendance by staff on auditor and audit reporting • attendance on external auditors for certification • management review • inspection • testing • calibration and maintenance of inspection and test equipment • checking • review of own work • independent review of work • review meetings • other verification activities • internal audits of projects • attendance on project audits by second parties • external audits of suppliers and subcontractors (where applicable) • validation activities such as prototype testing and commissioning • debriefing • demolition and reconstruction of contractor’s work including wastage, scrap and replacement costs and all costs associated with attendance on this work and delays arising from the work. • all costs associated with attendance and delays related to sub contractors’ re-work • internal re-work of documents as a result of review including project quality, plans, calculations, sketches, shop drawings, variation claims, progress claims, programs and resourcing schedules • re-work of issued documents such as those listed above • re-printing and processing of documents • re-inspection, re-checking or review of rework • project nonconformance and corrective action not covered above • dealing with client complaints • dissatisfied client pacification • project litigation including attendance on lawyers and barristers and professional indemnity insurance excess payment • reduction or non payment of contract sum • late payment and bad debts and interest on borrowing • the on-cost emergency resourcing of projects • unnecessary duplication of filing system • communication breakdown in head office and between head office and sites • nonconformance and corrective action not project related • client dissatisfaction which is not known • prime consultant dissatisfaction • supplier and subcontractor dissatisfaction • loss of client as a result of the above • loss of reputation as a result of the above • project indemnity insurance premiums • new staff getting to know “the way the firm works" optimisation of construction process inspection rates using a learning approach by swapan saha et al page 10 the australian journal of construction economics & building cost of inspection and rejection costs related to construction errors are generally divided into three categories: • prevention • appraisal • failure/rectification prevention costs are all those costs associated with minimising or preventing failure from occurring. appraisal costs are those costs associated with quality control and system review of a project. failure /rectification costs are costs associated with the service (or product) not meeting client requirements. despite the fact that failure/rectification costs are the most substantial costs of all, they are often overlooked. components of these cost items are presented in table 2 development of the model in the minimum cost method (mcm) model the sum of prevention and appraisal (conformance) costs and failure/rectification (non-conformance) costs are minimised at a certain quality level. this quality level has a minimum sample size. using the minimum cost model we can determine the optimum fraction of a lot size for a specified ratio of cost of failure to cost of prevention and appraisal. let, ct = the cost of prevention and appraisal (for detail refer table 2) cf = the cost of failure/rectification (for detail refer table 2) n = lot size n = sample size r = non-conforming items in a sample size, n p = average proportion defective (error rate) inspection/testing cost = ct * n (13) failure cost = (r/n) * n* cf (14) therefore, total cost, c= ct * n + (r/n) * n * cf (15) for minimum n, (dc/dn) = 0, after solving equation (15) n2 = (r*n*cf)/ct (16) n = (r/n) * n * (cf/ct) (17) replacing r/n = p, equation (17) becomes n/n = p*(cf/ct) (18) by using equation (18) the sample size can be determined for a particular lot size if the cost ratio is known for the construction process. an example of how to determine the optimal lot size is discussed below. example in this example the number of defective items (r) for a sample has been generated by using a random number generator. an average value of proportion defective (p) can be obtained from a set of p values, which are obtained from the random values of r using poisson’s distribution. in this particular example, assuming values of average proportion defective (p) equal to 0.1 and maximum allowable proportion defective (q) equal to 0.194 (based on 95% confidence interval) and for an arbitrary series of (cf/ct) values (0,0.5,1.0,1.5, etc.), n/n can be calculated using equation (18). these n/n and cf/ct values are plotted in figure 7. this figure illustrates an envelope, which is obtained for average p and q values. for example, for a cost ratio of 3.0 at lower confidence level, n/n is 0.36 and at upper confidence level, n/n is 0.57. this implies that the number of samples to be inspected or tested per lot depends on the average fraction defective (p) and the ratio of cost of failure (cf) to cost of prevention and appraisal (ct). in this example, if n = 30, then the upper limit of the n value for a cost ratio of 3.0 is 83. if the cost ratio is lower the percentage of inspection will be lower. for higher failure cost 100% inspection will be required to satisfy the confidence of owner and contractor. optimisation of construction process inspection rates using a learning approach by swapan saha et al the australian journal of construction economics & building page 11 figure 7 fraction of sample size versus ratio of cost of failure to initial cost 0 0.2 0.4 0.6 0.8 1 1.2 0 0. 7 1. 5 2. 2 3 3. 7 4. 5 5. 2 6 6. 7 7. 5 cf/ct n/ n p(avg) q value construction industry related example the minimum cost method can be used for the calculation of optimum inspection rate for the repetitive tasks in construction. due to mechanisation and use of same design in construction projects, construction processes are becoming repetitive. data collected from the sydney harbour tunnel construction project, shows that a number of tasks were subdivided into lots in a manner that they became repetitive. for example, in the north shore driven tunnel, 2400 meter long ceiling works were divided into 264 reinforced concrete slabs (each slab is approximately 12m long 7.6 m wide). cost data on this slab construction was collected, including the cost of rework and the cost of inspection/testing. the average ratio of the cost of rework and the cost of inspection/testing was found to be approximately 5.0 ($5000/$1000). the proportion defective (error rate) for this sort of work (eg. reinforced concrete construction) can be found from previous studies and historical data, is 0.118 (stewart 1992). therefore, using equation (18), the number of slabs to be inspected for the tunnel job (for p=0.118 and n =264) worked out to be 156. according to the records available all slabs were inspected and tested for this job. therefore, if this method was used, a substantial amount of money could have been saved on inspection and testing without affecting the final quality of the product. discussion and conclusion a number of sampling plans are available for the calculation of number of tests/inspections to be performed for a construction task. all the plans are not suitable for the construction industry. in this paper the double sampling plan and the attribute proportional sampling plan are presented with illustrated examples. there are, however, some limitations of these acceptance-sampling methods. these sampling plans do not provide the optimum number of tests at which the cost of tests will be minimised. an alternative method for the calculation of optimal sample size has been developed. this method is based on minimising total costs including prevention costs, appraisal costs and failure/rectification costs. an example has been presented to illustrate the application of the method. the example has shown that the number of samples to be inspected or tested per lot is not only depended on the average fraction defective but also on the cost of failure and the cost of prevention and appraisal. the example presented on the construction of repetitive slabs for the sydney harbour tunnel construction project, suggests that a saving can be made using the minimum cost method by determining optimum inspection rate. in this project a number of activities were subdivided into lots. in large optimisation of construction process inspection rates using a learning approach by swapan saha et al page 12 the australian journal of construction economics & building construction projects this is the norm for effective handling and controlling of construction activities in terms of cost and quality. the construction processes are also becoming more repetitive in residential construction due to the use of the same design and the same construction methods in a number of projects. in the australian residential construction industry residential builders are involved in construction of project homes. these project homes are of a ‘standard’ design with inflexible contractual arrangements which make design changes costly and/or impractical. anecdotal evidence suggests that medium to large residential builders in australia need to complete in the range of 100 to 200 houses of (relatively) same design scale per annum to provide sufficient return to the business. therefore, the application of the minimum cost method can be useful for the determination of optimum inspection rate for a number repetitive trade works (eg. foundation work, brickwork, framing, painting, etc.) involved to build these project homes. the average error rate (proportion defective) for a repetitive construction task is not constant throughout the project. it varies from organisation to organisation and project to project depending on a number of factors. these factors include, site management, experience and skill of the workers and inspectors, site conditions, environment and task complexity (saha et al., 1999 and saha, 1998). in future research, modelling of these factors by applying appropriate tools, (eg. fault tree analysis, event tree analysis, and learning curve model), will further enhance the effects of error rate, which may be utilised in predicting realistic inspection rate in construction. references a. a. auff. preliminary acceptance criteria for some road dimensions. proceedings of applications of statistics & probability in soil and structural engineering, third international conference, sydney, australia, pp. 352-363, 1975. a.w. manton-hall and r. sym. operating characteristics of overlapping and nonoverlapping "means of n" compliance criteria a detail comparison. proceedings of applications of statistics & probability in soil and structural engineering, second international conference, aachen, germany, pp. 278-291, 1975. b. dale. counting up the cost, journal of total quality management, oct 1991, pp 22-34, 1991. b.s. dhillon. quality control, reliability and engineering design. marcel and decker inc., new york, 1985. c.d. ittner. the economics and measurement of quality costs: an empirical investigation, phd thesis, graduate school of business administration, harvard university, usa, 1992. cida, measuring up or muddling through: best practice in the australian non-residential construction industry, construction industry development agency, australia, master builders association, sydney australia, pp 59-63. 1995. dist. building for growth: a draft strategy for the building and construction industry, department of industry, science and tourism, commonwealth of australia publication, february, canberra, australia, 1998. n. doganaksoy and g.j. hahn. moving from every lot inspection to audit sampling. journal of quality technology, vol. 26, no.4, pp261-273. e. l. grant and r. s. leavenworth. statistical quality control, mcgraw-hill, new york, 1988. h. gitlow, a. oppenheim and r. oppenheim. tools and methods for the improvement of quality. irwin, usa, 1989. h.y. fang. sampling plan and construction control. proceedings of applications of statistics & probability in soil and structural engineering, second international optimisation of construction process inspection rates using a learning approach by swapan saha et al the australian journal of construction economics & building page 13 conference, aachen, germany, pp. 323337, 1975. i. blyth, qa sharing the experience, the building economist, march 1995, pp9-12. l. chang and m. hsie. developing acceptance sampling methods for quality construction. journal of construction engineering and management, vol. 121, no. 2, pp. 246-253, 1995. p.e.d. love, and h. li, quantifying the causes and costs of rework in construction, journal of construction management and economics, uk, .vol. 18, pp 479-490 2000 r.d. leitch. basic reliability engineering analysis. butterworths & co. ltd., london, 1988. s.k. saha, mathematical modelling of construction error and optimal inspection policy, the sixth east pacific conference on structural engineering and construction, january 14-16, 1998, the national university of taiwan, taipei, pp. 1155-1160, 1998. m.g. stewart, the occurrence and detection of errors in reinforced concrete beam construction. the department of civil engineering and surveying, research report no. 063.05.1992. the university of newcastle, nsw,1992. s. k saha., , c. greville, t. mullins, simulation experiment: the effects of experience and interruption in predicting error rate for a construction inspection task. international congress on modelling and simulation proceedings, the university of waikato, new zealand, december 6-9, pp. 1003 –1008, 1999 w.w. hines and d. c. montgomery. probability and statistics in engineering and management science. john wiley & sons, singapore, 1990. cost analyses of measures to improve residential energy ratings to 6 stars – playford north development, south australia cost analyses of measures to improve residential energy ratings to 6 stars playford north development, south australia. dr martin belusko and mr timothy o’leary (university of south australia) abstract this paper reports the results of a study on the cost implications of achieving greater energy efficiency as measured by house energy rating (her) ‘stars’ for new housing on a greenfield development in the northern suburbs of adelaide. twelve house designs typical of the housing options available from a number of builders engaged with this development were modeled using the 2nd generation building code of australia (bca) accredited energy rating assessment tool accurate. where the model predicted a rating below the minimum rating (6 star) proposed under the recently agreed commonwealth of australia, national energy efficiency strategy, the designs were modified in order to improve the rating to 6 stars using a combination of specification changes and energy efficient technology options. these changes or options were then priced at prevailing building suppliers and subcontractors retail cost levels in order that an average ‘extra cost to 6 star’ and range of indicative costs to achieve 6 star housing compliance could be articulated. the results revealed that standard and currently available technologies, such a reflective foil barriers, increased insulation and low emissivity ‘e’ type glazing provide a means to achieving 6 star ratings at a modest additional cost, i.e. 1-2% of total construction and development costs. keywords: 6 star costs, energy rating, sustainability, sustainable housing, energy efficiency introduction in australia, the regulation of energy efficiency of buildings is covered by a range of commonwealth, state and territory agencies. in april of 2009 specific measures to increase energy efficiency of buildings were set out in a council of australian governments (coag 2009) communiqué proposing : • an increase in the stringency of energy efficiency for all classes of commercial buildings; • mandatory disclosure of energy efficiency for all classes of commercial buildings; • the phase-in of mandatory disclosure of residential building energy, greenhouse and water performance at the time of sale or lease, commencing with energy efficiency by 2011; and • an increase in energy efficiency requirements for new residential buildings to six stars, or equivalent, nationally in the 2010 update of the building code of australia with full implementation by all states by 2011. the research presented in this paper aims at identifying additional capital costs associated with improving existing house designs to meet the new 6 star standard as per the latter of the four main proposals listed above. the focus is on the volume or ‘project’ home sector typical of modern suburban housing developments of reasonable scale (at least 30 plus allotments) where a number of builders compete on price and design features and where the blocks or allotments are developed on a phased basis over several or more years. the paper demonstrates a case study approach for predicting the additional housing capital costs for achieving six star housing in a temperate climate and mature housing market such australasian journal of construction economics and building belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   37 as is found in south australia. an existing housing development, playford north provided a source of typical housing designs where builders and suppliers could be queried on costs of energy efficiency measures and dwellings could be assessed for her star ratings. housing energy efficiency as measured in ‘stars’ relates to the nationally adopted home energy rating (her) rating system and the use of software modeling as a route to verification for compliance with the energy efficiency requirements of volume two (residential class 1 & 10) of the bca. this software simulation method allows for the modeling of energy performance of a house under both heating and cooling loads. the software used to assess the housing designs was the csiro accurate software version 1.4 which is accredited under the ratings protocol of the australian building codes board (abcb). the modeling of improved building envelope thermal performance was limited in scope to typical temperate climate modifications around the elements of wall and roof insulation and glazing as has been shown in a number of recent studies by constructive concepts pty (2009) and earlier by burghardt (2008) to improve thermal performance in australian housing and dwelling units. the focus on these elements is also supported by the prescriptive deemed to satisfy (dts) measures for energy efficiency as adopted by the australian building codes board (2009). in relation to costing the design modifications the builders were queried as to likely ‘upgrade’ costs as well as costings by the authors using market information and publications. in a comparative cost benefit study of energy efficiency measures for victorian housing, energy efficient strategies (2002), data regarding costs of such products as insulation revealed two separate rate levels, i.e. a low rate applicable to volume builders and a higher rate applicable to non volume builders. the analysis revealed across a range of building products and various house improvement measures that volume builders generally enjoyed lower costs (in the order of 10%). playford north housing case study design and energy efficiency options the playford north urban renewal project is a major urban housing and infrastructure project located approximately 30 kilometres north of adelaide, commenced in 2008 and set to continue for a 15 year anticipated development phase. over this period it is anticipated that more than 5000 new houses will be constructed in a variety of phased land and allotment releases with involvement of many of the major volume residential builders operating in the south australian market. a number of adelaide home building companies were approached in early 2009 to be part of this research study on a strictly confidential basis. from this initial approach a modest yet representative sample of 12 house designs and specifications suitable for construction were obtained from project home builders involved in the playford development. a typical specification for the style of housing is outlined in table 1 below with a front elevation photo illustration in figure 1: typical brick veneer house design has very low thermal mass caused by brick or concrete within the internal space, and can be essentially treated as lightweight (athienitis and santamouris, 2002). recently, the level of air leakage in housing has improved, however unless it is measured it is not possible to significantly improve further, and default values are assumed. internal loads cannot be controlled or easily determined, and generally, represent a small component of the total heating and cooling requirement. australasian journal of construction economics and building element construction for base design external walls brick veneer + r1.5 insulation + 10mm plasterboard windows/ext. doors aluminium framed single 3mm clear float glass windows aluminium sliding door, single glazed 5mm clear float flyscreens internal doors timber (solid) floors ceramic tiles to wet areas, vinyl to kitchen areas, carpet to bedrooms ceiling 10mm plasterboard + r 3.0 glasswool bulk insulation roof concrete tiles – unsarked or colorbond metal roof (25 deg pitch) weatherstrip/ seals all windows, external doors and exhaust fans sealed/weatherstripped air movement fans to main living room and bedrooms table 1 typical base specification of playford houses consequently, as far as minimising heating and cooling demand for brick veneer houses the primary focus is on reducing transmission and affecting solar load. affecting solar loads relates to design decisions concerning the orientation of the building, window sizes and shading of windows. transmission loads are reduced by applying various insulation technologies. most brick veneer designs today consist of a large open plan living/dining/kitchen area with a number of contained bedrooms. the living zone represents those areas which are occupied during waking hours. the bedroom zone relates to areas occupied during sleeping hours. the living zone requires greater levels of comfort than bedroom zones and given that the living zone represents the majority of the house floor area, generally dominates the heating and cooling demand for a building. as a result effective design involves north facing windows in the living zone and ensuring all windows are shaded during summer. figure 1 playford housing – photo of typical front elevation belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   38 australasian journal of construction economics and building belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   39 home energy rating – calculation of the star rating, heating and cooling loads the need for heating or cooling a house relates to the total effect of all heat flows in and out of the building. the sum of the total heat flow determines the internal temperature, and artificial heating or cooling is needed to reach comfort temperatures (ashrae, 2005). this is the method applied by accurate to determine the heating and cooling energy needed for a house design, from which the star rating is determined. an increase in star rating results in a lower energy demand in order to achieve assumed thermal comfort levels.. once the data for a house has been entered the report features of the software can be used to generate two specific reports as below; • a summary report listing the project, client and rating assessor details. the heating and cooling requirements (as measured in megajoules per m2) and most fundamentally a star rating in compliance with the bca/nathers protocol • a more detailed building data report which lists data on the construction elements for individual zones, sizes, openings etc. the classification of houses situated in playford north for climate data purposes under the national home energy rating system (nathers) is climate zone 16 (adelaide) and the relevant energy consumptions are respectively 125 and 96 mj/m2 for 5 and 6 stars.therefore, an increase from 5 to 6 stars represents a reduction of 23% in the energy demand of a house in the adelaide climate zone. whilst a target energy reduction of that magnitude might infer major building specification changes, housing design modifications around insulation and glazing and to a lesser extent shading and air movement devices are known to offer significant improvement to building thermal characteristics. fricker (2002) in his study shows that the benefit of additional insulation levels is non linear and diminishes once high levels of insulation are ‘standardised’ into housing and a recent report by the australian window association (2009) into the changes to a 6 star energy rating for residential buildings points to a requirement for high performance glazing as this insulation benefit reduces. smaller houses have a greater surface area compared to their floor area than larger houses. because total heat flow through the building fabric is greatly influenced by the surface area, without a correction factor smaller houses of the same shape and materials will have higher energy loads per unit of floor area. this effect is exacerbated because window areas as a percentage of floor area are often relatively greater in small houses than in larger houses, and because heat flows through windows are generally the largest. in regulation mode, star ratings are to be based on energy loads that have been adjusted by an area adjustment factor (aaf). the size of the adjustment depends on the conditioned floor area and the climate zone. for adelaide housing (zone 5) the appropriate area adjustments used by the software in energy load calculations are: 50m2 150m2 250m2 350m2 1.2 0.3 -0.3 -0.8 the accurate results for the case study houses when modelled in simulation mode the results of the base designs energy performance is listed in table 2. lot numbers refer to individual house designs unique to each allotment for which builders provided the required design information. australasian journal of construction economics and building belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   40 unadjusted load, mj/m2 lot base star rating heating cooling ratio of heating to total load floor area, m2 16 4.9 78 63.8 0.55 175 17 4.9 94.9 61 0.61 130 23 5.8 58.8 53 0.53 142 26 5.9 75.1 42.9 0.64 104 13 5.4 53.4 63.5 0.46 170 29 4.9 62.8 65.1 0.49 211 184 4.9 59.5 77.4 0.43 188 45 5.2 60 68.1 0.47 180 901 5.1 70 68.5 0.51 167 8 5.3 60.5 69.9 0.46 173 902 5.4 51.7 62.5 0.45 224 194 4.9 68.9 70.6 0.49 190 table 2 house star and thermal load information using the list of technology options listed in tables 3 and 4, the star rating was increased to 6 stars for each house design. a condition of the upgrade in energy efficiency was that major changes to the floor plan, changes to window location or overall window and door sizes were deemed too great a divergence from an acceptable design solution for each lot. as a result the principal focus in increasing the star rating relates to technology options affecting the transmission heat flow through the house. lot 17 was the poorest design with a base star rating of 4.9 (figure 1). as shown in table 2 it had the highest heating load due to large southern windows and the northern windows shaded by the building preventing winter sun. as a result, in addition to adding the maximum levels of insulation in the building, the southern windows needed to be double glazed and the windows throughout the house required low emissivity glass. lot 26 was the best design with a base star rating of 5.9. although the house required more energy to heat, per unit of floor area, than some other houses, due to its smaller floor area it was penalised less than other houses, and as a result achieved a higher rating. the house has minimum southern windows preventing heat loss, no eastern and western windows preventing the sun in the summer and northern windows providing for winter sun. to achieve 6 stars all that was required was foil in the roof. lot 184 was a typical design in that it applies the deemed to satisfy provisions of the bca and achieves a star rating in the simulation method of 4.9. the building requires more cooling than heating and this is due to the large unshaded western windows in the living zone. foil was added to the roof and walls, the internal wall was insulated and the roof insulation upgraded to 3.5. low emissivity glass was applied to most of the glass doors/windows. in addition to the development of the 6 star designs, the impact of the technology options was systematically investigated for each house design. applying the list prescriptively, tables 3 and 4 show the absolute and incremental impact on the star rating of the design, respectively. in total, except for lot 17, all other designs achieved 6 stars with the average house design reaching 6.4 stars. this result indicates that in general there is scope to reduce these measures, while maintaining the 6 star rating. furthermore, although insulation options have been exhausted, there is scope to increase the star rating for those designs which achieve a significantly lower star rating. these measures include (in order of application): australasian journal of construction economics and building belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   41 1. applying low e single glazing to all other windows/doors in the house 2. applying double glazing to the living zone windows/doors 3. applying double glazing to all windows/doors in the house based on the average increase, each technology option produces a meaningful increase in the star rating. the incremental increase that each technology option generates will be different depending on the order of application. therefore, the average increase determined should only be used as a guide. table 4 shows the average increase each technology option measure provides. low e single glazing is the most effective at 0.49 stars followed by the foil in roof, internal wall insulation and then the bulk insulation measures in the building envelope. this result reflects the fact that bulk insulation is already present in the house design and therefore any increase in the r rating will have less of an impact compared to glazing, where the original glazing has a very poor thermal resistance. updated star rating with technology option lot foil in roof r2.5 ext walls r4 roof r1.5 internal walls low e glass in living zone 16 5.2 5.4 5.6 5.9 6.4 17 5.1 5.2 5.2 5.4 5.6 23 6 6.1 6.3 6.4 6.7 26 6.1 6.3 6.5 6.6 6.8 13 5.7 5.8 5.9 5.9 6.3 29 5.2 5.4 5.4 5.4 6.1 184 5.2 5.3 5.4 5.6 6.2 45 5.4 5.6 5.8 6 6.6 901 5.3 5.4 5.6 6 6.6 8 5.5 5.6 5.6 5.8 6.5 902 5.7 5.8 5.8 6.1 6.6 194 5.1 5.1 5.2 5.4 6 table 3 cumulative star rating impact of each technology measure for each lot star rating increase with technology option lot foil in roof r2.5 ext walls r4 roof r1.5 internal walls low e glass in living zone 16 0.3 0.2 0.2 0.3 0.5 17 0.2 0.1 0 0.2 0.2 23 0.2 0.1 0.2 0.1 0.3 26 0.2 0.2 0.2 0.1 0.2 13 0.3 0.1 0.1 0 0.4 29 0.3 0.2 0 0 0.7 184 0.3 0.1 0.1 0.2 0.6 45 0.2 0.2 0.2 0.2 0.6 901 0.2 0.1 0.2 0.4 0.6 8 0.2 0.1 0 0.2 0.7 902 0.3 0.1 0 0.3 0.5 194 0.2 0 0.1 0.2 0.6 average 0.24 0.13 0.11 0.18 0.49 table 4 incremental increase of star rating (rounded to one decimal) by impact of each technology measure for each lot australasian journal of construction economics and building belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   42 the performance of the foil reflects the increased impact of the cooling demand on higher star rated homes, and is an important measure for higher star rated houses. internal wall insulation isolates the living zone from the rest of the house and effectively reduces the conditioned area. cost analysis cost per star, cost per technology option costs were determined based on retail costs not including gst. the actual cost increases for each lot relates to the specific design choices and combinations of technology options around insulation and glazing. these design choices were made in order to minimise cost. table 5 below shows these upgrade costs. normalised cost lot base stars estimated upgrade cost total cost/star 16 4.9 3958 3872 3520 17 improved 4.9 4801 6321 5747 23 5.8 433 521 2607 26 5.9 134 220 2199 13 5.4 863 869 1448 29 4.9 7880 6392 5811 184 4.9 5516 5022 4566 45 5.2 2678 2546 3183 901 5.1 1422 1457 1619 8 5.3 2243 2219 3170 902 5.4 1469 1122 1870 194 4.9 6404 5770 5245 17 as provided 4.9 6590 8677 7888 average 5.2 3150 3028 3415 table 5 cost estimates to upgrade existing designs to 6 stars ($aus june 2009 prices) overall, the range of costs was large, with a minimum of $134 and a maximum of $7880, with the average being $3150. this range is significant and reflects design choices made which affected the need for a glazing solution. where a glazing solution was not required cost increases were negligible. two options are provided for lot 17, the as provided value represents what was advised to builders, however, this was able to be significantly improved, and this value is presented. to compare each house correctly, the costs were normalised to the average floor area of 171 m2, and the cost per star was determined. for example, lot 23 has a floor area of 142m2 (see table 2). upgrade cost/floor area $433/142m2 = $3.05/m2 normalised to average size house 171m2 x $3.05 = $521 for the 12 houses in the study the average cost per star is $3415 +/46%. all average values only consider the improved arrangement for lot 17. the study assumes that a cost minimisation approach is available to the builder and that in the absence of being able to make specific design choices, the cost of upgrading, applying the measures listed in tables 3 and 4 can be calculated (table 6). this costing exercise is based on applying the list of measures in full irrespective of whether it achieves a higher star rating than six. based on the average of each measure the highest cost is clearly the glazing solution followed by foil, internal wall insulation and with external wall and roof australasian journal of construction economics and building belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   43 insulation being the least costly. this is expected as currently external walls and roof are already insulated, and therefore the cost is only the cost of upgrading. cost increase of technology option, $aud lot foil in roof r2.5 ext walls r4 roof r1.5 internal walls low e glass in living zone 16 526 213 168 478 3322 17 358 190 53 389 2458 23 433 77 136 422 3309 26 320 204 100 251 3225 13 518 87 163 539 4264 29 743 286 202 520 4767 184 578 276 180 498 4720 45 550 244 173 638 4114 901 460 239 160 582 4318 8 475 77 71 558 3873 902 618 101 92 750 4543 194 530 88 78 774 4935 average 509 173 131 533 3987 table 6 cost increase of each measure for each lot table 7 presents the total cost of applying the measures with the average being $5334. the average total based on normalising the cost to the average floor area of 171 m2 was $5377 +/-12%. this cost is significantly higher than the actual upgrade cost presented in table 5. this difference represents the cost minimisation process. where a process of optimisation can be applied in the modelling, an average cost saving of $1962 or average rate of $11.47/m2 gfa can be achieved. this variation of the average total cost of applying the measures in table 7 represents the different choices in window/sliding door area and living room areas which will affect the cost. generally the cost variation is small for applying all the measures. as shown in table 3 the application of these measures delivers varying increases in star rating often well above 6 stars. table 7 also presents the cost of a 1 star increase for each lot with the average being $4921 +/-27%. the variation shows the impact of the design and relates to the base star rating. although this represents the true cost of going from a 5 to 6 star design in practice it will depend on whether designers are able to implement a portion of a measure. for example, applying r3.5 in the roof as opposed to r4, or applying low emissivity glass to some of the glass doors and windows in the living zone. figure 2 presents the average normalised cost of each measure together with the star increase this measure delivers. a description of the measure is presented in table 8. the figure shows that the trends of cost and star increase are essentially identical with the foil and internal wall insulation measure providing higher star increases at higher costs than external wall and roof insulation. what the graph also highlights is that once insulation solutions are exhausted a significant increase in cost occurs with the implementation of the glazing solution. this cost is particularly relevant to poor house designs, as glazing solutions are the only alternative technology option to achieving higher star ratings. australasian journal of construction economics and building normalised cost lot total cost total cost/star 16 4708 4605 3070 17 3448 4540 6486 23 4377 5276 5862 26 4100 6747 7497 13 5571 5609 6233 29 6518 5287 4406 184 6251 5692 4378 45 5718 5438 3884 901 5759 5902 3935 8 5054 5000 4167 902 6103 4663 3886 194 6404 5770 5245 average 5334 5377 4921 table 7 total cost and total normalised cost to a 171 m2 floor area 0 500 1000 1500 2000 2500 3000 3500 4000 4500 1 2 3 4 5 measure c os t, $ 0.00 0.10 0.20 0.30 0.40 0.50 0.60 s ta r in cr em en t cost star increment figure 2 normalised cost and star rating increment of each measure, as defined in table 8, for a 171 m2 floor area house table 8 presents the star increase each measure delivers per $1000 of cost. what it shows is that increasing external wall and roof insulation are the most cost effective measures followed by adding foil and internal wall insulation and finally the glazing solution. this result shows that although internal wall insulation and foil are of low cost, they are an addition as opposed to an upgrade and therefore are less cost effective than external wall and roof insulation measures. the glazing solution is significantly less cost effective than the insulation solutions. belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   44 australasian journal of construction economics and building belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   45 1 foil in roof 0.48 2 r2.5 ext walls 0.69 3 r4 roof 0.82 4 r1.5 internal walls 0.35 5 low e glass in living zone 0.12 table 8 star rating increase per $1000 for each measure in table 4 a retail market based approach was used in costing the various material and technology combinations modeled to improve the star rating. suppliers and subcontractors in the south australian home building market were willing to provide indicative supply prices at a retail price i.e. without any mark downs that can often be negotiated by volume purchases or companies using long term customer relationships as price bargaining leverage. therefore it could be said the figures used in the analysis may slightly overstate the increased cost effect of additional measures or higher specification in the houses variations. appendix a (tables a.1 and a.2) presents the list prices as provided by company a for various batt sizes and foils, and companies c, d and f for windows with a discount incorporated. a survey of prices in a major hardware store showed a discount of 46% for batts and a discount of 62% for foils (ignoring gst). these are discounts from normal retail prices and it was explained by company a, that volume home builders would achieve an additional 10% discount. appendix a also provides installation prices at prevailing labour rates that are consistent with current construction cost data publications such as rawlinsons (2009) conclusions with moves towards the 6 star energy efficiency rating for houses, the cost implications need to be analysed. the study of adelaide houses shows a range of indicative costs at an average of cost increase to achieve 6 stars of some $3,150. given average house and land package of $290,000 this represents a low order of cost increase for a housing consumer with anticipated benefits of greater thermal performance built into the house. integrated with this issue is the development of an effective methodology by which designers can readily achieve 6 stars. a five step approach was investigated which involves applying various insulation options and then applying the lowest cost glazing option. applied as a guide this was used on 12 house designs upgrading the designs to 6 stars, through an optimisation process aimed at minimising cost. the variation in the original base star rating was a single star rating, which reflected the impact of the design modification. whilst the average cost increase to achieve 6 stars for all designs was $3150, a significant range in cost increase occurred, from $134 to $7880 due to the required application of various technology options. the principal cost increase is the application of the new glazing solution, low emissivity glass. the most cost effective measures was increasing bulk insulation in the external walls and roof, however this was due to the associated costs only being an upgrade cost. applying reflective foil in the roof together with internal wall insulation was the next most cost effective option achieving 0.24 and 0.18 increases in stars. the most effective increase in star rating was the glazing option increasing the star rating by an average of 0.49. in this study basic design modification principles were identified which can mitigate the costs associated with upgrading to 6 stars. consequently, together with the technology options currently available, the cost increase to 6 stars can be described as modest or minor. australasian journal of construction economics and building belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   46 references australian building codes board (abcb) (2009) supporting commentary on the proposals to amend the energy efficiency provisions in the building code of australia volume 2 for 2010, abcb, canberra, act ashrae (2005) ashrae handbook – fundamentals, american society of heating, refrigerating and air-conditioning engineers inc., atlanta, usa australian window association (awa) (2009) industry capacity/capability study, australian window association, gordon, new south wales athienitis a. and santamouris. m. (2002) thermal analysis and design of passive solar buildings, james and james, london ambrose, m. delsante, a. johnson, d. and tucker, s.n. (2004) energy efficiency uptake within the project house building industry, csiro, canberra, act burghardt, g. (2008) study of the thermal performance of class 2 multiple unit dwellings using accurate house energy rating software, report for the australian building codes board, nov. canberra, act constructive concepts (2009) building improvements to raise house energy ratings from 5.0 stars, overview of systematic accurate modelling for the australian building codes board, tony isaacs consulting, australian building codes board, canberra, act council of australian governments (coag), 2009 communiqué, hobart april 2009 national strategy on energy efficiency, canberra act energy efficient strategies, (2002) comparative cost benefit study of energy efficiency measures for class 1 buildings and high rise apartments, report for the sustainable energy authority of victoria, melbourne, australia fricker, j (2002) ‘the diminishing benefit of extra home insulation’, viewed at http://fricker.net.au accessed 09/06/09 rawlinsons (2009) australian construction handbook 2009, rawlhouse publishing pty ltd. perth, western australia appendix a insulation product $/m2 r2 bulk insulation 4.29 r2.5 bulk insulation 4.87 r3 bulk insulation 5.07 r3.5 bulk insulation 5.62 r4 bulk insulation 6.03 r1.5 bulk insulation 3.19 single sided reflective foil 1.00 double sided reflective foil 1.05 installation cost 1.50 table a.1: retail prices for insulation (non gst) australasian journal of construction economics and building belusko, m and o’leary, t  (2010)  ‘cost analyses of measures  to  improve residential energy ratings  to 6 stars –  playford north development, south australia’, australasian journal of construction economics and building, 10 (1/2)  36‐47   47 window company $/m2 standard clear single glazed window c 223 standard clear single glazed door c 278 standard clear single glazed window d 118 standard clear single glazed door d 168 low e single glazed window c 426 low e single glazed door c 466 standard double glazed window d 307 standard double glazed door d 526 high performance double glazed window f 450 high performance double glazed door f 940 table a.2: retail prices for windows (non gst) cost analyses of measures to improve residential energy ratings to 6 stars playford north development, south australia. abstract introduction playford north housing case study design and energy efficiency options home energy rating – calculation of the star rating, heating and cooling loads cost analysis cost per star, cost per technology option conclusions references appendix a microsoft word july paper 3.doc design cost modelling – a way forward by peter lawther and peter edwards page 32 the australian journal of construction economics & building design cost modelling – a way forward peter m lawther and peter j edwards department of building and construction economics royal melbourne university of technology university, australia 1. introduction accurate cost modelling is fundamental to the efficiency of the construction industry in general, and the stakeholders within the industry in particular. clients, consultants and contractors all have much to lose from the consequences of inaccurate cost modelling, e.g. through the time and cost ramifications of tender results not matching clients’ budgets. such ramifications include: • the costs of redesign and retendering / negotiating of projects (perhaps of reduced scope and quality) and the associated time delay, or; • increased construction costs requiring additional funds to be sourced by clients. potentially this can impact upon the financial returns of a building project to a client and, at worst, lead to the abandonment of a project altogether. design cost modelling (i.e. during the design stage of the development process) has traditionally been undertaken by consultant quantity surveyors, at times with less than adequate results. research undertaken at the department of building and construction economics at rmit investigated potential means for improvement of the accuracy of design cost modeling, and has concluded that the way forward may lie in the manner of procurement for building projects. the objective of this paper is, firstly, to review the current status of design cost modelling in terms of the techniques used, their accuracy, levels of usage, and deficiencies. secondly, the paper identifies a way forward for research in this field through the emergence of nontraditional methods of building procurement. 2. cost modelling cost models are technical aids which enable management decisions to be made in the context of building design (skitmore and marston, 1999). the primary function of cost models in this context is to provide reliable cost forecasts (elhag and boussabaine, 1998), either for the client or the contractor (ashworth, 1999). more specifically, the management decisions supported by cost models include: • forecasting the total cost of construction. • comparing design alternatives. • forecasting the economic effects upon society of changes to design codes and regulations (skitmore and marston, 1999). because clients undertaking construction projects will wish to have an understanding of their financial commitment, it is appropriate to apply cost modelling techniques as early as possible in the development process, prior to commissioning extensive design work (ashworth and skitmore, 1983). further, because design precedes construction in the development process, cost modelling is generally commenced at the beginning of the design stage. at its earliest, this could be the initial feasibility study of a project. various cost modelling techniques may then be utilised throughout the design process, generally in accordance with the level of design information (drawings, specifications etc.) available at any particular stage. importantly, such design information portrays the completed product or building, rather than the production processes of construction. that is, the design information represents what is to be built (in terms of the completed building), as opposed to the production process of (explicitly) how the building is to be constructed. as such, cost modelling design cost modelling – a way forward by peter lawther and peter edwards the australian journal of construction economics & building page 33 techniques used during the design process, which are based upon such design information, have also traditionally focused upon modelling the completed product price, rather than modelling the production process cost, of construction. consequently, two distinct paradigms of cost modelling techniques exist: • product based – where the completed building is modelled. • process based – where the construction production process is modelled (skitmore and marston 1999). these differences have been recognised for some time. beeston (1982) suggests that cost modelling techniques are either “black box” (product based) or “realistic” (process based). realistic methods are derived from attempts to represent costs in the ways in which they arise. ‘black box’ methods do not attempt to represent the ways in which costs arise. brandon (1982) considers that the cost modelling techniques used during the design stage of the development process are distinctly “black box”, and suggests that “modelling the reality, i.e. the way costs are incurred on site, does not enter into the (development) process until operational costs are considered, usually at the post contract stage.” the cost modelling techniques themselves are now considered separately in terms of product based and process, or resource based, cost modelling techniques. 3. product based cost modelling techniques fortune and lees (1996) and fortune and hinks (1998) identified the following "traditional" (product based) cost modelling techniques in widespread use, as summarised in table 1. technique description judgement without quantification the use of professional expertise and intuition to formulate strategic cost advice. functional unit a monetary rate or amount applied to a unit commensurate with the function of the building e.g. $/ carparking space superficial a single rate applied to the floor area of a building e.g. $/m2. principal item a single $ rate applied to the major item of a project. interpolation method the application of costs from previous projects by way of interpolation. elemental analysis a summation of the application of costs to the design elements within a project. significant items the measurement and pricing of significant items of work. approximate quantities the measurement and pricing of a small number of grouped items. detailed quantities the measurement and pricing of many items, such as a bill of quantities. table 1 – cost modelling techniques in widespread use (source: fortune and lees 1996, and fortune and hinks, 1998) design cost modelling – a way forward by peter lawther and peter edwards page 34 the australian journal of construction economics & building technique description cube (smith, 1998). a single cost rate applied to the internal volume of a building. functional area (smith, 1998). similar to the superficial model, although different cost rates are applied to different functional areas within a building on the assumption that those different areas will cost different amounts to construct. superficial perimeter (ashworth, 1995) a variation on the superficial method. as well as taking the floor area of a building into account, the length of building perimeter is also included in an endeavour to increase accuracy. storey enclosure (james, 1954) the measurement and costing of the area of the external walls, the floor and ceiling which enclose each storey within a building. regression analysis (flanagan and norman, 1978) a statistical technique whereby historical data is analysed in a structured format. the major components of construction are identified and a mathematical relationship between them, in the form of an algebraic equation, is determined using historical data. probabilistic treatments (mathur, 1987) the use of probability theory and random number generation to produce cost models with risk profiles which recognise the inherent variability and uncertainty of design cost modelling, due to its predictive nature. expert systems (british computer society, as cited in ogunlana, 1989) the capture, bottling and dissemination of expert knowledge for use by less qualified / experienced personnel, generally by computer program. table 2 – lesser used product based cost modelling techniques additional traditional or product based cost modelling techniques identified from the literature are summarised in table 2 (above). as stated, traditional or product based cost modelling techniques model the completed building as opposed to the production process of construction. however, such models contain an implicit assumption about construction processes. this assumption is that similar designs will always be constructed in the same way. whilst this assumption may be valid at a general level, it is likely to be less so at more detailed levels. therefore, if some variation in construction process is inevitable, and product based cost modelling techniques do not explicitly deal with it, how acceptable is the accuracy of these models? 4. accuracy of product cost modelling techniques studies have been undertaken to determine the accuracy of cost modelling techniques. ashworth and skitmore’s (1983) literature review of the accuracy of “estimating” in the design stage of the development process indicates a perceived level of accuracy of design stage cost modelling ranging from +/20 – 40% in the early stages, and improving to +/10 – 15% in the latter stages of the design process. studies by flanagan and norman (1983) compared the “last price prediction prior to design cost modelling – a way forward by peter lawther and peter edwards the australian journal of construction economics & building page 35 tender” with the lowest tender price received in two english county council authorities. the results indicated that approximately 50% of projects were estimated within +/10% and all projects were estimated within +/25%; a considerably higher level of inaccuracy than ashworth and skitmore’s perceived accuracy levels. beeston (1974) outlined the variability of design cost modelling in terms of the coefficient of variation (standard deviation expressed as a percentage of the mean), based upon investigation of submitted tender bids. with respect to estimating the lowest tender, beeston concluded that the variability of consultant quantity surveyors’ estimates, when combined with the inherent variability of the tendering process itself, resulted in a best possible co-efficient of variation of 7%. according to beeston, such a co-efficient of variation would result in 52% of quantity surveyors’ estimates being within 5% of the lowest tender, 68% of estimates within 10% of the lowest tender, and all estimates within 30% of the lowest tender. it is not clear which cost modelling techniques, or stages of the design process, are being referred to in beeston’s work, other than “using present methods in the best way under average circumstances”. beeston considers that improvements to the quantity surveyor's estimating variability (and hence accuracy) could be made through a model which makes a “direct evaluation of contractors' costs”, considering that “if this assesses costs by a method related to the way in which they arise it will be especially suitable for giving cost advice to designers.” morrison (1984) outlines the difficulty of comparing deign stage cost forecasts with tender bids, due to the constant state of flux of the design of many construction projects. morrison’s work compared the quantity surveyor’s pre-tender estimate with the lowest tender received on 557 projects in which it was possible to exclude prime cost and provisional sum items common to both figures. the results found a mean deviation between the pretender estimate and the lowest tender of 11.97% (co-efficient of variation of 15.45%). morrison contrasts these results against studies done into the accuracy of contractor’s estimating (barnes and thompson 1971; barnes 1972; and flanagan, 1980) which indicate a mean deviation in the order of 6% (co-efficient of variation of 8.22%), reducing to a mean deviation of 3.75% (co-efficient of variation of 6.59%), when projects valued under 100,000 united kingdom pounds are excluded from the sample. morrison considers this estimating performance of quantity surveyors to be “very poor”, yet likely to represent the best performance achievable, concluding that “this level of performance is unlikely to fulfil clients’ requirements for controlling the cost of construction within pre-determined limits”. such criticism of quantity surveyors' estimating performance implies deficiencies with the cost modelling techniques upon which this performance is based. such deficiencies are now considered. 5. deficiencies of product based cost modelling techniques the product based cost modelling techniques outlined are considered useful on the basis of their ease of application, familiarity and speed, and a tolerable level of accuracy as noted above (ashworth and skitmore, 1983; ashworth, 1995). however, the same models have also being criticised on the basis that: • they are not (explicitly) founded upon construction production criteria as the generator of cost (brandon, 1982; morton and jaggar, 1995) • they do not fully represent the relationship between design decisions and the resulting construction processes (bowen, 1993). • they fail to consider the uncertainties of the construction process (bowen et al, 1987; bowen, 1993). • the cost data used to support such models is often taken from previous projects, previous bills of quantities, price books etc. design cost modelling – a way forward by peter lawther and peter edwards page 36 the australian journal of construction economics & building and does not represent cost as a function of resource usage, but rather as a function of the completed building product (raftery, 1984; morton and jagger, 1995). additionally, such cost data is often “massaged”, or subject to “noise” (newton, 1989), by having the actual resource costs spread over the unit rates, and also when unit rates are allocated into elemental costs. thus the criticisms of traditional product based cost modelling techniques are focused upon two main concerns: • firstly, the lack of an explicit relationship between the cost modelling techniques and the construction process. • secondly, the use of distorted cost data to support such cost modelling techniques. it is contended that “process” or “resource based” cost models more accurately reflect the way in which construction costs are incurred. in simple terms, this would comprise the necessary labour, material, plant and equipment required to construct a building. mccaffer and baldwin (1986) and beeston (1974, 1987) consider that the greatest opportunity for improved accuracy in design cost modelling lies in aligning the modelling techniques as closely as possible with the generators of such costs, i.e. the methods by which they arise. bowen et al (1987) contend that truly realistic cost models must simulate the construction process. such models are hence termed “process based” or “resource based” (hereinafter referred to as “resource based”) cost modelling techniques, and are deemed to be inherently more reliable than their product based counterparts (skitmore and marston, 1999). 6. resource based cost modelling techniques in response to the deficiencies of traditional product based cost modelling techniques, a number of “resource based” cost modelling techniques have been developed. these are summarised in table 3. all of the resource based cost modelling techniques outlined in table 3 share a common theme of utilising the contractor's resource based data during the design process. however despite their potential, the literature contains no reported cases of the use of such resource based cost modelling techniques. their effectiveness, therefore, remains a matter of academic conjecture, and the question arises as to the extent of use of cost modelling techniques in the design stage of the development process. 7. use of cost modelling techniques in the design stage of the development process fortune and lees (1996) surveyed cost modelling technique usage during “early cost advice”1 by “organisations” in northern england and wales. consulting quantity surveying firms made up 62.6% of the sample frame in this study, the remainder comprising project management, contracting and multidisciplinary organisations, and local and regional authorities. later studies were conducted by fortune and hinks (1998) into the use of cost modelling techniques by consultant quantity surveyors in the provision of “early cost advice”2 throughout the whole of england. the results of these studies are shown in table 4. 1 “early cost advice” was defined as being “any cost advice given to the client prior to a formal offer of contract being made” 2 “early cost advice” was defined as being “any cost advice given to the client prior to a formal offer of contract being made” design cost modelling – a way forward by peter lawther and peter edwards the australian journal of construction economics & building page 37 resource based cost modelling technique description operational bill of quantities (skoyles, 1968). an attempt to restructure the traditional bill of quantities to correlate with the way construction work is carried out. construction unit planning approach (bowe 1993). similar to the operational bill of quantities. british property federation system (morton an jaggar, 1995). use of a construction program for the tender bid, in lieu of the bill of quantities. cost of contractors operations (beeston, 1973 a cost modelling technique that enables designers to consider the construction implications of design decisions and design alternatives by simulating the thought processes used by construction planners in terms of selecting plant and allocating labour to a project. pre-established critical path method networks (bowen, 1993). a cost model for use in early stage cost forecasting, which is sensitive to both construction method and construction duration. the model is based upon the use of default critical path method networks, with the injection of algorithms to determine the duration of construction activities. simulation (bennet and ormerod, 1984). a cost modelling technique which mimics the construction process to provide a “simplified representation” of likely duration and cost, through the use of a computer program. a processed based modelling system (bowen et al, 1987; bowen 1993). similar to simulation, with critical path and sub-networks used as the underlying cost modelling structure. data integration systems (morton and jaggar 1995; kim et al, 1999). models developed to accommodate the differing data requirements of the design and construction stages of the development process. table 3 – resource based cost modelling techniques the results of these surveys indicate that traditional product based cost modelling techniques (with the exception of the principal items model) have the highest relative incidence of model usage, and resource and process based cost modelling techniques the lowest incidence in usage. studies by bowen and edwards (1998), investigating cost modelling techniques employed amongst south african quantity surveying practices, revealed that traditional cost modelling techniques such as elemental analysis and approximate quantities are the most popular methods employed. additionally, the superficial method and bills of quantities are also employed at particular stages of the design process; i.e. the brief and documentation stages respectively. this study revealed that a large proportion (83%) of respondents “seldom, if ever, utilise (resource based cost models such as) critical path methods or activity bills of quantities in the preparation of price forecasts”. bowen and edwards concluded that “south african quantity surveyors show little inclination to adopt models which attempt to more closely represent the construction process itself, i.e. resource based cost models”. design cost modelling – a way forward by peter lawther and peter edwards page 38 the australian journal of construction economics & building model incidence in use (% of respondents) fortune and lees (1996) incidence in use (% of respondents) fortune and hinks (1998) judgement 85.80 82.96 functional unit 75.50 69.74 cost per m2 (superficial) 97.30 96.96 principal items 47.30 39.57 interpolation 87.00 84.13 elemental analysis 88.70 88.05 significant items 73.00 69.83 approximate quantities 96.20 93.34 detailed quantities 68.70 63.66 resource based*3 50.40 46.23 process based* 31.80 26.35 table 4 use of various cost modelling techniques by northern england “organisations” (1996) and all england quantity surveyors (1998) (source: fortune and lees, 1996. fortune and hinks, 1998) 3 for the purpose of fortune and lees' study, resource based cost modelling techniques were defined as those which use schedules of materials, plant and labour. process cost modelling techniques were defined as those which use bar charts and networks. no comparable study could be found of the use of cost modelling techniques by consulting quantity surveyors in the australian context. however, the similarities of structure of the australian, english and south african development process in general, and cost modelling techniques in particular, make it reasonable to suggest that similar findings would prevail. these studies indicate that whilst consultant quantity surveyors do at times make use of resource based cost modelling techniques in some semblance, they clearly prefer to use traditional product based cost modelling techniques. however, if resource based such cost modelling techniques do in fact more realistically represent the cost of construction, and hence provide for greater levels of modelling accuracy, why are they not used to a greater extent? 8. inhibitors to use of resource based cost modelling techniques skitmore and marston (1999) adumbrate the difficulty of using resource based cost modelling techniques during the design stage of the development process due to the additional assumptions required to convert design information into process information. formoso (cited in bowen, 1993) contends that the primary reason for the low level of usage of resource based cost modelling techniques in the design stage of the development process is due to a fundamental lack of understanding by the design team of construction processes. ogunlana (1989) considers “design cost estimators” to be “ill-equipped” to estimate construction costs as contractors do. skitmore and patchell (1990) and bowen (1993) have cited lack of understanding of the construction process on the part of “design cost estimators” as the reason for design cost modelling – a way forward by peter lawther and peter edwards the australian journal of construction economics & building page 39 the lack of usage of the simulation and cost of contractors operations resource based cost modelling techniques respectively. ashworth (1999) notes that the data required to use resource based cost modelling techniques is not available to the design cost estimator, whilst ogunlana (1989) contends that even if such data were available, unfamiliarity would act as a barrier to their usage. such arguments are supported by the earlier study of fortune and lees (1996). in analysing the relationship between organisational type and incidence of cost modelling technique, they note that project management and contracting organisations are more frequent users of resource based cost modelling techniques than quantity surveying practices. a possible explanation offered by the authors for this discrepancy concerns the limited access of quantity surveyors to appropriate construction resource and process data, as opposed to information (bills of quantities etc.), which support traditional product based cost modelling techniques. additionally, lack of understanding of resource based cost modelling techniques was considered to “significantly” contribute to their comparatively lower level of usage by quantity surveying practices. ogunlana (1989) notes the time constraints of resource based cost modelling techniques; considering them to be “relatively painstaking and time consuming compared with other techniques.” bowen and edwards (1998) agree, considering that time constraints “appear to preclude more detailed attention to the construction resource implications of building design.” such inhibitors to the use of resource based design cost modelling infer a “gulf” existing between the users of such techniques (consultant quantity surveyors) and the construction process they are attempting to model. it is contended that such a gulf emanates from the traditional method of building procurement. 9. design cost modelling and the traditional method of building procurement notwithstanding the time constraints of resource based cost modelling techniques, it is postulated that any lack of resource based data, or understanding of construction processes, on the part of consultant quantity surveyors is predominantly a function of the traditional method of building procurement itself. such a method distinctly separates the design and construction stages of building development and creates cost specialists in each; consultant quantity surveyors in the design stage and contractors in the construction stage. any time constraints which preclude the use of resource based cost modelling techniques merely serve to reinforce this division caused by the traditional method of building procurement. love et al (1998) consider that this traditional fragmentation of the design and construction functions has created “walls” around the project participants, resulting in ineffective communication processes. such “walls” create an environment in which processes such as cost modelling, and the information upon which they are based, are often conducted in a climate of self-perpetuating isolationism. in such an environment, consultant quantity surveyors “suffer” from modelling a design which does not explicitly represent all the cost generators which are fundamental to the accuracy of the cost model. kim et al (1999) consider such a problem to result from the “functional gap” created from differing data requirements and “traditional barriers” existing between professionals. in addition, the separation of the design and construction processes under the traditional method of building procurement has effectively excluded contractors from the design stage of the development process. as contractors are the specialists of construction, and by extension construction processes and methodology, the implementation of construction process expertise into design cost modelling techniques is also excluded. design cost modelling – a way forward by peter lawther and peter edwards page 40 the australian journal of construction economics & building 10 alternative methods of building procurement the traditional method of building procurement has generally not accommodated the implementation of resource based design cost modelling. indeed, the obstacles created by the traditional method of procurement have possibly stalled research into this area. however, if the construction expertise of contractors were available in the design stage of the development process, it is reasoned that a resultant increase in the accuracy of design cost modelling can be expected. in this regard, recent shifts in the procurement methods of projects may provide a way forward. the growth in popularity of non-traditional procurement systems which incorporate the contractor into the design stage of the development process, such as design and construct, construction management and management contracting (turner, 1997; franks, 1998) provide a “window” by which the design cost modelling techniques of contractors may be examined. if the design cost modelling techniques used by contractors can be identified, they can then be compared to those used by consultant quantity surveyors. such a comparison will give an indication as to the importance of resource based cost modelling in overall forecasting accuracy. in turn, areas of potential improvement to traditional design cost modelling techniques used by consultant quantity surveyors may be identified. 11 conclusions consultant quantity surveyors generally utilise product based design cost modelling techniques; such techniques reflecting the design information upon which they are based. these techniques do achieve a tolerable level of accuracy. however, they are deficient in terms of lacking an explicit relationship with the construction process they are purporting to model, and by using distorted cost data to support them. whilst resource based cost modelling techniques have been developed, the traditional product based cost models retain greater favour with consultant quantity surveyors. reasons proffered for lack of use of resource based cost modelling techniques by consultant quantity surveyors include lack of data, lack of understanding of construction processes, and time constraints. these restrictions emanate from the traditional method of building procurement which distinctly separates the design and construction processes and thus militates against the easy transfer of data between the actors engaged in them. however, the emergence of nontraditional methods of building procurement provides fresh opportunities for the advancement of design cost modelling research. such procurement methods position the contractor directly in the design stage of the development process, making it possible to examine their design cost modelling techniques and utilise their process expertise. it is postulated that such an investigation would provide indicators of potential improvement to the accuracy of design cost modelling techniques used by consultant quantity surveyors. 12. references ashworth, a. and skitmore, r.m. 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(1984) simulation applied to construction projects. construction management and economics. vol.2, no.3, pp:225-263. e&fn spon, london. bowen, p.a. (1993) a communicationbased approach to price modeling and price forecasting in the design phase of the traditional building procurement process in south africa. unpublished phd thesis, university of port elizabeth, south africa. bowen, p.a. and edwards, p.j. (1998) building cost planning and cost information management in south africa, journal of construction procurement, vol.4, no.1, pp16-26. the international procurement research group. glamorgan university, united kingdom. bowen, p.a, wolvaardt, and j.s, taylor, r.g. (1987) cost modelling: a process modelling approach. in building cost modelling and computers, brandon, p. (ed). e&fn spon, london. brandon, p. (1982) building cost research: need for a paradigm shift? in building cost techniques new directions, brandon, p. (ed). e&fn spon. london elhag, t.m.s. and boussabaine, a.h. 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(1986) estimating and tendering for civil engineering works. collins, london. design cost modelling – a way forward by peter lawther and peter edwards page 42 the australian journal of construction economics & building morton, r. and jagger, d. (1995) design and the economics of building. e&fn spon, london. morrison, n. (1984) the accuracy of quantity surveyors’ cost estimating. construction management and economics. vol.2, no.1, pp:57-75. e&fn spon, london. newton, s. (1989) cost management and the project manager. school of building, university of technology, sydney. ogunlana, s.a. (1989) accuracy in design cost estimating. unpublished phd thesis. loughborough university of technology, united kingdom. raftery, j. (1984) models in building economics: a conceptual framework for the assessment of performance. in proceedings 3rd international symposium on building economics. cib w-55, ottawa. skitmore, r.m. and marston, v.k. 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(1997) building procurement. macmillan. london. viewpoint contract delay what is it and how are we performing? david finnie (otago polytechnic, new zealand) abstract this paper examines the management of contract delays in the construction industry as currently practised, and suggests some best practice alternative methods. research results about the level of contractor’s time management skills were analysed to determine the related impact on their ability to manage contract delays. a comparison was made between three conditions of contracts used in new zealand to determine how delay management should be managed with a discussion about how the different contract conditions distribute risk among the parties. recommendations were made to improve contract conditions, up-skill industry practitioners and ensure student graduates have adequate delay management skills. introduction one of the main measures of a construction project’s success is time (pino, 2010). the responsibility for finishing a project on time is a complex issue. contractors must ensure that the building is constructed within the contractual completion date, or risk the imposition of financial penalties. if the principle or their agent are the cause of the delay however, the completion date may be extended to compensate the contractor. the principal and their agent must therefore ensure that they provide the contractor with information in a timely manner, to avoid causing delays. contract conditions may also contain provisions for the contactor to be awarded extensions of time (eot) for other types of specified delays, such as inclement weather. effective project time management is highly dependent on the contractor, and can be adversely affected in a number of ways. over recent decades the use of technology such as computer software has changed the way that programme schedules are developed and analysed, with a massive increase in sophistication. the software creates complex links between schedule tasks, and can identify the longest sequence of interdependent tasks, the critical path, which is the most critical task sequence for successful time management. the critical path may then be compared against paths which contain float to help determine the impact of a delay on the overall completion date. however, these new systems rely on the competency of the practitioners who operate them. research has been carried out which found a significant lack of contractor skill around time management. insufficient skill in managing project time will also impair a contractor’s ability to identify and claim for contract delays. the contract conditions themselves may also impact on the efficiency of processing delays, through the designated method for distributing risks among parties, and through the lack of clarity in the way that the contract is written. this widespread shortfall of industry knowledge would indicate both a need for existing practitioners to be up-skilled, and for educational institutions to ensure that their student graduates have sufficient delay management skills. australasian journal of construction economics and building finnie, d (2012) ‘contract delay what is it and how are we performing?’, australasian journal of construction economics and building, 12 (1) 83-91 84 how well does industry manage contract delays? submission of extension of time claims (eot) the effective submission of eot claims begins with effective time management. time management begins with the definition and acceptance of a baseline programme. this programme must include the logical sequence of activities which form the as-planned critical path. however, the original baseline programme is seldom followed accurately. reasons for this include the difficulty of predicting every future event accurately at the time the baseline programme is written, and the possibility that the programme writer may be quite isolated from the actual construction work and out of touch with actual events (pickavance, 2001). new ways of doing things may also be found during the construction phase. a further complicating factor is the complexity of the modern schedule produced with computer software to logically sequence tasks. the typical modern schedule may contain between 1,000 and 10,000 components, including a) tasks, b) at least three tasks relationship for every task, and c) associated resource and costs constraints (barry, 2009). furthermore, over the last few decades the construction industry has experienced an increasing demand for design and build, guaranteed maximum price and engineer procure and construct contracts. these require the contractor to accept greater risk, and to develop more efficient and technologically complex solutions, all within shorter time scales and tighter financial constraints (pickavance, 2009). farrow’s 2001 comment, that “delay analysis today is more involved, more analytical, more forensic and more challenging feature of construction law than it was ten years ago” (p. 3), is even more true today. following the agreement of the baseline programme, it needs to be updated regularly throughout the construction period to reflect changes in the actual sequence and performance of construction and to accommodate any changes in the scope of works variations which may be instructed by the principal. accordingly, regular notes should be made, for instance in a daily site diary, to record progress, the logic of events, and any circumstances affecting the construction. mcdonough (2006) and nash (2006) identified that communications between parties should be recorded and preserved. nz master builders scc 10.4 provides that a subcontractor who delays the contract works may be liable for a portion, or all, of any liquidated damages “as the contractor may suffer as a result of the subcontractor’s default”. however, it will be difficult for the head contractor to determine which of their subcontractors caused the delay if they have failed to kept adequate records. this challenge may be further complicated by the many changes which can occur to the contractor’s programme over the duration of the project, due to such things as contract variations and the re-aligning of resources to maximise efficiency. importantly, clause 10.1.2 states that any “revisions to the contractor’s current construction programme, or to the times when the subcontractor is to carry out and complete any part of the subcontract works, must be communicated to the subcontractor in a timely manner”. so what is the level of understanding and conduct regarding time management in today’s construction industry? in 2008 the chartered institute of building (ciob) conducted a survey among 400 companies to which they received 73 responses. their thesis underpinning the research was that little had changed in time management since the development of the bar chart, nearly 100 years ago (pickavance, 2009). from their research, they uncovered a number of interesting facts: a) repetitive, low-rise projects had a greater chance of success, as they could generally get by with less sophisticated programme management processes. b) the quality of time management on complex construction projects was found to be poor. c) time control, if it existed, was left to the contractor, with little collaboration between project participants. d) programmes were often used solely as a political tool to protect companies and managers against blame for delays rather than being used to monitor and review progress and to minimise the consequence of delays. australasian journal of construction economics and building finnie, d (2012) ‘contract delay what is it and how are we performing?’, australasian journal of construction economics and building, 12 (1) 83-91 85 e) only one fifth of respondents said they would voluntarily report a delay even if contractually required to do so. nearly half felt that they would not report the delay because they thought they would be able to remedy it. a third did not want to upset the principal, and a tenth admitted they may be able to blame someone else. f) interestingly, 95% of respondents thought that education and training in the management of time was unsatisfactory. these finding are of great concern when compared with the actual requirements of construction contracts for managing contractual delay. for example if we look at nzia scc requirements of contractors when submitting an eot claim, they are that the contractor must apply in writing and: nzia scc clause 11.5.2 a) do so within 5 working days, or as soon as practicable, after the delay begins; b) state in sufficient detail the grounds for the extension, including the cause of the delay relied on; c) specify the number of working days claimed. nzia scc clause 11.6 “must take reasonable steps to avoid delays and minimize the effects of these delays” a contractor cannot possibly hope to submit an extension of time claim within the required time frame if, firstly, they have not been monitoring progress and updating their programme regularly, and secondly, if they are reluctant to do so for any of the reasons given above. moreover if the contractor’s programme is not constructed properly with sequencing between tasks to identify the critical path, it will be very difficult to calculate the number of working days claimed. evaluation time delay delay analysis is the “investigation into the issue of what has caused a project to run late.” (farrow, 2001, p. 4). it can be a challenging process involving many complicating factors, and a range of different evaluation techniques which may be adopted. generally, the process involves identifying which delays have occurred to the critical path and calculating the amount of delay caused. when analysing delays; firstly the incident and effect of the delay should be identified then secondly the cause should be established (barry, 2009). mcdonough (2006, p. 6), identified three key questions to be answered in the investigation and analysis of delay claims: who and what delayed the project? was the delay critical to completion? and who is responsible for the additional costs under the contact? the analyst needs to be aware of the different evaluation techniques and be able to select the best technique to the case at hand. barry (2009) identified the five main types of delay evaluation techniques: 1) the impacted as-planned analysis method: in this prospective (future orientated) analysis method, a new as-planned programme is compared to the original base-line programme to determine the effect of the delay on completion. importantly, it does not determine the cause of the delaying event. barry (2009) recommended that this method only be used where delays occur at the outset of the project or where a contract specifically requires its use. 2) the time impact analysis method: recommended by the scl delay and disruption protocol (the society of construction law, october (2002) sourced from barry (2009)) and is widely used. it is both a dynamic (involves computer aided schedule calculations) and prospective method. one advantage of this method is that it takes account of the timing and effect of the delay. in order to be effective, this method requires programmes to be well detailed and up to date. in this method the programme is updated to the point at australasian journal of construction economics and building finnie, d (2012) ‘contract delay what is it and how are we performing?’, australasian journal of construction economics and building, 12 (1) 83-91 86 which a delay occurs then the delay is added and a new completion date is established in recognition of the actual progress up to the delay and the delay itself. 3) the collapsed as-built or “but-for” analysis method: being a retrospective (past orientated) method, it performs well when all the information is fully available. however, being dynamic this method requires a network schedule. the process involves retrospectively reinstating the logical relationship of links to the as-built schedule at the end of the project (the as-built schedule is the fully updated baseline schedule with the links overwritten as part of the updating process). however, it can be a very complicated process to restore all of the links, especially to a complicated project. once the links have been restored a known delay event may be removed to determine what he schedule would have been if the delay had not occurred. this process does not account for every possible sequence of the events if the delay had not occurred and so this method must be accepted as hypothetical only. it is best used in a project where either all tasks are linear or the delay occurs near the end of the project. 4) snapshot/ windows/ time slice analysis method: also retrospective and dynamic, this method relies heavily on a network baseline or host schedule and regularly updated, asbuilt data. the baseline schedule is regularly updated to provide various snapshots of progress used to determine both; the critical path sequence and amount of delay at the date of each snapshot. 5) as-planned versus as-built windows analysis method: in this retrospective and static (involves manual determination without computer calculations) method the occurrence, impact and causes of each delay are determined by comparing the various schedule sequences to determine the critical path. then planned dates are compared to actual dates to find delays to completion. this method requires that the analyst is provided access to good quality project information such as methodology, schedule, scope, correspondence and photos in order to gain a high degree of understanding about the project. in addition to understanding which technique to adopt, the analyst faces a range of complicating factors. firstly, determining who owns the programme float, the contractor or the principal (critchlow, farr, briggs, hammond, pickavance & lavers, 2005). it may simplistically be assumed that the contractor does. however, case law has not provided a clear resolution. furthermore, in the case of a subcontractor delay, the head contractor cannot nominate a general float period (farrow, 2001). secondly, when a delay occurs which is not on the critical path, whether the contractor should be entitled to claim the delay as an extension of time because it erodes into their overall project float, or whether only delays to the critical path should be claimed (winter, 2009). thirdly, given that the actual level of time management may differ from what is actually required, the delay analyst may not be provided with an accurate critical path programme which has been regularly updated. certainly, the findings from the ciob research reinforce this point. accordingly, mcdonough (2006, p. 6) asserted that in the “… rough and ready world of construction, the documentation and updating of the progress programme is not always dependable. all actual progress information reported in the programme needs to be checked and verified/corrected by detailed reference to the most accurate records available, usually the daily inspection or quality control records.” furthermore if a construction programme is regularly and accurately updated and any issues clearly communicated to all stakeholders and agreed upon, it is unlikely that a dispute will arrive at arbitration in the first place (mcdonough, 2006). finally, the analyst must determine which delay takes precedence in the event of more than one delay occurring concurrently. the issue of concurrent delay is a complicated one with many considerations such as, the conditions of contract used, any difference in causative potency between the different delays, who or what is responsible for each delay and the legal system used in the determination. this discussion highlights a complicated matter which is outside the scope of this paper. (marrin qc, 2002), provides an informative discussion regarding the correct approach for evaluating contractors’ claims arising out of concurrent delays. australasian journal of construction economics and building finnie, d (2012) ‘contract delay what is it and how are we performing?’, australasian journal of construction economics and building, 12 (1) 83-91 87 it is an interesting point that none of the conditions of contract discussed above specify that the construction programme identify a critical path, sequencing of tasks, timing or procedures for updating the programme, or that the baseline programme be jointly accepted between parties. mcdonough (2006) identified this issue and asserted that “contracts can specify, for instance, critical path method (cpm) programming and the monitoring procedures to be adopted by the parties during construction. these can include the joint acceptance of the baseline programme; the frequency and accuracy of programme updates; progress measurement and documentation; their analysis of delays, variations and (additional or disputed) claims; and the procedures for the formal revision of the baseline.” importantly, there is no stand-alone profession for time management in the construction industry. it is carried out by practitioners whose primary profession is another discipline (pickavance, 2009). understanding the process of delay evaluation, its techniques and complications requires a great deal of competency for both current practitioners and for graduates who are likely to participate in time management in the future. this applies both to the analyst and the contract manager. the analyst needs to understand the application of various techniques to the particular case and be aware of the complicating factors. the contract manager not only needs to be capable of producing and updating their programme effectively, but they also need to an understanding of the process for submitting their eot claims and the associated evaluation in order to know what evidence they will need to provide and whether their claim is likely to succeed from the onset. how construction contracts distribute risk associated with delay between parties time has a measurable financial effect on a project (mcdonough, 2006). there are different risks associated with contract delays on each party to the construction contract. for the principal, a delay may represent the risk of a planned investment not providing cash inflows when forecast. this may result in increased short-term funding costs to service the project, or worse still, the risk of missing a market deadline. for example, a developer not having a building ready for student accommodation at the beginning of the academic year, may have to arrange and pay to relocate students into temporary accommodation elsewhere until their building is ready. worse still, the developer may miss a whole year of rental income which could force them into liquidation. for the contractor, the risk of a delay usually represents the risk of incurring penalties for completing the project late, such as liquidated damages, and they may be unable to charge this to their subcontractors. they may also lose credibility within the industry, and incur greater construction costs due to their own increased time-related costs or prolongation costs. stulic (2010) asserted that commercial risk is allocated in most construction contracts through the following points;  a specified completion date  a method to determine when completion has been achieved  consequences for not achieving the completion date, in the form of liquidated damages  provision to extend the completion date for extension of time to provide the contractor with relief against liquidated damages the distribution of the delay risk between the contractor and the principal lies in balancing the enforcement of liquidated damages with the contractor’s claims for prolongation costs. an example of this is where a contractor’s time-related costs are allowed for eot resulting from variations only, and not for delays caused by such events as inclement weather. so for any delay other than the net effect of a variation, the contractor becomes exempt from liquidated damages for the delay period, but still incurs their prolongation costs. conversely, the principal losses their right to enforce liquidated damages for the time extension, but does not incur costs for the contractor’s prolongation. one could conclude that liquidated damages are specified to protect the principal and that the contractual provision of extension of time claims are to protect the contractor. however extension of time provisions may also protect the principal. if there were no eot provisions and the princi australasian journal of construction economics and building finnie, d (2012) ‘contract delay what is it and how are we performing?’, australasian journal of construction economics and building, 12 (1) 83-91 88 pal (or their agent) delayed the contractor, the contractor could claim that the completion date no longer applies and that time is now at large (lal, 2007; marrin, 2002). this term is used to indicate that there is no longer an enforceable completion date. in such instance, the contractor must complete the project within a reasonable time and the principal can only apply for general damages under common law (stulic, 2010, p. 2). (pickavance, keith, maclaughlin, wendy, 2005). this is the basis of the prevention principle, originating from the case of holmes v guppy. in which case it was determined that when acts of the principal prevent the contractor from achieving the specified completion date, and there is no contractual mechanism to extend the date, the contractor may be excused from completing the work by the date of completion. the principal is in a much more vulnerable position with time at large than if there were a new extended completion date. so in effect, eot contract provisions provide protection to the principal as well as the contractor. prevention principal vs time-bar clauses one debate revolves around whether the specified time-frames or time-bar clauses, take precedence over the prevention principle. lim (2009) stated that time stipulations in a contract may range from being conditions, in nominate terms or warranties and that a contractor needs to understand this when they form a contract condition. their failure to comply would result in a breach of contract. however, it was also recognized that a more liberal approach has been adopted at common law in that “by asking for performance when the promise is guilty of delay is to ask the promisor to do something that he or she never agreed to.” (lim, 2009, p. 5). jones (2009) determined that the debate between whether the prevention principle or the time-bar clause takes precedence has not yet been resolved and that it is an area which requires further work. he suggested that perhaps the prevention principle should be applied only to reduce the recoverable damages for periods of delay caused by the principal. however, in his evaluation of case law examples in the uk, ireland and australia, lal (2002) asserted that, on the basis of risk allocation and the requirement of price surety, even when the principal has caused the delay, the contractor should not be made exempt from damages unless their claim is in accordance with the conditions of contract. the basis of this argument is that the principal may not always know that they have caused a delay and that they transfer the risk allocation, including identification and assessment of eot claims to the contractor. in addition, eot claims which are not submitted within the specified time frame may lay dormant and be used as a threat in settlement negotiations. i also agree that time-bar clauses should take precedence on the basis that if the contractor fails to notify the principal in a timely manner, the principal loses the opportunity to pay the contractor acceleration costs for such things as working overtime, in order to meet the original completion date. indeed, the acceleration costs may be far less than the costs which the principal may face if the project is not ready on time, as outlined earlier. there are a number of ways in which the conditions of contract can affect delay risk between parties, and head contractors should be aware of the contract conditions within their subcontracts, as well as those in the head contract. timeframes firstly, tighter timeframes imposed on the contractor to submit eots makes claiming more difficult, increasing their risk. nzs3910: 2003 scc clause 10.3 allows the contractor 20 working days to provide notice to the engineer of an eot claim or “as soon as practicable thereafter”. while nzia clause 11.5.2 only allows the contractor 5 working days, which is the same time allowed for a subcontractor under master builders clause 10.2.2 b). this raises some issues for the head contractor. given the subcontractor has the same time period to claim, the head contractor has no time to receive and evaluate it against their programme before submitting a claim to the principal. also 5 working days may not be adequate for the contractor to determine whether the delay is genuine or just a minor scheduling problem which may rectify itself (pinto, 2010). research conducted by the chartered institute of building (ciob) indicates that in practice contractors prefer longer timeframes because they do not want to risk upsetting the principal early, australasian journal of construction economics and building finnie, d (2012) ‘contract delay what is it and how are we performing?’, australasian journal of construction economics and building, 12 (1) 83-91 89 but would rather have more time to try rectifying the delay in order to save face, even at their own cost. preconditions for claiming eot secondly, the contractor’s risk may be increased by allowing fewer pre-conditions for claiming. nzia scc-2005: clause 11.5.1 provides a list of such pre-conditions, for example “(f) weather that interferes with the progress of the work”. to acknowledge the difficulty with foreseeing every possible event, clause (l) provides for “something else of significance beyond the contractor’s control”. in a similar manner nzs 3910: 2003: clause 10.3.1 lists reasons for an extension of time claim and also provide (f) “any circumstances not reasonably foreseeable by an experienced contractor at the time of tendering and not due to the fault of the contractor”. one advantage of nzs 3910: 2003 is where clause 10.3.7 clarifies that “the contractor shall not be entitled to compensation for time related costs where an extension of time is granted on grounds other than the net effect of a variation” while nzia scc leaves this area open to interpretation. master builders scc 2009 section 10.2 provides that subcontractors are entitled to an eot for any reason described in the head contract. the maximum extension is that of which the contractor is entitled to under the head contract or for delay caused by suspension of the contract works. clause 10.2.1 b) also provides the inclusion of any delays caused by the principal, engineer or contractor or other subcontractors and, interestingly, “for any other act of prevention of the contractor not specifically covered in this clause”. dependant on the head contract conditions, there is a risk to the head contractor that “any other act” implies something outside of their head contract. the subcontractor is tied into the head contractor’s programme in section 10.9 by providing that the subcontractor must “complete their works as required by the contractor’s current construction programme (which has been issued to the subcontractor). this ensures that there is no delay to the progress and completion of the head contract works”. again clause 10.3.1 provides that “the subcontractor is not entitled to compensation for costs incurred in relation to the extension, unless the extension was a variation…” opportunities for further research one limitation within this essay is that the research about time management skill levels was conducted overseas. therefore, there exists an opportunity to carry out similar research within new zealand. when attempting to source data measuring the success of construction projects in new zealand with regard to timing, it was found that two kpi benchmarking initiatives had failed or were struggling, due to lack of industry participation. constructing excellence in new zealand and the nz centre for advanced engineering (caenz) had both attempted such benchmarking initiatives over the past decade. this not only means there is a lack of information to determine industry performance in such areas as time management, but also represents a missed opportunity for well managed construction companies to gain objective data, which they could use to market their company and also apply to highlight areas requiring attention. another limitation is that while three different contract conditions were analysed, different procurement methods were not. one area of potential research would be to compare different procurement methods such as lump sum, cost reimbursement or collaborative partnership contracts to determine the effects on delay management. recommendations for improvement in order to simplify the contractual requirements for time managers and contract administrators following changes are recommended: firstly, nzia and nzs3910 work together to produce a common set of contract clauses relating to the timing and evaluation of eot claims. it is recommend that “or reasonable time thereafter” be removed from timing and instead be replaced with a fixed duration. this would clarify the clause and help to focus practitioners’ attention to it. this may also help in clarifying any dispute between the prevention principle and the time-bar clause in the case of a dispute. a period of say, 10 work australasian journal of construction economics and building finnie, d (2012) ‘contract delay what is it and how are we performing?’, australasian journal of construction economics and building, 12 (1) 83-91 90 ing days would provide the contractor with one week to identify the delay and one week to claim it. if the contractor is updating their programme weekly, this should be achievable. alternatively a further two days could be potentially added for float. secondly, nzia, nzs3910, and nzmbf scc compile a common list of acceptable preconditions. this will not only provide consistency across the head contract conditions, but will also remove the head contractors of having different requirements for claiming delays under their head contract to that of their subcontractors claiming delays to them. thirdly, nzia and nzs3910 revise their conditions of contract to include provision for specifically requiring the construction programme to identify the critical path, task sequencing and requirements for updating the programme. furthermore the skill level of time management and contract administration throughout industry needs to be improved. this may be achieved by implementing training to up-skill current practitioners. there may exist opportunity for training providers to develop short courses specific to this area. in addition, educational institutions of diploma and/ or degree courses, in the field of construction and project management, should review their graduate profiles to ensure that graduates entering the workforce have sufficient skills. for example, we can look at two of the courses which form part of the new zealand national diplomas in both quantity surveying and construction management. these are unit standards 9637 programming and 9661 administration of contracts. programming requires updating construction programmes to account for contingency events and re-scheduling resources and tasks accordingly, but makes no mention of recording and using this information for the purpose of submitting eot claims. only contract administration requires students to understand the process of eot claims. it would be easy for education providers to miss the important linkage between the time management contained in programming and the contractual process of eot in contract administration, especially given that the two subjects are likely taught at different times by different lecturers. conclusion there is a linkage between the skill levels required to manage project timing and the use of those skills to identify and claim for contract delays. there are common law requirements for practitioners to be aware of such as the prevention principle versus time-bar clauses. one benefit of upholding the time-bar clause is that it protects the principal’s opportunity to pay acceleration costs. additionally practitioners must be aware of the requirements for claiming delays under the conditions of contract specific to that project. furthermore, differences exist between new zealand conditions of contract nzia, nzs3910 and nz master builder’s conditions of contract, mainly in the area of timing clauses and the listed criterion for claiming extensions of time. moreover, none of the contract conditions reviewed, specify that the construction programme be produced to identify a critical path and sequencing of tasks. finally, it is important for training institutions to ensure that their training programmes encompass the relationship between time management and contract delay. this should include competencies for effective time management and understanding the various techniques for delay evaluation and the associated complicating factors. references constructing excellence in new zealand. (retrieved april 1, 2011). www.constructing.co.nz. barry, d. (2009). beware the dark arts! delay analysis and the problems with reliance on technology. society of construction law, 1-14. dr critchlow, julian; farr, alastair; briggs, steve; hammond, john; pickavance, keith; professor lavers, anthony. (2005). the great delay analysis debate. society of construction law. farrow, t. (2001). delay analysis methodoly and mythology. society of construction law. lal, h. (2002). extension of time: the conflict between the "prevention principle and notice requirements as a condition precedent. society of construction law. australasian journal of construction economics and building finnie, d (2012) ‘contract delay what is it and how are we performing?’, australasian journal of construction economics and building, 12 (1) 83-91 91 lal, h. (2007). the rise and rise of time-bar clauses for contractors' claims: issues for construction arbitrators. society of construction law. lim, t. (2009). essence of time in construction contracts. the australasian journal of construction economics and building, 1-6. marrin qc, j. (2002). concurrent delay. society of construction law. mcdonough, f. (2006). analysing and handling delays. constructing nz, 7. mcdonough, f. (october 2006). analysing and handling delays in. constructing nz, 6-7. nash, s. c. (2002). delay and disruption: legal considerations. society of construction law. new zeland centre for advanced engineering (caenz). (retrieved april 1, 2011). www.caenz.com. pickavance, k. (2001). principles and policies in delay analysis. society of construction law. pickavance, k. (2009). managing the risk of delayed completion in the 21st century: the ciob research. society of construction law. pickavance, keith; maclaughlin, wendy. (2005). a little of time at large: proof of a reasonable time to complete in the absence of a completion date. society of construction law. pinto, j. k. (2010). project management achieving competitive advantage 2nd edition. new jersey: pearson education. professor jones, d. (2009). can prevention be cured by time bars? society of construction law. stulic, m. (2010). prevention and the allocation of the risk of project delays: evolution or revolution? society of construction law. the society of construction law. (october, 2002). delay and disruption protocol. available from www.eotprotocol.com. winter, j. (2009). how should delay be analysed dominant cause and its relevance to concurrent delay. society of construction law. introduction factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore page 80 the australian journal of construction economics & building factors affecting the performance of small indigenous contractors in papua new guinea daniel wasi and martin skitmore, school of construction management and property queensland university of technology, brisbane, australia introduction the total area of png is 461,690 square kilometres with a total land area of 451,710 square kilometres. the national government owns only 3% of the total land, with 2% privately owned and 95% is traditional owned through clans or kinships. the national government-owned land comprises freehold land, which is only accessible by nationals, and alienated land, which is accessible by nationals and foreigners for development purposes. despite 20 years of independence, general construction activity in papua new guinea is dominated by large overseas construction companies, mainly from australia, who undertake major engineering and building construction projects funded by the private and public sector. the large expatriate companies have access to finance, equipment, material and management and technical expertise, which enable them to move around the country to undertake large construction projects. on the other hand, the small indigenous contractors compete for small construction projects within the town or city where they operate and rarely move out to expand their business. when there is a shortage of work, the large expatriate contractors cover their overheads by competing with the small contractors for small work – a phenomenon termed ‘downwards plundering’ (ilo, 1987:37). in 1993, the national government, noting that the construction industry could assist in solving the country’s employment problem, established the construction industry unit (ciu). this unit comes under the department of commerce and industry and is responsible for working together with the construction. in the same year, the national government, under the national housing corporation (nhc) act no.1 of 1990, also established the nhc, by amalgamating the department of housing and the national housing commission. the national government then ruled that all construction projects valued up to 100,000 kina1 must be undertaken by only small indigenous contractors. from k100,000 to k5 million, projects are reserved for local and png based expatriate companies, with projects over k5 million being reserved for joint ventures where the national partner holds over a fifty percent share (tait and callick, 1993:165). towards the end of 1995, the nhc began its housing construction program and today has built over fifty houses at a cost of k1.2 million. in line with the national government policy to create businesses and employment opportunities for the people of png in the construction field, the nhc engages small indigenous contractors for all its infrastructure, maintenance works and housing construction projects throughout the country. all the nhc housing construction projects are carried out under a lump sum contract and open tenders are called for all projects. the construction industry unit (ciu) contractors’ register comprises 150 contractors registered in the country. this includes contractors undertaking engineering, building and specialised work. out of these, there are 20 large expatriate construction companies, mostly involved in both engineering and building work. when registering the contractor, their financial status, experience, plant and equipment, experience and personal qualification are taken into consideration. the contractors are then classified 1 1 kina = approx us25c factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore the australian journal of construction economics & building page 81 contractor’s category allowable range of contract cost to be carried out small category sub-category a equal to or less than k 100,000 sub-category b equal to or less than k 500,000 medium category sub-category a above k 500,000 to k 2,500,000 sub-category b above k 500,000 to k 5,000,000 large category sub-category a above k 500,000 to k 10,000,000 sub-category b above k 10,000,000 table 1: contractor’s category and allowable range of contract cost (source: construction industry unit, 1997). accordingly as small, medium or large contractors as shown in table 1 (above). registration of contractors is undertaken annually and contractors are assessed again. if the contractor’s performance is satisfactory the contractors status in the register is upgraded. in the png capital of port moresby, there are a total of 33 contractors registered to undertake building construction work. large expatriate contractors make up almost a third of those registered. however, it is estimated that the number of registered contractors comprise only 5% of the total number of contractors submitting bids for housing projects. small indigenous contractors in png face similar problems as small contractors in other developing countries and their performance is thought to be poor. stretton (1984) has helped identify some problems associated with the poor performance. however, the study did not measure the impact of their problem. the research described in this paper aims to correct this by examining the extent and effect of factors on the performance of small indigenous building construction companies in port moresby. likely factors that affect small indigenous contractors' performance are identified from the literature. an empirical study is then described aimed at determining how these factors affect project cost, time and quality. this comprised a survey by personally administered questionnaires to a sample of small indigenous contractors to assess the level of factors associated with the problem of lack of performance. the view of each firm concerning the effect of each factor on performance was also obtained. the results show that, with the exception of culture, all the factors are perceived to have an effect of construction performance. it is also shown that the incidence of these factors within the firms surveyed are quite low. of particular concern is the level of cash flow. problems faced by small contractors: literature review cash flow small contractors in developing countries are often the ones on the fringe of the construction industry and undertake work unwanted by the large contractors. most of their work, comprising construction, maintenance and refurbishment work, is from the public sector. consequently, they are likely to be greatly affected by the state of the country’s economy because of, for example, changes in the government’s expenditure policy (ruddock, 1992:93). as most government agencies experience financial problems, there are delays of payments to contractors – with a consequent adverse effect on the contractor’s cash flow (ofori, 1991). this then affects the operation of the contractor, ultimately hindering the factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore page 82 the australian journal of construction economics & building projects from being delivered as required (adam, 1997:445-55; jannadi, 1997:33). many small contractors also experience difficulties in obtaining money from financial institutions to finance their business due to the high levels of bankruptcy in the industry, hence the initial capital for the business must come from the contractor (miles 1979:86). in addition, most small and medium contractors in developing countries have very limited funds as they are seldom able to offer the necessary fixed assets as collateral (ofori, 1991:27). small contractor’s therefore operate on very tight budgets, and when they make a loss on one project they tend not to have sufficient resources to continue in business (stretton, 1984:34-52). stretton further noted that the success of small indigenous contractors is dependent on the type of contract used lump sum contracts requiring contractors to have sufficient finances for purchasing materials and paying workers. in png, all public funded projects are let on lump sum contacts with funds only released to contractors for payment of work done. the nhc, being aware of contractors’ cash flow problems, make weekly payments to contractors. however, the contractors still experience problems with delay in progress payments. many small local contractors do not have credit arrangements with major building materials suppliers or financial institutions, and operate on a cash basis. delays in payment are therefore expected to greatly affect their cash flow. construction management skills deficiency in planning and management skills is said to be the greatest single problem for small-scale contractors generally (ilo, 1987:47). in developing countries, the local construction industry lacks the capacity and capability of undertaking large construction projects, resulting in the continual domination of expatriate construction companies in undertaking all major construction projects (adam, 1997:95-108). consequently, smaller companies find it hard to acquire experience in their type of project (jannadi, 1997:33) leading to contractors with limited management and technical skills (ofori, 1991:371-2). this affects their ability to acquire building materials, manage their workers, successfully bid for work (stretton, 1984:34-52) and generally contributing to poor performance (ofori, 1991:371-2). given the fluctuation in the building industry, employment in the construction industry in third world countries offers less employment security (stretton, 1984:142). in addition, small contractors in developing countries experience a shortage in skilled labour due to the salary and the security of employment offered by large construction companies being greater than that offered by the small contractor (ilo, 1987:40-3). furthermore, more young graduates are being assigned to oversee projects and their “lack of skills and experience at both the supervisor and worker level” has been a contributing factor (lewis, 1984:37-48). contract documentation inappropriate contract documents has been identified as one of the most common problems affecting the operation of small contractors ofori (1991:371-2). in developing countries, most public sector clients do not use a standard set of contract documents and building plans. the methods of construction are also different which often confuses the contractors. in png, public housing construction drawings provided by nhc are based on the assumption that the site is flat. any site work is considered as extras and the contractor can claim for work done. however extra work is not paid for until after practically completed when all extra work is measured and paid out. this places a consequent strain on the contractors’ cash flow. factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore the australian journal of construction economics & building page 83 working relationships overall in png most small indigenous contractors often do not want a bad working relationship with the client, given that this may jeopardise their chances of getting any further work. clients are hard to find and easy to lose and a contractor who finishes a contract on time and with a good reputation will be one step ahead of his competitor when the next invitation to tender comes along (miles, 1980:245). however small indigenous contractors have been known to express disappointment with their working relationship with the client’s representative mainly because of the unsympathetic attitude to the contractor’s problems regarding shortage of materials and the delay in payments. facilities and equipment given the size of their company, many local contractors that are owner managed and operated, run their work from their own residence. without office equipment like fax and photocopying machines, urgent information or queries take time to reach the parties concerned. communication communication in small firms is often good, although poor communication skills of the manager can be a problem (fryer, 1985:65). in developing countries, there is often no means of communication between the workers on site and the contractor’s office. urgent site problems, therefore, cannot be solved immediately because the site workers cannot talk to their manager or owner. in png, the nhc site representative can not communicate urgent information to the contractor, thus it has to be relayed through the workers on site. this may lead to information being given to the wrong person or the information being misinterpreted when relayed. the ilo (1987:43) has further noted that the level of supervision by the client can also affect the performance of the contractor if the client supervisor is not qualified, or there is no effective communication between the contractor and the client. shortage or the lack of client supervision staff in some developing countries also contributes to the contractor’s problem. this may result in the contractor doing remedial work, which can be very costly for small contractors – reducing profit margins and putting a strain on cash flow. cultural impact ‘wantokism2’ is the common cultural problem in png and is thought to lead to the downfall of local construction companies. as in all business ventures in png that are family owned, members of the family are employed to work for the company. local building contractors also employ people from their family, the clan and the village. it has been found that, when a contractor employs only relatives, work input is very low when the owner is away from the site (stretton, 1984:34). local contractors in png are often culturally pressured to employ more of their relatives to maintain a relationship with the village. if the contractors decide otherwise and hire workers from outside the village they are alienated from the village (stretton, 1984:140). financial management skills small contractors have very low financial reserves and use the profit from ongoing projects to finance their next project, hence a loss in one project ultimately leads to a cash flow problem and liquidation (stretton, 1984:43). this is exacerbated by the tendency for small contractors in developing countries to take money out of the business for spending on personal items such as cars or a new house (ilo (1987:40). most indigenous contractors in png are owner operated who also control the company financial matters. it is likely therefore, that project funds will sometimes be channelled into 2 onedo (1991:122) defines wantokism or the wantok system as one talk or language, in generic sense this refers to people of the same linguistic, ethic, village, provincial or region. factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore page 84 the australian journal of construction economics & building other personal matters which consequent financial strain to the projects. in addition, delays in contractor payment caused by the cumbersome process of making contractor payments in the public sector, create financial problems for the contractor. unless well managed, this delay is very damaging to contractors who are operating in a location remote from the client (edmonds and miles, 1984:47). research design and methodology all the data required for the study was collected over a one week period in the form of a ‘one-shot’ or cross-sectional study via a self administered questionnaire (see appendix a). the questionnaire comprised two parts. the first part contained both structured and unstructured questions concerning general information about the company, relating to the contractor’s performance. the second part of the questionnaire contained the factors identified above. the questionnaire was estimated to take no more then fifteen minutes to complete. the questionnaire was hand delivered to all small indigenous contractors and each was asked to complete the questionnaire by the end of the week, at which time they were then personally collected. the contractors were allowed to answer the questions in their own office and own time and without any pressure being applied on them. hand delivery and collection of the questionnaire, also afforded the opportunity to answer or clarify any query the contractors had regarding the questions and purpose of the study. there are 100 small indigenous contractors operating in the national capital district, where the survey was conducted. this excludes contractors involved in engineering and trade work like painting and electrical and plumbing work. using stratified random sampling, a total sample of 50 contractors were identified, comprising small indigenous contractors involved in refurbishment, maintenance work, specialist work, engineering and building construction. questionnaires were then prepared and delivered to small indigenous contractors in port moresby experienced in the construction of residential buildings and capable of undertaking project worth up to k100,000 annually. in total, 20 completed questionnaires were returned – representing a response rate of 40%. analysis of results approximately 70% of the respondents obtain work from the public sector, with the remainder securing work from the private sector. a summary of this information regarding the type of work the respondents undertake and their clients is shown in table 2. all the respondents undertook projects totalling no more than k100,000 pa. table 3 shows the results for the questions “extent of item in your company/experienced by your company” and “effect of item on performance” together with their respective means and standard deviations (sd) for each item. this shows that for the “extent of item in your company/experienced by your company”, with the exception of item 7, all the mean responses are below the midpoint of 3 – indicating that all are, as expected, lower than an average standard. the lowest is ‘cash flow, followed by ‘communication’, ‘construction management skills’, ‘financial skills’, ‘office facilities’, ‘contract documentation’, and ‘level of harmonious relationships’. ‘cultural impact’, with a mean of 3.05, was a little higher as expected. the results for the question “effect of item on performance” show that, in contrast with “extent experienced”, the mean responses of all items are above the midpoint of 3 – suggesting that all are, as expected, quite highly rated. the highest is ‘office facilities’, followed by ‘ financial skills’, ‘communication’, ‘cash flow’, ‘contract documentation’, ‘harmonious relationships’, ‘management skills’ and ‘cultural impact’. factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore the australian journal of construction economics & building page 85 client house construction (%) maintenance (%) refurbishment (%) others (%) public 20 53 11 15 private 35 37 19 9 table 2: summary of respondent’s source and main areas of work experience performance item mean sd mean sd 1 cash flow 2.05 0.99 3.60 1.14 2 construction management skills 2.45 1.43 3.30 1.38 3 contract documentation 2.70 1.21 3.55 0.99 4 harmonious relationship 2.95 1.09 3.40 0.99 5 office facilities and equipment 2.60 1.35 4.10 0.71 6 communication 2.40 1.23 3.80 0.89 7 cultural impact 3.05 1.70 3.20 1.36 8 financial management skills 2.50 1.23 4.05 0.60 table 3: extent of experience and effect on performance discussion the information provided indicates that most of the small indigenous contractors obtained the majority of their work from the public sector. the predominant area of work is shared between maintenance work and the construction of houses, with some undertaking refurbishment and other trade work. performance factors. cash flow ranking the least of the factors experienced by the contractors and yet fourth highest in terms of effect, the results confirm that most contractors work with very limited funds, and any delay in payments by the client or when the project funds are mismanaged have an important effect on the contractor’s performance. management skills this factor was the third least experienced by the contractors but was considered to have one of the lesser effects on performance. it is noted that most of the small indigenous contractors have established their business through the ‘trade route’, and should be reasonably proficient in reading plans and undertaking the actual construction work. clearly, the situation is even worse than expected. contract documentation rated not too low relative to other factors in terms of extent experienced, this factor is rated fifth in terms of the effect on performance. however, it is noted that most clients, either public or private, often use different contract documents. for public housing, the plans are standard all being designed for a flat site to enable plans to be used throughout png. no site contours are shown on the plans and the contractor is required to inspect the site to allow for any siteworks. given the lack of information, contractors may increase their estimates for siteworks at the risk of overpricing the work. most contract conditions put the majority of risk on the contractor. payments are not made for materials on site unless they are installed, but when operating with minimum funds this affects the contractor’s performance. factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore page 86 the australian journal of construction economics & building working relationships this is regarded at an average level by respondents and third highest in terms of effect on performance. with almost 70% of their work coming from the public sector, it is necessary for the contractors to maintain a good working relationship with the client to enable them to stand a better chance of getting work in future. therefore, most contractors may have problems but rarely show them. office facilities and equipment this rates better than the least occurring factors in terms of experience but is the most important in terms of effect on performance. whilst undertaking the survey, it was noted that most contractors do have office space within their residence. however given that most of the small indigenous construction companies are owner managed, there is no one to attend to administrative work when the owner is out on site. nor do they keep proper records of the projects that the company has undertaken or is likely to undertake. most do not have proper office facilities to support their field operation in providing materials and equipment. given the office locations, there is insufficient space to store materials required for the project, which often results in the materials being bought when required. when this happens, a number of problems arise: the workers on site cannot do any work until the materials are delivered; materials are expensive as they are not bought in bulk; and projects are delayed when materials are not in stock. the unavailability of space means also that most of the contractors prefabricate the work on site. without any proper working areas and machinery, most of the workmanship in their joinery work is very poor. level of communication as one of the least experienced factors, this is also one of the highest in terms of effect on performance. being small, most of the communication in the organisation is usually informal, and done verbally to get things done quickly to save cost. however, the problem most small contractors have is the mode of communication between their workers on site and their office or with the owner or manager and the client. workers on site do not have any means to communicate with their office or the owner or manager. communication with the owner or manager can only be done when the owner or manager is on site, thus, requests for urgent matters from workers or from the client’s site supervisor are often delayed. cultural impact of all the factors covered, this rated the highest in terms of level experienced but of the lowest effect on performance. this suggests that most of the small indigenous contractors value their culture sufficiently to say that it has a relatively small impact on their performance. it is noted that to be successful in their business the contractors need to be able to combine commercial culture with indigenous culture. this something most businesses in png including the construction business have been unable to do very well. financial management skills this is better than the least of the factors experienced and rated highly in terms of the effect on performance. financial management skills enable the contractor to better manage their finances to enable them to know where and when to spend their money to keep the company operating. those contractors with financial management skills may have come from the commercial route to establish their company or may have taken a book keeping course, hence their ability to manage their finances. however, according to results from the level of cash flow, many contractors have cash flow problems. this could mean that the clients delay payment, or that money is being spent on other things. factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore the australian journal of construction economics & building page 87 conclusion the analysis interpretations and discussion of the results support the background and observations regarding the reasons for the inadequate performance of small indigenous contractors. they also show that all the factors investigated are perceived to have a significant effect on performance. equally, it is also shown that the factors are being experienced at poor levels by png contractors. of particular concern is the level of cash flow, which was perceived to be very low by respondents and among the four highest factors affecting performance. similarly, the level of financial skills, one of the most important factors affecting performance, is among the worst recorded in the firms surveyed. cultural impact, however, contrary to expectations, is seen to have the least impact on performance. it is also likely that the factors that affect performance are interrelated and also affect each other. in other words, when there is poor communication between the contractors and the clients site representative, problems associated with the project can not be solved, which would affect their working relationship. the pacific islands group that includes papua new guinea is, in several respects, unique among developing countries. many of the islands have been populated only in the last 500 years. unlike other post colonial economies, they comprise a fragmented and very diverse population with a relatively weak concept of society. papua new guinea, with a population of approximately 4 million people, is by with far the largest of the islands. together with lae, port moresby, is the primate city of the region, with the largest proportion of urban population and the core of economic and commercial activity. this makes it difficult to generalise the results outside the locality of the study. however, information from nhc contracts offices indicated that a majority of small indigenous contractors in the provinces undertaking the nhc projects often experience the same problems as contractors in port moresby when undertaking construction of public housing. it is expected, though, that the relevance of the factors that affect performance would differ from those being experienced in port moresby. for example, a contractor in port moresby experiencing delays in payments would be able to discuss this faceto-face with the client, whilst a contractor outside of port moresby has to either spend money calling the client in port moresby or just wait until payment is made. references adam, o. (1997) contractor development in nigeria: perceptions of contractor and professionals. construction management and economics, 15 95-108 edmonds, g. and miles, d. (1984) foundation of change, aspects of the construction industry in developing countries, london: intermediate technology publication ltd. international labour organisation, (1987) guide-lines for the development of small scale construction enterprises, geneva: international labor office. jannadi, o.m. (1997) reasons for construction business failures in saudi arabia. project management journal, 28(2) jun 32-6. lewis, t, m. (1984) a review of the causes of recent problems in the construction industry of trinidad and tobago. construction management and economics, 2 37-48. miles, d. (1979) financial planning for the small building contractor, london: intermediate technology publication. miles, d. (1980), the small building contractor and the client, london: intermediate technology publication. ofori, g. (1991) programmes for the improving the performance of the contracting firms in developing countries: a review of approaches and appropriate factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore page 88 the australian journal of construction economics & building options. construction management and economics, 9 19-38. ruddock, l. (1992) economics for construction and property. london: hodder and stoughhton. stretton, a. (1984) the building industry in papua new guinea, papua new guinea: institute of applied social and economic research. tait, m., and callick, r. (1993) the papua new guinea handbook, canberra: national library of australia. factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore the australian journal of construction economics & building page 89 appendix a small local contractors performance survey questionnaire form (a) contractor 1.0 general question please provide suitable answers to the question. 1.1 what approximate percentage (%) of your work is from private and public sector? private ____________% public_______________% 1.2 of your private sector projects please estimate approximate percentage? a) house /building construction ________________% b) maintenance work ________________% c) refurbishment ________________% d) others ________________% 1.3 of your public sector projects please estimate approximate percentage? a) house /building construction ________________% b) maintenance work ________________% c) refurbishment ________________% d) others ________________% 1.4 please indicate the predominant area that you undertook ? ___________________________________________________________ 1.3 what is the total value of work your company undertake annually � a) up to $ 50,000. � b) $50,000 to $100,000 � c) $100,000 to $ 500,000 � d) over $ 500,000 factors affecting the performance of small indigenous contractors in papua new guinea by daniel wasi and martin skitmore page 90 the australian journal of construction economics & building 2.0 performance factor (a) small contractor please circle where appropriate. it is understood that you may not be able to answer all questions, however your attempt in answering all would be greatly appreciated. item extent of item in your company/experienced by your company effect of item on performance low high low high 1. level of cash flow 1 2 3 4 5 1 2 3 4 5 2. level of construction management skills 1 2 3 4 5 1 2 3 4 5 3. level of sufficient contract documentation 1 2 3 4 5 1 2 3 4 5 4. level of harmonious working relationship 1 2 3 4 5 1 2 3 4 5 5. level of office facilities and equipment 1 2 3 4 5 1 2 3 4 5 6. level of communication within firm & with principal 1 2 3 4 5 1 2 3 4 5 7. level of cultural impact (wantok system) 1 2 3 4 5 1 2 3 4 5 8. level of financial management skills 1 2 3 4 5 1 2 3 4 5 please indicate others 9. …………………………. ………………………………. ……………………………….. 1 2 3 4 5 1 2 3 4 5 10. ………………………….. ………………………………. ………………………………. 1 2 3 4 5 1 2 3 4 5 11. ………………………….. ………………………………. ……………………………….. 1 2 3 4 5 1 2 3 4 5 introduction problems faced by small contractors: literature review cash flow construction management skills contract documentation working relationships facilities and equipment communication cultural impact financial management skills research design and methodology discussion performance factors. cash flow management skills contract documentation working relationships office facilities and equipment level of communication cultural impact financial management skills references item lowhigh valuing the contribution of knowledge-oriented workers to projects: a merit based approach in the construction industry mehrdad arashpour, (rmit university, australia) majeed shabanikia, (isfahan university of technology, iran) mohammadreza arashpour, (azad university, iran) abstract evidence points to the fact that frequent resignation of project engineers from construction companies is primarily the result of dissatisfaction with the factors that shape the salary scale. this research aims to identify the major influencing factors in merit based salary calculation systems for knowledge-oriented engineers so as to more accurately reflect their contribution to construction projects. results from a questionnaire sent to managers, engineers and hr professionals throughout the iranian construction industry revealed that while there was overall agreement on principles for a merit-based approach, engineers in particular stressed ‘professional skills’, ‘experience’ and ‘creativity’. management-oriented parties should take into account engineer perspectives in order to more accurately reflect the self-assessed contribution of these workers to construction projects. this research provides a basis for understanding the key factors in the merit based salary scale formulation through the construction industry. keywords: construction industry, knowledge-oriented workers, salary scale formulation introduction as a rule of thumb the objective of any payment system is to attract, hold, and motivate employees. consequently, such a system should be designed to not only help organisations to meet their goals, but also to improve employee performance and company productivity. because construction projects are very employee intensive and need to attract a knowledgeoriented and professional workforce (shabanikia 2009), the design of the payment system is crucial to employee retention. the aim of this study is to explore how managers, engineers and hr professionals in the iranian construction industry perceive the value of the contribution of engineers to construction projects. it will then discuss a merit based wage system that includes project process and outcome in the salary scale formulation for “knowledge-oriented” engineers. this research has a direct application to construction industry supply chain companies that are seeking to reform their salary scales so as to retain their valuable assets by rewarding the contribution of a knowledge-oriented workforce. literature review engineering companies work in a knowledge-oriented atmosphere. they are also production-oriented provided that drawings and document are considered as products. from this perspective, the construction industry needs engineers as knowledge-oriented workers. knowledge workers are active in analyzing information, solving problems by means of their expertise, proposing opinions, and creating new items and services. in other words, engineers are idea and information processors. they are individuals who deploy their analytical and mental strengths more than hands in adding value to workplaces and are australasian journal of construction economics and building arashpour, m et al. (2012) ‘valuing the contribution of knowledge-oriented workers to projects: a merit based approach in the construction industry’, australasian journal of construction economics and building, 12 (4) 1-12 2 likely to be autonomous, active and proud (abdul-aziz & law 2012; arif et al. 2012; horibe 1999). compensation systems can produce competitive advantages for construction firms as salary, working conditions, opportunities for promotion and lifelong learning are reported by both male and female employees as the most important factors (chileshe & haupt 2010). valuing the contribution of knowledge-oriented hr to projects can increase productivity and skills of the personnel (zakeri et al. 1996). one of the main methods of achieving job satisfaction in companies is to improve the salary structure and the social security system especially in developing countries (fan & yong 2011; yisa, holt & zakeri 2000). compensation structure acts as a tool for achieving companies’ strategic goals. human resource performance appraisal is the core of project human resources management and the objective basis for implementing the scientific and rational salary management in project organisation (cheng & fan 2010). in fact, compensation strategy is the major component of the companies’ strategy, creating competitive advantages and success as well (ferguson and parsons 1992). valuing the contribution of knowledge-oriented hr has two functions of attracting and retaining skilled workforce and also directing their efforts towards organisational goal (chen & edgington 2005). therefore, the most important outcome of a merit-based compensation system is to create a fair dealing atmosphere within organisations (konopaske & werner 2002; milkovich et al. 1999). in terms of employees’ demonstrable qualities, knowledge-oriented workers usually have four characteristics: performing cross-disciplinary tasks, acting with flexibility, attempting towards organisational objectives and collaborating with team members (arashpour & arashpour 2012; flannery, hofrichter & platten 2003). motivational pay systems aim to arouse the initiatives of staff by means of perfecting the structure of pay management, expanding the proportion of unfixed pay and defining the bonuses based on measures of performance (anantatmula & shrivastav 2012; li 2011). in the field of human resource studies, little if any research has analysed interdependent factors associated with valuing the contribution of knowledge-oriented workers in the construction industry. the present research tries to bridge this gap. research method the method for the present study comprises a comprehensive literature review and a survey of the iranian construction industry. finally factors influencing the salary scale formulation in the construction industry are ranked based on respondents’ perspectives and significant differences in perspectives are discussed comprehensively. the questionnaire was designed to elicit perspectives that respondents had with regard to the significant factors for salary scale formulation. as such, the main feature of the survey asked respondents to classify influencing factors on salary calculation by their level of importance in the construction industry. a bipolar scaling system, which helps the respondents to express their ideas clearly, was employed (sekaran 2006). respondents identified each of the factors as “very insignificant = 1”, “insignificant = 3”, “neither significant nor insignificant = 5”, “significant = 7” or “very significant = 9”. a total of 185 survey questionnaires were sent out in april-august 2011 to selected construction firms. the respondents were an array of experts from the construction supply chain. managers, engineers and hr professional were targeted as responding groups due to the aim of the research. the majority of participants came from firms employing more than 200 people (46.5 per cent), whilst 33.7 per cent were employed by firms with 50200 personnel. only 19.8 per cent of respondents worked for firms employing less than 50 australasian journal of construction economics and building arashpour, m et al. (2012) ‘valuing the contribution of knowledge-oriented workers to projects: a merit based approach in the construction industry’, australasian journal of construction economics and building, 12 (4) 1-12 3 people. care was taken to select experienced individuals. no respondent had less than 10 years of experience in the construction industry. of 185 sent questionnaires, 150 responses were deemed valid. the survey listed 20 factors associated with job and personal characteristics, which were sourced from a number of references presented in table 1. personal and job related factors who and when 1. professional skills (clemens 2009) 2. leadership skills (morrison 1994) 3. compliance with organisations norms and values (becker, huselid & ulrich 2001; weaver & trevino 1999) 4. academic records (chen & edgington 2005; robinson & sexton 1994) 5. creativity (tian & belk 2005) 6. duration of employment in the current company: long term commitment (cowherd & levine 1992; o'malley 2000) 7. education relevancy (arashpour & farzanehfar 2011; coelho 2010) 8. experience quality: local experience (monks 1996) 9. graduating university (dowling & fisher 1997) 10. level of responsibility (mcauliffe et al. 2009) 11. number of employees under management (arashpour & arashpour 2010; delaney & huselid 1996) 12. overtime amount (wilson 2008) 13. performance speed and efficiency (flannery, hofrichter & platten 2003) 14. relevant past experience (medoff & abraham 1981) 15. tasks complexity (allan 2000; verburg, den hartog & koopman 2007) 16. working condition: physical and psychological (milost 2007) 17. years of experience (arashpour, wakefield & blismas 2012) 18. working hours (johnson & lipscomb 2006) 19. workload (bradley et al. 2010; hollands & wickens 1999) 20. performance quality: outcomes (paauwe & boselie 2005) table 1 summary of personal and job related factors influencing salary calculations for knowledge-oriented workers the final question asked respondents to evaluate their own organisational attitudes towards knowledge-oriented workers. they were asked to select ‘satisfactory’ or ‘unsatisfactory’ in response. they had opportunity to make suggestions for improving salary scales through the construction industry. data analysis the analysis included the frequencies of the various respondents’ answers and the relative importance or rank of answers compared to others based on analysis of variance (anova) australasian journal of construction economics and building arashpour, m et al. (2012) ‘valuing the contribution of knowledge-oriented workers to projects: a merit based approach in the construction industry’, australasian journal of construction economics and building, 12 (4) 1-12 4 test. the results demonstrated significant differences among the means of the various responding groups. the f statistic demonstrated if two given variances differed from one another or were from the same population (sekaran 2006). a post-hoc test complemented the anova to identify the groups with opposing views. tukey's hsd (honestly significant difference) test was selected as the post-hoc to compare all possible pairs of means based on a studentized range distribution (q) which is very similar to t-test distribution. first and foremost, to evaluate the reliability (providing same results in different situations by measurement instrument), and validity (exact measurement of the variables by the instrument), the following results were extracted by spss. software evaluation illustrates the reliability of survey outcomes. since cronbach’s alpha is 0.771 and it is greater than the benchmark of 0.7, the reliability of questionnaire results analysis is approved (see table 2). this table also illustrates the validity of results analysis for the two groups of variables. for the set of variables the kaiser-mayer-oklin measures of sampling adequacy is 0.575. as it is greater than the benchmark of 0.5, the validity of results is approved. reliability of results validity of results cronbach’s alpha= 0.771 kmo measure of sampling adequacy= 0.575 table 2 data reliability and validity test results and discussions a key measure for the validity of this research was the distribution of survey responses across knowledge-oriented workers in the construction industry. in the current research, engineers (41.3%), and managers (40.8%) made up the majority of respondents and the remainders were hr professionals (17.9%). all respondent were involved in the construction industry projects. of the respondents surveyed, 40.1% had 10-20 years of experience in the construction industry and 54.7% had more than 20 years. the wealth of experience is evenly dispersed throughout the industry and thus the high percentage of experienced respondents also validates the results of the survey. furthermore, none of the hr professionals who responded to the survey had less than 10 years of experience. influencing factors on salary calculations in construction industry table 3 presents factors influencing the salary scale of knowledge-oriented personnel identified by the respondents. it compares and contrasts opinions of managers, engineers and human resource professionals. the most important factor identified was ‘performance quality’ with a mean of 8.34 and standard deviation (σ) = 0.98. it was followed by ‘compliance with organisation norms and values’ with a mean of 7.81 and σ = 0.90. other important factors averaging above significance (scale 7) were ‘professional skills’, ‘relevant past experience’, ‘creativity’, ‘educational relevancy’, ‘leadership skills’, and ‘level of responsibility’. the factors considered to be least important were ‘academic records’, ‘graduating university’ and ‘duration of employment in the current company’. some significant factors such as ‘compliance with organisations norms and values’ and ‘professional skills’ identify that personal characteristics are important factors in the salary calculation of knowledge-oriented workers. this finding is consistent with the literature where horibe (1999) identified similar results, indicating this as a characteristic for unique knowledge workers. a great evidence to validate the survey design and factor selection is that none of the 20 investigated factors were identified ‘insignificant’ (i.e. factors with average means below 3) by the survey respondents. http://en.wikipedia.org/wiki/sample_mean http://en.wikipedia.org/wiki/studentized_range_distribution australasian journal of construction economics and building arashpour, m et al. (2012) ‘valuing the contribution of knowledge-oriented workers to projects: a merit based approach in the construction industry’, australasian journal of construction economics and building, 12 (4) 1-12 5 key factors to calculate salary total perspective managers’ perspective engineers’ perspective hr professionals’ perspective mean sd mean sd mean sd mean sd 1 performance quality (outcomes) l e a s t i m p o rt a n t fa c to rs m o s t im p o rt a n t fa c to rs 8.34 0.98 8.40 1.20 8.27 0.84 8.35 1.20 2 compliance with organisation norms and values 8.29 0.90 8.01 0.64 7.98 0.79 8.87 0.80 3 professional skills 7.69 0.88 7.47 0.70 8.53 0.70 7.07 1.10 4 relevant past experience 7.63 0.88 7.00 0.89 8.43 1.00 7.47 1.07 5 creativity 7.43 0.85 7.43 0.68 8.41 0.89 6.45 0.85 6 educational relevancy 7.23 0.83 7.02 0.83 7.00 1.01 7.67 1.40 7 leadership skills 7.19 1.01 7.76 0.71 7.08 0.81 6.73 1.25 8 level of responsibility 7.01 1.00 7.02 1.23 7.74 0.70 6.27 0.65 9 years of experience 6.64 0.93 6.45 0.65 7.09 0.85 6.38 1.00 10 work load 6.46 1.05 6.02 1.06 7.43 0.99 5.93 1.10 11 working hours 6.45 0.90 6.79 0.63 5.35 0.95 7.21 1.00 12 performance speed 6.24 1.03 6.31 0.99 6.70 0.93 5.71 1.05 13 experience quality (local experience) 6.21 0.97 6.29 0.76 5.93 0.85 6.41 1.25 14 no. of employees under management 6.05 0.89 6.18 0.61 5.81 0.79 6.16 1.20 15 complexity of tasks 5.88 1.16 6.01 0.84 7.00 0.80 4.63 0.70 16 working condition 5.54 0.80 5.01 0.89 6.61 0.91 5.00 0.52 17 overtime amount 5.43 1.06 4.63 0.98 6.76 0.70 4.90 1.00 18 duration of employment in the current company 5.16 1.05 6.09 1.00 4.10 1.00 5.29 0.40 19 graduating university 5.06 1.13 4.94 1.00 5.26 0.70 4.98 1.00 20 academic records 5.03 1.11 4.83 1.07 5.23 0.90 5.03 1.40 table 3 influencing factors on salary calculation: diverse perspectives across construction industry interestingly, engineers considered ‘professional skills’ as the most important factor. this is perhaps due to the high emphasis that knowledge-oriented workers place on the professional promotion. in the case of managers, ‘performance quality’ ranked as the most important factor in the salary calculation within the construction industry. this finding implies that there are continuous concerns at the top managerial levels about actual quality performance of highly skilled recruited employees. this result is alarming considering that compensation practices should contribute to competitive advantage by promoting more australasian journal of construction economics and building arashpour, m et al. (2012) ‘valuing the contribution of knowledge-oriented workers to projects: a merit based approach in the construction industry’, australasian journal of construction economics and building, 12 (4) 1-12 6 productive workers. high-ranking factors reflected by hr professionals were ‘compliance with organisation norms and values’, ‘performance quality (best effort)’ and ‘relevant professional experience’. as the frontline agent in recruiting, hr professionals consider the organisation norms and values as very important and employees’ compliance is regarded as highly significant factor in the salary scale formation. table 4 summarizes significant factors (i.e. factors averaging above scale 7) identified in valuing hr contribution by the knowledgeoriented workers in the construction industry. respondent factors (in order of importance) mean manager perspective (8 factors) performance quality 8.40 compliance with organisation norms and values 8.01 leadership skills 7.76 professional skills 7.47 creativity 7.43 level of responsibility 7.02 educational relevancy 7.02 relevant past experience 7.00 engineer perspective (11 factors) professional skills 8.53 relevant past experience 8.43 creativity 8.41 performance quality 8.27 compliance with organisation norms and values 7.98 level of responsibility 7.74 workload 7.43 years of experience 7.09 leadership skills 7.08 educational relevancy 7.00 complexity of tasks 7.00 hr professional perspective (6 factors) compliance with organisation norms and values 8.87 performance quality 8.35 educational relevancy 7.67 relevant past experience 7.47 professional skills 7.07 working hours 7.00 table 4 most significant factors in valuing knowledge-oriented workers’ contribution to construction projects surprisingly, whereas engineers identified 11 significant factors that should contribute to their salary calculation, managers and hr professionals only suggested eight and six factors, respectively. it shows that engineers expect the salary scales to include more contributing factors. australasian journal of construction economics and building arashpour, m et al. (2012) ‘valuing the contribution of knowledge-oriented workers to projects: a merit based approach in the construction industry’, australasian journal of construction economics and building, 12 (4) 1-12 7 to find the controversial factors that attracted different perspectives, analysis of variance (anova) was used for further statistical analysis of the survey results. as there were 20 variables and three groups of respondents, namely managers, engineers and hr professionals, anova is the best mean to find out significant differences among survey participants’ opinions. “whereas the (independent samples) t-test indicates whether or not there is a significant mean difference in a dependent variable between two groups, an analysis of variance (anova) helps to examine the significant mean differences among more than two groups” (sekaran 2006, p. 347). table 5 summarizes the anova results, highlighting six factors with significance difference (less than 0.05). no. factor sum of squares mean square f statistic significance of f 1 performance quality .430 .215 526.750 0.043 2 compliance with organisation norms and values 25.543 12.772 31290.583 0.065 3 professional skills 56.920 28.460 69727.000 0.034 4 relevant past experience 53.123 26.562 65076.083 0.057 5 creativity 96.040 48.020 117649.000 0.048 6 educational relevancy 14.530 7.265 17799.250 0.066 7 leadership skills 27.430 13.715 33601.750 0.045 8 level of responsibility 54.030 27.015 66186.750 0.059 9 years of experience 15.310 7.655 18754.750 0.061 10 workload 70.770 35.385 86693.250 0.000 11 working hour 90.750 45.375 111168.750 0.066 12 performance speed 24.870 12.435 30465.750 0.052 13 experience quality (local experience) 6.240 3.120 7644.000 0.062 14 no. of employees under management 4.330 2.165 5304.250 0.067 15 complexity of tasks 96.330 48.165 118004.250 0.043 16 working condition 85.870 42.935 105190.750 0.062 17 overtime amount 134.490 67.245 164750.250 0.056 18 duration of employment in the current company 1.270 .635 1555.750 0.054 19 graduating university 3.040 1.520 3724.000 0.071 20 academic records 4.003 2.002 6538.778 0.066 table 5 anova analysis results: significantly different factors by participating groups (sig<0.05 highlighted) as it is evident from the results, there are six significantly different factors by responding groups: compliance with organisation norms and values, professional skills, creativity, leadership skills and complexity of tasks, applying a confidence level of 95%. australasian journal of construction economics and building arashpour, m et al. (2012) ‘valuing the contribution of knowledge-oriented workers to projects: a merit based approach in the construction industry’, australasian journal of construction economics and building, 12 (4) 1-12 8 in the next step of the data analysis, tukey's hsd (honestly significant difference) test was used to compare all possible pairs of means based on a studentized range distribution. table 6 illustrates the results of post-hoc tukey test. dependent variable (i) person (j) person mean difference (i-j) std. error significance performance quality engineer manager -.13000 .00407 .045 hr -.08000 .00516 .011 professional skills engineer manager 1.06000 .00362 .037 hr 1.46000 .00601 .008 creativity engineer manager .98000 .00404 .030 hr 1.96000 .00516 .016 leadership skills engineer manager -1.06000 .00209 . 063 hr .40000 .00103 .038 workload engineer manager 1.41000 .00415 .039 hr 1.50000 .00328 .022 complexity of tasks engineer manager .99000 .00439 .047 hr 2.37 .00401 .003 table 6 tukey's hsd (honestly significant difference) test: significantly different perspectives among groups the post-hoc test reveals that engineers have significantly different perspectives about performance quality than have managers and hr professionals. engineers rank this factor below other factors such as professional skills and creativity. this could be due to the fact that engineers consider the process of doing tasks as more important than outcomes; however, managers and hr professionals focus more on outcomes to measure performance quality as evidenced by their high ranking of this factor in salary scale formulations. in addition, the similar perspectives of management-oriented parties unveils the deep influence of managers on hr practices in engineering companies (paauwe & boselie 2005). tukey’s hsd results for the post-hoc test reveal significantly different perspectives about professional skills and complexity of tasks. both managers and hr professionals underestimated these factors compared to engineers, which is evident from the negative mean difference illustrated in table six. it is probable that engineers regard professional skills as a kind of toolkit to get the work done. however, the other two management-oriented groups paid less attention to these factors focusing more heavily on the best results from their knowledge-oriented workers. creativity is also a source of controversy. while engineers consider creativity as a very significant factor, hr professionals did not believe so. this might be because of the fact that hr professionals tend to quantify outcomes of employees’ jobs; however, creativity is very hard to quantify. it is not surprising that managers ranked creativity below compliance to organisational norms and values. in fact, some managers consider this quality as a potential threat to established rules and work routines in their organisation (arashpour & arashpour 2011). http://en.wikipedia.org/wiki/sample_mean http://en.wikipedia.org/wiki/studentized_range_distribution australasian journal of construction economics and building arashpour, m et al. (2012) ‘valuing the contribution of knowledge-oriented workers to projects: a merit based approach in the construction industry’, australasian journal of construction economics and building, 12 (4) 1-12 9 interestingly, hr professionals did not rate leadership skills as a significant factor but managers put more stress on this factor. it is likely that managers prefer a more autonomous workforce without the need for continuous instructions. despite the managers’ desire to maintain hierarchy in their organisations, this finding shows their reluctance to be involved in administrative tasks. results illustrate that ‘workload’ is another significant factor identified by engineers. it is likely that engineers, who work at the frontline of construction projects, are more concerned about balancing professional and family lives. however, management-oriented respondents did not consider workload as important as the performance quality. in response to the question about the degree of satisfaction about organisational attitudes towards knowledge-oriented workers, the majority of respondents (62.5%) felt that their organisation’s attitude was unsatisfactory, and this perception was stronger downstream in the industry (i.e. engineers). most of the 27.5% of respondents considering their organisation’s performance as satisfactory were managers. less dispersed in the results was the typical consensus that respondents’ organisations could implement the merit-based approach to salary calculation, paying special attention to both job outcomes and the processes involved to do jobs (83% of survey participants). conclusion prior work has documented the measures assessing performance of employees in the construction industry; becker, huselid and ulrich (2001) for example, report how to link people, strategy and performance in firms. however, few researchers have analysed interdependent factors associated with valuing the contribution of knowledge-oriented workers in the construction industry this paper has presented the results of a survey on factors influencing merit based salary scale formulation in order to optimize the contribution of knowledge-oriented engineers in construction projects. it was assumed that processoriented (engineers) and management-oriented (managers and hr professionals) parties would be able to provide valuable perspectives on the issue. the engineers perceive their work as complex and the salary scale should reflect that complexity by the inclusion of more process-oriented factors. this view conflicts with that of the two management-oriented parties, which focus more on outcome-related factors. while all parties agree in principle to a merit-based approach to salary calculation, each identified different key criteria for measuring merit. the survey illustrated that ‘performance quality’ was the most important factor identified by all parties. other important shared perspectives included ‘compliance with organisation norms and values’ and ‘professional skills’. however, variations were identified in the ranking of these factors. from the hr professionals’ perspective, ‘compliance with organisation norms and values’ was identified as the most important factor followed by ‘performance quality’, factors which emphasize job outcomes over processes. this is in direct contrast with factors identified by engineers as most significant, such as professional skills, experience and creativity. the findings suggest that if companies are to value the work of these knowledge-oriented engineers, not only the job outcomes but also the processes involved in doing the job should be considered in the formulation of a merit based salary scale. after all, the construction industry is only as strong as its knowledge-oriented workers. replication of this study in construction industries in other regions of the world is recommended. similar results might be achieved because of the significant difference in focus between management-oriented and process-oriented individuals, which is a characteristic of the different work aims and intentions. australasian journal of construction economics and building arashpour, m et al. 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(1996) 'a survey of constraints on iranian construction operatives' productivity', construction management & economics, 14 (5), 417-426 microsoft word ajceb vol.2 no.1 compiled sized.doc s. thomas ng, duc thanh luu and swee eng chen 70 the australian journal of construction economics and building vol.2 no.1 decision criteria and their subjectivity in construction procurement selection s.thomas ng, university of hong kong duc thanh luu and swee eng chen, university of newcastle, australia introduction the escalating requirements of clients on project time, cost, quality and risk have given rise to the development and use of alternative construction procurement systems (fellows, 1993). however, since each procurement system has its distinctive characteristics, advantages and constraints, there is hardly any single best system that could suit all kinds of clients and projects (nahapiet and nahapiet, 1985). the selection of procurement system therefore becomes a very important task for clients, as employing an inappropriate procurement system may lead to project failure (chua et al., 1999). the consequence may be time and cost overruns and/or general dissatisfaction (bennett and grice, 1990; sharif and morledge, 1994). despite its significance, many clients have been selecting procurement systems in a cursory manner, and some clients even use a specific procurement system by default without making a deliberate choice (masterman, 1992). a recent uk study (hibberd and djebarni, 1996) showed that 89% of respondents were dissatisfied with the procurement system they had previously employed. inexperienced clients often have to rely on expert advice when selecting a procurement approach and this could result in inappropriate decisions with unforeseeable consequences (nedo, 1985). experienced clients may also suffer if they simply based their selection upon biased past experience and the conservative decisions of their in-house experts (masterman, 1992). the need for selecting and using an appropriate procurement system for a particular construction project, together with the proliferation of differing procurement systems, calls for more systematic methods of selection (skitmore and marsden, 1988). to do this, decision criteria pertinent to the selection of procurement approaches and their properties (i.e. subjectivity) must be carefully identified and evaluated. this paper reports the findings of an australian study focusing on procurement selection criteria. the subjectivity of the identified criteria is considered and their effects on procurement selection are examined. criteria for procurement selection according to masterman and gameson (1994), the selection of an appropriate procurement system depends largely on the accurate identification of client requirements. many researchers have attempted to arrive at a list of client requirements that might affect the selection of a procurement system, and the outcomes of these studies are summarised in table 1. speed this refers to the need to complete a project more quickly than other projects of similar nature, complexity and size. shorter construction duration can be achieved by accelerating or fast-tracking some key phases in the construction project, and this would favour the use of design and build or management contracting (rowlinson and mcdermott, 1999). since the requirement for a speedier completion could often result in a premium both in the price and quality of construction, a strong justification for speed would be desirable. certainty of completion time this relates to the degree of certainty that a project will be completed on the exact date and time specified in the contract. time certainty is a crucial need of clients, particularly for those involved in large or prestigious projects scheduled for a particular function or event. there is a strong connection between the certainty of time and speed: the greater speed a procurement system can offer, the higher the degree of certainty that the project can be completed on time. decision criteria and their subjectivity in construction procurement selection the australian journal of construction economics and building vol.2 no.1 71 table 1: summary of client’s needs for a construction project client’s needs description authors speed speedy procurement process, e.g. a desire to have the project completed as soon as possible. bennett and flanagan (1983) nedo (1985) skitmore and marsden (1988) singh (1990) cost certainty price and the stipulated time and knowledge of how much the client has to pay at each period during the construction phase. a reduction in unanticipated extra cost over-run hewitt (1985) nedo (1985) skitmore and marsden (1988) singh (1990) masterman and duff (1994) time certainty degree of certainty that the project will be completed on the date, which is agreed by client and contractor when signing the contract. a reduction in unanticipated extra time over-run. hewitt (1985) nedo (1985) skitmore and marsden (1988) singh (1990) masterman and duff (1994) flexibility ability to accommodate design changes during both design and construction periods bennett and flanagan (1983) hewitt (1985) nedo (1985) skitmore and marsden (1988) singh (1990) responsibility an involvement in, and a need to be kept informed about, the project throughout its life bennett and flanagan (1983) hewitt (1985) nedo (1985) skitmore and marsden (1988) singh (1990) masterman and duff (1994) complexity client may specify innovative design/ high technology building and require particular subcontractor, or constructability analysis bennett and flanagan (1983) nedo (1985) skitmore and marsden (1988) singh (1990) quality level contractor’s reputation, aesthetics and confidence in design. a building which reflects the clients activities and image bennett and flanagan (1983) nedo (1985) skitmore and marsden (1988) singh (1990) risk allocation / avoidance a wish to identify risks and uncertainties during the procuring process bennett and flanagan (1983) nedo (1985) skitmore and marsden (1988) singh (1990) price competition covering such issues as value for money, maintenance, costs and competitive tendering. bennett and flanagan (1983) nedo (1985) skitmore and marsden (1988) singh (1990) masterman and duff (1994) disputes and arbitration nedo (1985) skitmore and marsden (1988) singh (1990) s. thomas ng, duc thanh luu and swee eng chen 72 the australian journal of construction economics and building vol.2 no.1 certainty of price some clients may need to have a firm price for their project before committing to it. price may include design fees, construction costs, financing costs and management fees. according to turner (1990), “certainty” should not be conceived as an absolute assuredness, but instead a relative or sliding scale, i.e. “how certain” the price that a procurement approach could offer. procurement approaches offering the highest price certainty include design and build or the traditional lump sum method. quality level this requirement has three components: quality of materials, workmanship and the design concept. when high levels of quality of materials and workmanship are required, a more stringent supervisory and checking process must be adopted, and one would expect that the speed and price should be more flexible to cater for the required quality standard. design quality is determined by the experience of the designer, and the cost and time available. the contractor’s construction experience may contribute to the quality of design solutions if management contracting is employed. flexibility flexibility is about the ability to accommodate variations, such as design changes (bennett and flanagan, 1983), during the construction phase. flexibility is particularly needed for large and complex projects or when the exact requirements cannot be carefully established before tendering. management contracting allows more variations to be introduced without provoking significant contractual claims. responsibility responsibility is directly related to the degree of client involvement and control over the procurement process. some clients may prefer to have a single point of responsibility, and hence reduce their exposure to risk. if the clients have in-house expertise to manage the diversified responsibilities created in a project, traditional and management systems will be more suitable. complexity this reflects the client’s desire for the final building product to be highly specialised, technologically advanced or highly serviced (nedo, 1985). projects with greater complexity may call for the use of traditional methods, as design can be fully developed before tendering proceeds. management-type procurement approaches may also suit complex projects as a management contractor can participate in the early design stage and provide advice on buildability. price competition price competition covers such issues as value for money, maintenance, costs and competitive tendering (nedo, 1985). many public clients, to satisfy public accountability requirements, must seek competitive tenders. private clients also favour competitive tendering for commercial reasons. turner (1990), however, asserts that speed, time certainty, quality level and the complexity of the building may restrict the level of price competition. risk allocation/avoidance this requirement reflects the degree to which the client wishes to transfer the risks of cost and time slippage to the contractor. in choosing a certain procurement system, it is important for the client to know how and to what extent the risk has consciously been passed to another organisation, how it has been shared, how the risk may not have been passed on at all, or indeed how the risk to his organisation may have been increased by the employment of another organisation. research method semi-structured interviews were conducted to establish the decision criteria currently used for selecting procurement systems and to determine the subjectivity of those criteria. to ensure that in-depth knowledge of procurement selection was obtained, people in the sample had to: have good theoretical knowledge and practical experience in different building procurement methods have been actively involved in the process of selecting building procurement systems understand the methods of procurement selection. since it would be difficult to identify suitable samples that meet all above considerations, purposive sampling and snowball sampling were used (burgess, 1989). purposive sampling requires researchers to identify experts who have the potential to provide decision criteria and their subjectivity in construction procurement selection the australian journal of construction economics and building vol.2 no.1 73 the necessary information. snowball sampling, however, requires individuals engaging in the initial interviews to identify and recommend other experts suitable for the study. a protocol was developed to drive the interviews. the protocol consisted of three parts. part i — respondent’s profile seeks to establish the knowledge and experience of interviewees on construction procurement part ii — procurement selection criteria reveals the criteria influencing the client’s choices in selecting procurement systems part iii — characteristics of procurement selection criteria uncovers the interviewees’ perceptions of the subjectivity of procurement selection criteria. the protocol was piloted by two experts not participating in the final interviews. the pilot studies revealed that some questions were ambiguous, while others might lead to biased responses. for instance, some terms in the protocol were not clearly understood by the experts during the pilot studies. the protocol was therefore edited to address the above issues, and definitions of some key terms were incorporated. respondents’ profiles five australian client organisations were identified that agreed to participate in this study. these included one private and four public client organisations. all interviewees were responsible for managing the procurement of construction works in their organisation (table 2). the results of the interviews confirmed that all respondents always performed procurement selection for their construction projects. they all recognised the need to select an appropriate procurement system for each construction project, satisfying the time, cost, quality and risk requirements. this indicated that the respondents possessed a good understanding of procurement selection. the above finding was confirmed by the revelation of the respondents’ practical experience in procurement selection. as shown in table 2, except for respondent b, who had been involved in procurement selection for almost 10 years, all other respondents had over 15 years experience in procurement selection. to further establish the suitability of the interviewees, indirect assessments of respondents’ knowledge on various procurement systems were conducted. issues like the different types of procurement systems available in australia, their advantages and disadvantages, and their application in different circumstances were raised with each respondent. it was found that all respondents had comprehensive knowledge and experience of all those issues, and that they were suitable for this study. procurement selection practice all organisations surveyed had their own procedures for procurement selection. respondent a indicated that many consultants were invited to advise on project characteristics, such as design, complexity, budget costing, and special management requirements. their advice serves as the basic information for procurement selection. inhouse experts then examine the organisation’s requirements and, based upon their experience, determine the most appropriate procurement system for the project. table 2: details of interviewees ref. type of organisation position of interviewees experience a private client manager, dept. of planning and physical estate > 15 years b city council manager, dept. of project management 10 years c city council manager, procurement dept. > 15 years d city council manager, procurement strategist dept. > 20 years e road authority manager, dept. of project management > 15 years s. thomas ng, duc thanh luu and swee eng chen 74 the australian journal of construction economics and building vol.2 no.1 figure 1: considerations in procurement selection procure ment selectio n orga nisational procedure s in-house expertise consultant’s advice previous expertise according to organisations a, b, c and e, the traditional procurement approach was still the more favourable choice for small projects. for organisations b and c, small projects were those valued at less than $300,000, while small projects were defined by organisation e as those valued at less than $1,000,000. according to the respondents, small projects were normally rather straightforward, and did not require a great deal of design and management skills from the contractors. for projects above the stated value limits, a formal process of procurement selection was required. a variety of issues such as organisational policies, financial regulations, advice from in-house experts, advice from external consultants, previous experience, risks and quality assurance would be considered. only organisation d had occasionally attempted to adopt the concepts of theoretical procurement selection as proposed by researchers (e.g. alhazmi and mccaffer, 2000; franks, 1990; griffith and headley, 1997; skitmore and marsden, 1988). however, such application is limited and has never been taken seriously. procurement selection criteria a list of procurement selection criteria as suggested by the respondents is presented in table 3. these criteria include speed, time certainty, price certainty, complexity, flexibility, responsibility, risk allocation, quality level, price competition, public accountability, client requirement and political issues. compared with the list of procurement selection criteria found in relevant literature (e.g. bennett and flanagan, 1983; hewitt, 1985; masterman and duff, 1994; nedo, 1985; skitmore and marsden, 1988; singh, 1990), the current findings are very similar to those identified in previous studies. the only differences were public accountability, political issues and client requirements, which were not emphasised in previous studies, whereas disputes and arbitration were not suggested in this study. respondent b explained that public accountability and political issues were considered during procurement selection as the local government was required to demonstrate accountability to the community. as a result, the selected procurement system should be in favour of public accountability criteria such as cost reduction and environmental friendliness. decision criteria and their subjectivity in construction procurement selection the australian journal of construction economics and building vol.2 no.1 75 table 3: criteria used for procurement selection respondents criteria a b c d e speed a a a a a price certainty a a a a a time certainty a a a a a complexity a a a a a flexibility a a a a a responsibility a a a a a quality level a a a a a risk allocation a a a a a price competition a a a a a others public accountability client's requirements, political issues client's requirements, political issues note: a represents common selection criterion from the respondent’s perspective table 4: subjectivity of procurement selection criteria respondents criteria a b c d e speed a a a a a price certainty a time certainty a complexity a a a a a flexibility a a a a a responsibility a a a a a quality level a a a a a risk allocation a a a a a price competition a a a a a note: arepresents subjective criterion from the respondent’s perspective respondents c and d also considered political issues (along with client requirements) as important criteria for procurement selection. being the public agents representing other governmental departments in construction works, their decisions or their clients’ decisions in procurement selection were largely affected by governments’ political policies. although disputes and arbitration were not directly mentioned by the respondents in the interviews, as key procurement selection criteria, these factors had been implied by the respondents as part of risk allocation. for instance, respondent e stated that there was a need to allocate risks or manage safety issues upfront so that when problems occurred they could be resolved easily. respondents c and d conceived disputes and arbitration as components of risk allocation as they pointed out the disadvantages of traditional lump sum procurement when disputes occur. they also advocated that design and build approaches favoured clients during the disputes and arbitration processes as all the risks would have been transferred to the contractor. subjectivity of procurement selection criteria respondents were asked to express their perceptions on the subjectivity of the decision criteria identified, and the results are summarised in table 4. four out of five respondents believed that time certainty and price certainty could be measured objectively. time certainty was unequivocal as the completion date could be reasonably predicted by measuring the job requirements. likewise, price certainty was considered as an objective criterion as price can also be reasonably predicted beforehand. the certainty of price can then be s. thomas ng, duc thanh luu and swee eng chen 76 the australian journal of construction economics and building vol.2 no.1 measured against the contractor’s requirements. all respondents believed that other selection criteria including speed, complexity, flexibility, responsibility, quality level, risk allocation and price competition were vague and subjective. these findings have supported some researcher’s assertions (e.g. rowlinson and mcdermott, 1999; cheung et al., 2001) that some procurement selection criteria are intangible in nature. speed respondent d claimed that speed was an arbitrary factor, which depended very much on the client’s situations. the speed to be specified depends on the level of extra premium a client is prepared to pay for speeding up the design and construction processes. the definition of high speed may therefore differ from one client to another. respondent b suggested that speed might be determined by contractor’s experience. a contractor with ample experience in the prospective project type and construction method may complete the work in a much quicker time. as a result, the level of speed as specified by the client may not totally correspond to what the contractor can offer. complexity all respondents believed that complexity was very difficult to define, and the definition usually varied from person to person. respondent c suggested that the opposite of complexity was routine, repetitiveness or standardisation. as a result, a project could be very simple for someone who has done a similar job before, but extremely complex for someone with no prior experience of the project type. according to respondent a, complexity was vague as, apart from the complexity of physical design and work method statements, complexity could be caused by the public and/or people involved, and these are rather difficult to predict. the views of respondent a concur with those of turner (1990) who claimed that complexity was a non-quantifiable criterion since it could not be clearly depicted in the specification. flexibility all respondents conceived flexibility to be subjective. a good explanation was provided by respondent b who claimed that, in a construction project, flexibility depends on human factors such as stakeholders’ situation, experience and competence, and nonhuman factors such as project type, project situations, external factors (weather, strikes, political impact). he added that as both human and non-human factors are unpredictable and very difficult to manage, flexibility could become relatively ambiguous to the decision-makers. quality all respondents shared the same view that quality could be difficult to measure objectively, as it was partially determined by vague standards such as form, commodity, delight, and comfort. turner (1990) claimed that the quality of the design concept may not be easily determined in the specification, and may sometimes involve expert opinions. responsibility responsibility was not considered to be objective since there is no fixed definition as to what is a high, medium or low level of client involvement in a project, instead the level of responsibility varies from project to project. respondent c claimed that it was a normal practice to get actively involved in a project for as much as 50% of the total project time to gain the best results for the project. on the other hand, respondent a believed that allocating 50% of his total time to a project would be rather high. risk allocation four out of five respondents indicated that an interlacing relationship exists between risk allocation and responsibility, as the more responsibility one has been assigned in a construction project, the more risk one would have to assume. not only did they think that responsibility was not fully structured, they also believed risk allocation could not be measured objectively. respondent e elaborated by saying that when he transfers 50% of the total risk that might occur in a project to the contractor, he regards that amount of risk transfer as a high risk allocation and feels safe. on the other hand, a client who does not have any experience or knowledge in construction might think that it is necessary to transfer up to 90% of risk (i.e. a high risk allocation) to the contractor in order to feel comfortable. decision criteria and their subjectivity in construction procurement selection the australian journal of construction economics and building vol.2 no.1 77 table 5: procurement selection methods methods authors operational research procurement path decision chart nedo (1985) procurement rating system franks (1990) multi-attribute approach singh (1990) bennett and grice (1990) ambrose and tucker (1999) weighted score model griffith and headley (1997) analytical hierarchy process alhazmi and mccaffer (2000) multi-attribute utility approach cheung et al. (2001) statistical discriminant approach skitmore and marsden (1988) computerised rule-based expert computer system (elsie) brandon et al. (1988) price competition the respondents believed that price competition was vague, as the definitions of low or high price competition would vary with different clients. respondent a regarded a saving of 10% of the originally estimated project sum due to competitive tendering activities as high price competition, while respondent e indicated that he expected up to 20% saving to qualify as high price competition. respondent b suggested that around 15% could be reasonably seen as high price competition. discussion over the last two decades several theoretical selection models have been introduced with the aim of improving the objectiveness of procurement selection. these methods can be classified into three main categories, namely operational research, statistical and computerised models (table 5). while these models provide the means to improve the decision process, they fail to address the subjective characteristics of certain procurement selection criteria, which are used as primary input in these models. in fact, subjective criteria are usually linguistic in nature, which may contain a certain level of vagueness (fuzziness) in the description of semantic meanings (zimmermann, 1991). consequently these criteria may not be adequately handled by traditional probability theory, which assumes a precise definition of the situations to be dealt with (kolmogoroff, 1956). since probability theory is adopted in some procurement selection methods, there is a possibility that those methods may not properly capture the vagueness of the selection criteria used, and the decisions derived by these methods may be prone to error. to illustrate the effects of misinterpreting a subjective criterion in the assessment process, an example based upon skitmore and marsden’s multi-attribute approach is provided here. assuming “complexity” as the only subjective criterion involved in the assessment, as a principle of probability theory, the client needs to select a priority rating scale (say from 1 to 20) to represent his/her perception on how complex the project would be. to reflect his/her perception on a highly complex project, the client may select a priority scale of, for instance, 15, 17, 20 or any other large number within the range. tables 6 and 7 illustrate the preferred procurement options based on a priority scale for “complexity” of 17 and 20 respectively. with other selection criteria being equal, a different perception on “high complexity” could yield very different results. in this example, procurement system e was the most preferred option should “high complexity” be interpreted as 17 (table 6), while procurement system b should be chosen if a priority scale of 20 was used (table 7). as a result, the client may end up with different recommendations if there were different interpretations of the meaning of “high complexity”. s. thomas ng, duc thanh luu and swee eng chen 78 the australian journal of construction economics and building vol.2 no.1 table 6: result of procurement selection when priority rating for “high complexity” is 17 procurement paths a b c d e f g client's priority criteria client's priority rating rationalise priority rating utility result factor utility result factor utility result factor utility result factor utility result factor utility result factor utility result factor speed 11 0.14 40 5.4 10 1.4 60 8.1 100 13.6 90 12.2 110 14.9 110 14.9 certainty 12 0.15 30 4.4 30 4.4 70 10.4 100 14.8 100 14.8 10 1.5 110 16.3 flexibility 5 0.06 110 6.8 110 6.8 40 2.5 40 2.5 40 2.5 90 5.6 10 0.6 quality level 14 0.17 110 19.0 110 19.0 40 13.8 40 6.9 40 6.9 90 15.6 20 3.5 complexity 17 0.21 100 21.0 100 21.0 50 14.7 50 10.5 50 10.5 110 23.1 20 4.2 responsibility 12 0.15 30 4.4 30 4.4 100 10.4 100 14.8 100 14.8 10 1.5 110 16.3 price competition 10 0.12 20 2.5 110 13.6 10 9.9 10 1.2 80 9.9 40 4.9 30 3.7 totals 81 1.00 63.6 70.6 69.8 64.3 71.6 67.0 59.5 rank order 6 2 3 5 1 4 7 table 7: result of procurement selection when priority rating for “high complexity” is 20 procurement paths a b c d e f g client's priority criteria client's priority rating rationalise priority rating utility result factor utility result factor utility result factor utility result factor utility result factor utility result factor utility result factor speed 11 0.13 40 5.2 10 1.3 60 7.9 100 13.1 90 11.8 110 14.4 110 14.4 certainty 12 0.14 30 4.3 30 4.3 70 10.0 100 14.3 100 14.3 10 1.4 110 15.7 flexibility 5 0.06 110 6.5 110 6.5 40 2.4 40 2.4 40 2.4 90 5.4 10 0.6 quality level 14 0.17 110 18.3 110 18.30 80 13.3 40 6.7 40 6.7 90 15.0 20 3.3 complexity 20 0.24 100 23.8 100 23.8 70 16.7 50 11.9 50 11.9 110 26.2 20 4.8 responsibility 12 0.14 30 4.3 30 4.3 70 10.0 100 14.3 100 14.3 10 1.4 110 15.7 price competition 10 0.12 20 2.4 110 13.1 80 9.5 10 1.2 80 9.5 40 4.8 30 3.6 totals 84 1.00 64.9 71.7 69.8 63.8 70.8 68.6 58.1 rank order 5 1 3 6 2 4 7 decision criteria and their subjectivity in construction procurement selection the australian journal of construction economics and building vol.2 no.1 79 conclusion the selection and use of an appropriate procurement system is crucial to project success. this paper aims to improve our understanding of the commonly used procurement selection criteria and the objectiveness of those criteria. the results indicate that there are nine procurement selection criteria commonly used by australian clients: speed, time certainty, price certainty, complexity, flexibility, responsibility, quality level, risk allocation and price competition. only time certainty and price certainty were seen by the respondents as unambiguous criteria, as the completion date and price can be objectively predicted by the client beforehand. however, the other seven were regarded by the experts as subjective. an example has been presented to illustrate the effects of misinterpreting “high complexity” in a multi-attribute procurement selection model. the results indicate that different perceptions, as reflected by various priority ratings, would yield different recommendations for procurement system. this clearly does not improve the objectiveness of procurement system selection. the requirements for linguistic input for some criteria justify the use of the fuzzy set theory (zadeh, 1965). fuzzy set theory is the key to decision-making when encountering vague conceptual phenomena. it has been applied to various construction management decision models involving the use of vague input variables, such as project scheduling (ayyub and haldar, 1984; lorterapong and moselhi, 1996), tender evaluation (nguyen, 1984), contractor evaluation (russell, 1992), and prediction of contractor failure (russell and jaselskis, 1993). research into the application of fuzzy set theory to construction procurement selection is being conducted by the authors, and the results of this study will be reported when they become available. references alhazmi, t. and mccaffer, r. 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(1991) fuzzy set theory and its applications, 2nd edition. kluwer academic publishers, usa. duc tran and martin skitmore the australian journal of construction economics and building vol.2 no.2 36 the impact of culture on international management: a survey of project communications in singapore duc tran and professor martin skitmore queensland university of technology introduction right across industry, the attitude of senior management to their corporate affairs is evolving in response to the globalisation of business, the spread of information technologies, the growth of shareholder activism and increased intrusiveness of international and national governments in key areas of business management. a misfit of cultures is often a cause of failure (cartwright and cooper, 1996; cartwright and cooper, 1993; olie, 1994). in particular, managers’ strong preference for culturally similar environments has been identified as a major problem (oudenhoven and de boer, 1995). a major challenge of doing business internationally is clearly to adapt effectively to different cultures. such adaptation requires an understanding of cultural diversity, perception and values (granell, 2000). in australia, historically high levels of protection, particularly in the form of tariffs, have been the mainstay of australian industry policy (buxey, 2000). the consequence of this protectionism has been an inwardlooking industry with a low level of competitiveness in international markets. for many corporations in the 1990s, the highest priority was to develop an asian focus—the socalled asian challenge. however, international knowledge in australia is biased in favour of europe and there has been slow progress in developing significant and meaningful changes in attitudes, knowledge and awareness of asian ways (edwards et al., 1997). the tendency to date has been to take those management concepts and techniques that worked at home into other countries and cultures. it is now apparent, both from practice and cross-cultural research, that a single, universal style of management, at least across cultures, is not tenable (adler, 1997). one of the most important skills for project managers in the international marketplace is that of effective communication (harris and kumra, 2000). communication takes on special important in cross-culture management because of the difficulties in conveying meanings between parties from different cultures. the problems of misinterpretation and error are compounded in the international context. to overcome this, cross-cultural managers have to adapt and be flexible in the new environment; in addition to having the required functional and survival skills. thus, cross-cultural managers require an understanding of the meanings and dimensions of culture, organizational culture and diversity, and intercultural communication. with intensified internationalisation of business, there has been a notable increase of research interest in the relationship between national culture, values and managerial orientations and behaviour. the more recent work by hall and hall (1994a), trompenaars and hampden-turner (1998b), hofstede (1991) and laurent (1983) explicitly links broad cultural value dimensions to management issues. apart from loosemore and muslmani’s (1999) work in the persian gulf region, however, little has been done to date to document the inter-cultural communication issues in construction project management. to rectify this situation, in the australian context, the research described in this paper aimed to explore the impact of national culture, organizational culture and inter-cultural communication on the management of a company by means of a small empirical study of the correlation between the culture diversity and intercultural communication and its barriers. this involved a questionnaire survey derived from synthesis of culture dimensions from trompenaars and hampden-turner (1998b), hofstede (1980; 1991) and schein (1992). these dimensions enable us to describe and compare critical manifestations of organizational and national culture. data questionnaire the questionnaire was divided into three sections, comprising background information, with questions concerning nationality, the impact of culture on international management: a survey of project communications in singapore the australian journal of construction economics and building vol.2 no.2 37 employment status, field of profession and years of experience; culture, with questions relating to aspects of national culture, organisational culture and personal characteristics; and communications, with questions relating to communications in general, in projects and barriers to communication. following hofstede (1991), the aspects of national culture elicited were, on a five-point scale, the degree of uncertainty avoidance, individualism/collectivism, power distance and masculinity/feminity. similarly, the aspects of organisational culture elicited were external/internal emphasis, task/ social focus, individuality/conformity, risk/safety and adhockery/planning. personal characteristics concerned introversion/extroversion, sensing/intuition, thinking/ feeling and judging/perceiving. research population sample singapore was chosen for the survey as: it has a high power distance/low individualism culture, in contrast with the position of most western nations (hofstede, 1980). it is a region known for its cultural diversity. the high english literacy rates among singaporean managers enable a survey to be conducted in english, avoiding possible interpretation problems associated with the translation of questionnaires into other languages (chow et al., 1991). the targeted research sample consisted, variously, of project managers, construction managers, consultants and architects. both local and foreign respondents within singapore were targeted. a hundred questionnaires were forwarded to individual professionals currently working in the singapore construction industry. strict anonymity was observed. response rate thirty-nine responses were received. the respondents are from geographically and culturally diverse backgrounds, with a diversity of management experience, and with an average of 9 years of cross-cultural experience per respondent (table 1). there are a variety of nationalities involved, with two major response groups being australian (23%) and singaporean (22%). the majority are project managers, with 85% having five or more years of experience in the construction industry. results respondents were allocated into far eastern (46%) and anglo (54%) groups (after ronen and shenkar, 1985). sample correlation coefficients were then computed between the cultural variables (national, organisational and personal characteristics) and communication variables (communication in general, project based communications and barriers) for pooled data, anglo cluster and far eastern cluster. effects of cultural factors on communication as hall (1959) has noted, many intercultural communication difficulties stem from the lack of knowledge of how to communicate with people in other countries. behaviours and orientations considered appropriate in one culture can be offensive to people from another culture. obtaining knowledge about the communicative styles and orientations of persons in other cultures should help to reduce this happening inadvertently, as well as the misinterpretation of communication behaviours and orientations of people from other cultures. it is important, therefore, to examine, interculturally, those factors that have been found to have a significant (p<0.05) influence on communication behaviours. in focusing on these, the results are presented for the three dimensions in the questionnaire—national, organisational and personal. national culture the correlation between “uncertainty avoidance” and the general "communication to the external of the organisation is vital" (table 2) is positive (r=0.41), which may reflect relatively low uncertainty-avoidance cultures encouraging their personnel to use their own initiative and assume responsibility for their actions. on the other hand, the correlation between “uncertainty avoidance” and the communication barrier "lack of trust" is negative (r=-0.32), reflecting that relatively low uncertainty-avoidance cultures, being founded on trusting relationships, suffer the most when their trust is misplaced. relatively higher uncertaintyavoidance cultures, however, where lack of trust is endemic, require more formal ways of communication, e.g., writing, in anticipation of possible future litigation. duc tran and martin skitmore 38 the australian journal of construction economics and building vol.2 no.2 the correlation between “individualism/collectivism” and the project variable "effective communication" is positive, indicating that the more collectivist cultures perceive effective communication to be more important than those more individualistically inclined. certainly, in collectivist cultures, people tend to take time for consulting with, and gaining consent of, their group members. clearly then this suggests that people from cultures with high individualism, and therefore with lesser regard or ability for effective communication, are likely to experience difficulties in communicating with those from collectivist cultures. table 1: characteristics of the respondents characteristics q1 q2 q3 q4 respondent nationality status field of professions yrs. exp. 1 singaporean local construction manager 15 2 singaporean local developer 4 3 singaporean local project manager 11 4 american expatriate country manager 10 5 singaporean local project manager 7 6 australian local architect 7 7 australian/vietnamese local construction manager 14 8 singaporean local developer 10 9 australian expatriate consultant 11 10 australian expatriate project manager 9 11 australian local construction manager 10 12 indonesian expatriate project manager 2 13 australian expatriate project manager 10 14 american expatriate project manager 15 15 vietnamese local project manager 6 16 korean expatriate architect 2 17 british expatriate construction manager 10 18 american local consultant 23 19 singaporean local construction manager 5 20 vietnamese local project manager 7 21 vietnamese expatriate developer 9 22 australian/vietnamese local project manager 16 23 british expatriate architect 7 24 singaporean local project manager 8 25 singaporean local project manager 6 26 malaysian local consultant 8 27 australian local consultant 13 28 vietnamese local project manager 10 29 australian local consultant 13 30 australian/vietnamese local architect 4 31 vietnamese expatriate project manager 7 32 american/vietnamese expatriate developer 19 33 australian expatriate consultant 8 34 australian local project manager 4 35 american/vietnamese expatriate construction manager 14 36 bulgarian expatriate project manager 4 37 malaysian local architect 15 38 american expatriate project manager 5 39 singaporean local project manager 6 the impact of culture on international management: a survey of project communications in singapore the australian journal of construction economics and building vol.2 no.2 39 table 2: correlations between national cultures and communication variables item r communication +0.41** "communication to the external of the organization is vital" uncertainty avoidance +0.32* "lack of trust" +0.33* "effective communication" -0.32* "information filtering" individualism/ collectivism -0.32* "lack of personal skills" power distance masculinity/ femininity +0.40* "limited resources" ** p<0.01 (2-tailed) * p<0.05 (2-tailed) the correlation between “individualismcollectivism” and the communication barrier "information filtering" is negative. hall and hall (1994b) noted that, in high-context (collectivist) societies, messages are often highly coded and implicit. as a result, the sender’s job is to interpret what messages mean by correctly filtering through what is being said and the way in which the message is being conveyed. thus, collectivists see information filtering as less of a communication barrier than individualists. countries with relatively high-individualism also tend to have greater support for the protestant work ethic and greater individual initiative. thus, they agreed that personal skills affect communication process. this is shown through the negatively correlated “individualism/collectivism” and the communication barrier "lack of personal skills" (r=-0.32). unexpectedly, “power distance” was not significantly correlated with any of the communication variables. however, a positive correlation was found between “masculinity-feminity” and the communication barrier "limited resources" providing some support for hofstede’s (1980) assertion that individuals in countries with a relatively high masculinity index tend to dominate with power, as resources are not likely to be beyond their control. organisational culture frequently the question arises concerning whose cultural customs, mores and practices should take precedence in international operations. the “you attitude” principle shows that successful communication must necessarily be cation must necessarily be approached from the viewpoints of receivers, not senders (sprinks and wells, 1994, pp. 302–9). the results show that organisations with a relatively high external orientation need to have managers with sufficient inter, and intra, personal skills and an organisational communication strategy, but with a less flexible form and style of communication than those organisations with a relatively high internal orientation (table 3). it is difficult to suggest reasons why the latter should be the case except that, when it comes to communicating to a particular culture, the form and style of the communication have to be permanently adapted to the cultural customs and practices of the partners. for organisations that are relatively more social than task oriented, there appears to be a higher awareness of cultural problems and solutions, with the project variables of "high levels interpersonal/intra-personal skill management", "understanding and appreciation of cultural difference involved”, "effective communication", "awareness of national culture" and barrier of “resistance to change” all having significant positive correlations. unexpectedly, no significant correlations were found between individuality-conformity and communication of the organisation. this contrasts with the literature on the topic, which suggests that a conformity organisation culture would have policies and procedures to control communication of the company. duc tran and martin skitmore 40 the australian journal of construction economics and building vol.2 no.2 table 3: correlations between organization cultures and communication item r communication +0.41** "communication to the external of the organization is vital" uncertainty avoidance +0.32* "lack of trust" +0.33* "effective communication" -0.32* "information filtering" individualism/collectivis m -0.32* "lack of personal skills" power distance masculinity/ femininity +0.40* "limited resources" ** p<0.01 (2-tailed) * p<0.05 (2-tailed) a safety-conscious response to risks is expected to result in an emphasis on written, as opposed to verbal, communication. similarly, a risk-taking culture is likely to have a higher tolerance of ambiguity than a safetyconscious culture. these relationships are manifested through a positive correlation of safety consciousness with the barrier “language difficulties”. a risk-taking culture, on the other hand, perceives lack of “personal skills” as a communication barrier. finally, a planning culture is expected to emphasise the need for structure and a non-ambiguous communication process, while an “adhockery” culture is likely to be somewhat informally structured and less task-driven. this is justified by the findings, which show those from a planning culture to perceive a "well established organisational culture and objectives" and "communication planning,” allow "effective communication" in the organisation’s projects. also, it seems understandable that different communication activities take place among people of different cultures. thus, one way for managers to improve intercultural project communication is through knowledge of local customs and practices, which emerged through the positive correlations of "awareness of national culture", "understanding and appreciation of cultural difference involved" and "understanding of language and cultural practices of local area". the surprising result was the positive correlation between “adhockery-planning” and the communication barrier “face” although it is clear from these results that the more planning oriented organisational cultures are, as the socially oriented organisations mentioned above, somewhat more enlightened over cultural communication problems and solutions. of course, “face” is very important from the asian perspective, where the achievement of harmony in communication requires the maintenance of an individual’s “face”. personal characteristics research in social psychology suggests that personality dimensions significantly affect the effectiveness and outcome of communication (padgett and wolosin, 1980; runkel, 1956). individual personality exerts a significant influence on both the content and style of the interactions with other parties. extroverts, for example, are expected to prefer an interaction-oriented style of communication, involving the establishment of a personal bond with their counterparts. introverts, on the other hand, are likely to be territorially and internally oriented. this emerged strongly through the correlations of the project variables "two way communication both upward and downward", "project managers with excellent communication skills", "understanding of language and cultural practices of local area", and "effective communication" (table 4). extrovert managers would seem to be more competent in both communication and the cultural practices of their working environment. sensing types show a preference for facts and detail while intuitive types prefer innovation and focus on the big picture. this explains the correlation between “sensing versus intuitive” and the project variable "understanding and appreciation of cultural differences involved". the sensing person would have to explore the cultural differences involved to enhance their communication process in the project. the impact of culture on international management: a survey of project communications in singapore the australian journal of construction economics and building vol.2 no.2 41 table 4: correlation between personal characteristics and communication item r communication +0.50(**) "two way communication both upward and downward" +0.50(**) "project managers with excellent communication skills" +0.43(**) "understanding of language and cultural practices of local area" introversion vs. extroversion +0.43(**) "effective communication" sensing vs. intuition -0.42(**) "understanding and appreciation of cultural difference involved" -0.40(*) "understanding of language and cultural practices of local area" -0.38(*) "communication to the external of the organization is vital" -0.38(*) "project managers with excellent communication skills" thinking vs. feeling -0.37(*) "understanding and appreciation of cultural difference involved" judging vs. perceiving +0.42(**) "national culture control communication process" ** p<0.01 (2-tailed) * p<0.05 (2-tailed) thinkers decide things logically and objectively, while feelers use emotional appeals such as loyalty and responsibility. these concepts manifested weakly through the correlations of the general "communication to the external of the organisation is vital", and project variables of "understanding of language and cultural practices of local area", "project managers with excellent communication skills" and "understanding and appreciation of cultural difference involved". when the thinker decides that external communication is vital, the next logical step is to understand the cultural aspects involved and improve communication skills. finally, the relationship between “judging vs. perceiving” and the general "national culture control communication process" is positive, suggesting that people who are inclined to judge, since they desire organisation and control, would not conclude national culture to be a control factor hindering the communication process. comparison between anglo cluster and far eastern cluster according to trompenaars (1994), the anglo and far eastern cultures have opposite cultural values, the anglo culture being associated with individualism, specific relationships, universalism, emotional relationships and achievement. the anglo respondents should therefore contain closer relationships between cultural variables and communication variables than the far eastern respondents. this turns out to be the case, with approximately 20% more significant correlations in the anglo than the far eastern cluster results. it is noteworthy that the sign of the correlations for the two clusters is quite different, with 54% and 74% being positive for the anglo and far eastern clusters respectively. these results could be due the “face” barrier. the number of significant correlations between the cultural and communication variables for the anglo cluster are approximately double those of the far eastern cluster, when the comparisons are made individually between national, organisational culture and personal characteristics. it may be possible to conclude that organisational cultural dimensions would have more effects on communication than other variables. national dimensions the dimensions of uncertainty avoidance, individualism, power distance and masculinity broadly shape the aspects of the contents and style for each party in the communication process. based on hofstede’s research, hodgetts and luthans (1993) identified different dimensions between anglo and far eastern societies. anglo societies are generally low power distance and individualistic, duc tran and martin skitmore 42 the australian journal of construction economics and building vol.2 no.2 table 5: correlations between national dimensions and communication variables anglo cluster far eastern cluster item r communication r communication uncertainty avoidance -0.45(*) "understanding of language and cultural practices of local area" -0.49(*) "understand the languages and practices of the local culture enhances communication" 0.49(*) "project managers have good communication skills" 0.43(*) "effective communication" -0.53(*) "national culture control communication process" individualism/ collectivism -0.47(*) "face" power distance 0.50(*) "lack of trust” masculinity/ femininity -0.45(*) "lack of personal skills" +0.50(*) "lack of motivation" ** p<0.01 (2-tailed) * p<0.05 (2-tailed) while far eastern societies are high power distance and collectivistic. each requires a different approach to formulating an effective communication strategy. table 5 shows the significant correlations between national culture and communication variables for both the anglo and far eastern clusters. both anglo and far eastern clusters are classified as low uncertainty avoidance societies. people in these societies tend to accept each day as it come, take risks rather easily and show a relatively greater tolerance for opinions and behaviours different from their own. thus, they feel less threatened by the language and practices of different cultures when they communicate with others—as suggested by the correlations of both clusters on similar communication variables. from the anglo (individualist) point of view, far eastern (collectivist) managers do not have good communication skills and are ineffective communicators. it may be that collectivism also helps to explain this finding. collectivism stresses the importance of group decisions. when collectivists communicate with individualists, they would seem to be reluctant to make quick decisions and commit their organisation to these decisions. the anglo cluster suggests that national culture controls the communication process. “face” is an important barrier, when communicating with the far eastern cluster. this also explains the fewer number of significant relationships for the far eastern cluster. it is possible that praise is used more sparingly because this would involve singling out an individual and it may cause that individual to lose face. another manifestation of power distance is the willingness to trust other people. high power distance societies typically view others as a threat and, as a result, show less inclination to trust others. this is exhibited through the positive correlation of collectivism on lack of trust. when the anglo cluster (low power distance societies) communicated with far eastern cluster (high power distance societies), they felt that lack of trust hindered their communication process. finally, the anglo cluster (masculinity societies) suggested that personal skills were among one of the communication barriers, which reflects their value of assertiveness and respect for the super-achiever. on the other hand, the far eastern cluster (also a masculinity society) indicates that motivation is not a communication barrier. organisational dimensions culture control is increasingly used to replace rules-based control in an attempt to enhance communication within organisations. table 6 shows the relationship between organisational dimensions and the impact of culture on international management: a survey of project communications in singapore the australian journal of construction economics and building vol.2 no.2 43 table 6: correlation between organization dimensions and communication variables item r communication anglo cluster external vs. internal emphasis -0.58(**) "high levels of inter-personal and intra-personal skill are required" +0.62(**) "understanding of language and cultural practices of local area" +0.61(**) "two way communication both upward and downward" +0.61(**) "communication strategies to help minimize potential disputes and misunderstanding" +0.56(**) "effective communication" +0.51(*) "understanding and appreciation of cultural difference involved" -0.67(**) "lack of trust" -0.61(**) "resistance to change" task vs. social focus -0.50(*) "project type and duration has impact on communication strategy and structure" +0.52(*) "national culture control communication process" +0.46(*) "gender issues" +0.45(*) "lack of trust" -0.60(**) "two way communication both upward and downward" -0.45(*) "staff communication is encouraged" individuality vs. conformity -0.44(*) "effective communication" -0.55(**) "flexible form and style of communication" risk vs. safety -0.46(*) "project type and duration has impact on communication strategy and structure" +0.59(**) "communication is important" +0.49(*) "understand the languages and practices of the local culture enhances communication" +0.47(*) "communication planning" +0.46(*) "well established organizational culture and objectives" adhockery vs. planning +0.44(*) "knowledge of different cultures involve in the project is important" far eastern cluster external vs. internal emphasis +0.61(**) "high levels interpersonal/intra-personal skill management" +0.60(**) "understanding and appreciation of cultural difference involved" +0.60(**) "religious issues" +0.57(*) "face" task vs. social focus +0.41(*) "awareness of national culture" individuality vs. conformity risk vs. safety +0.65(**) "time limitation" +0.80(**) "well established organizational culture and objectives" +0.72(**) "awareness of national culture" +0.64(**) "understanding and appreciation of cultural difference involved" +0.58(*) "face" adhockery vs. planning +0.48(*) "understanding of language and cultural practices of local area" ** p<0.01 (2-tailed) * p<0.05 (2-tailed) duc tran and martin skitmore 44 the australian journal of construction economics and building vol.2 no.2 communication variables both for the anglo and far eastern clusters. an organisation emphasizing an external orientation places special emphasis on satisfying clients and customers. this can be taken to mean that external anglo organisations require their personnel to have high inter-personal and intra-personal skills to communicate with clients or customers. both clusters indicate that cultural variables and structured communication networks contribute towards effective communication. interestingly, the far eastern cluster does not find “religious issues” and “face” to be significant communication barriers. this may be due to their being task-oriented and with their priorities focused on the organisational activities rather than concern for the individual and social needs of its members. firms that encourage individuality displayed an appreciation of diversity among their members, allowing greater latitude in member lifestyles and behaviours. this would seem to be consistent with the positive relationship from correlations for the first three individuality vs. conformity variables (r=0.52, 0.46 and 0.45), although the last three variables (r=-0.60, -0.45 and -0.44) indicate that two-way communication would increase communication effectiveness. an organisation’s response to risk is an important dimension of organisational culture, particularly in a fluid and rapidly changing environment. thus in a risk averse culture, they tend to encourage flexible form and style of communication for different projects, as indicated by the risk vs. safety variables (-0.55, -0.46 and 0.65). some organisations create adhockery responses to all changes, while other may opt for elaborate plans that anticipate most future scenarios. these were indicated through the positive correlations of the adhockery vs. planning variables for both anglo and far eastern clusters, suggesting that, in an adhockery culture, cultural variables, organisational objectives and communication planning are not the most important issues in the communication process. personal dimensions research in social psychology suggests that personality dimensions significantly affect the effectiveness and outcome of communication. lachman (1983; 1988) tried to reconcile these different perspectives by showing that early and late socialization induce changes in different categories of values. early socialization affects core values, and late socialization affects only periphery values. thus, people’s periphery values may change because of pressure to comply with organisational requirements and managerial policies, whereas their core values will not. when organisational role requirements are incongruent with core values, people tend to modify these role requirements. the behaviour of individuals in the organisation is influenced by the values and beliefs the individuals bring with them to the their jobs. since communication takes place between individuals, these differences in values and beliefs are manifested through their communication interactions. these different values and beliefs could assist or hinder the individual’s ability to communicate with other. table 7 shows the relationship between personal dimensions and communication variables. extroverts would be expected to like socializing and social engagement. their orientation would be toward the outer world of people and things. introverts, on other hand, are likely draw more to their own inner world of ideas. the survey supports this through the positive correlations of the introversion vs. extroversion variables. this suggests that introverts would withdraw to their inner world. they would not appreciate the benefits from cultural variables, twoway communication or inter/intra-personal skills in enhancing the communication process. extroverts, on the other hand, would prefer the interaction communication from people of different cultures, which could improve their inter/intra-personal skills. sensing types are expected to show a marked preference for facts and seek out detail while intuitive types are likely to prefer to focus on the big picture. these preferences would explain the negative correlations of the sensing vs. intuition variables for the anglo cluster, which suggested that managers (sensing types) would endorsed a communication strategy to help minimise potential disputes and misunderstanding, although this would involve the managers understanding and appreciating cultural differences. furthermore, the correlations for the far eastern managers indicate that limited resources and varying capacity and capability would hinder the communication strategy. the impact of culture on international management: a survey of project communications in singapore 45 the australian journal of construction economics and building vol.2 no.2 table 7: correlation between personal dimensions and communication variables anglo cluster far eastern cluster item r communication r communication +0.56(**) "high levels of inter-personal and intrapersonal skill are required" +0.52(*) "project managers with excellent communication skills" +0.51(*) "two way communication both upward and downward" introversion vs. extroversion +0.51(*) "two way communication both upward and downward" +0.51(*) "understanding of language and cultural practices of local area" -0.53(*) "understanding and appreciation of cultural difference involved" -0.52(*) "limited resources" -0.52(*) "communication strategies to help minimize potential disputes and misunderstanding" -0.48(*) "varying capacity and capability" -0.51(*) "project managers with excellent communication skills" sensing vs. intuition -0.47(*) "understanding of language and cultural practices of local area" +0.49(*) "flexible form and style of communication" -0.47(*) "effective reporting system" thinking vs. feeling -0.45(*) "two way communication both upward and downward" -0.60(**) "national culture control communication process" judging vs. perceiving +0.58(**) "lack of personal skills" ** p<0.01 (2-tailed) * p<0.05 (2-tailed) thinkers are expected to decide things logically and objectively while feelers base their decisions on more subjective ground. these are manifested through the correlations of the thinking vs. feeling variables in the study, suggesting that thinking type managers believe that an effective reporting system and two way communication would enhance the communication process, while feeling type managers believe that flexible forms and styles of communication improve the communication process. finally, perceiving types are expected to be flexible in life, always seeking more information, with judgers tending to seek closure over open options together with a desire for control. these preferences would explain the positive correlations of the judging vs. perceiving variables for the anglo cluster. the perceiving types recognized that national cultures control the communication process and that personal skills would hinder the communication process. summary and conclusion this paper provides the results of a small survey of 36 singapore managers aimed at identifying the main cultural and individual factors affecting project communication. the main findings that are suggested by the survey are: in terms of hofstede’s types of national cultures, respondents from a low uncertainty avoidance culture appear to be associated with a communication process based on trust and one that is therefore less formal and standardized. in contrast, respondents from a high uncertainty avoidance culture have a more formal and standard communication process, such as in written communications. the results suggest that the communication process between those from individualist and collectivist societies can be difficult, perhaps because a collectivist culture’s approach is to take time to consult with, and receive the consent of, their group members. in addition, the message from those belonging to a collectivist culture is duc tran and martin skitmore 46 the australian journal of construction economics and building vol.2 no.2 often highly coded and implicit. those belonging to an individualist culture tend to view personal skills as a communication barrier, due to their nature in support of greater individual initiative. finally, those belonging to a masculinity culture may not view limited resources as a communication barrier, probably because individuals tend to be dominant with power so resources would not be beyond their control. for organisational cultures, the more externally oriented organisations of the respondents seem to require higher levels of inter/intra-personal skills. in addition, these organisations are more likely to establish a communication strategy for cross-cultural interactions. the more task focused organisations, on the other hand, tend to place the demands of the job before the individual. organisations may have to reduce their resistance to change if they wish to strike a balance between their activity and social orientation. those belonging to a riskaverse culture may have higher level of ambiguity tolerance than those of a safetyconscious culture, so that language is not viewed as a communication barrier. they may, however, perceive personal skills to be a barrier to communication. finally, those from a planning culture emphasise the need for structure and a non-ambiguous communication process, while those from an adhockery culture may require an informal communication structure. planning culture members may also have a greater recognition that cultural dimensions are important factors in the communication process. from an individual perspective, the more extroverted respondents seem to be more competent in both the communication and cultural practices of their environment. this may be because they prefer the interactionoriented style of communication and the personal bond with their counterparts. in contrast, those more introverted seem to be more territorial and internally focused. the ‘sensing’ respondents tend to explore cultural differences to enhance their crosscultural communication process and prefer facts rather than the ‘big picture’. possibly due to the logical nature of thinkers, they are more likely to perceive cultural aspects and personal communication skills as the main tools for communicating with clients or customers. finally, the judging type respondents may not perceive national culture to be a communication barrier, due to their desire for control and organisation. the results of the research suggest that the managers’ attitude and behaviours toward communication may be guided to large extent by their level of competence. the study also provides evidence to suggest that the individuals’ understanding of the communication process and its barriers, the way they behave with other individuals and expect to be treated, varies according to national cultures. this suggests that organisations should have a balanced dual strategy, as advocated by abell (1993) and supported by the research of appelbaum et al. (1998), which is to encourage managers to think globally and act locally. to accomplish this change management process, organisations would need to formally develop key behavioural skills and individual competencies to deal with conflict, culture and change. references abell, d.f. (1993) managing with dual strategies—mastering the present, preempting the future, free press, new york. adler, n.j. (ed.) (1997) international dimensions of organisational behavior, southwestern, cincinnati , oh. appelbaum, s.h., shapiro, b. and elbaz, d. (1998) the management of multicultural group conflict, team performance management, 4 (5), 221–34. buxey, g. (2000) strategies in an era of global competition. international journal of operations and production management, 20 (9), 997–1016. cartwright, s. and cooper, c.l. (1993) the role of culture compatibility in successful organisational marriage. academy of management executive, 7, 57–70. cartwright, s. and cooper, c.l. 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(ed.) 1998, riding the waves of culture: understanding diversity in global business, mcgraw-hill, new york. ajceb_vol2_no2_28-11-02_part42 ajceb_vol2_no2_28-11-02_part43 ajceb_vol2_no2_28-11-02_part44 ajceb_vol2_no2_28-11-02_part45 ajceb_vol2_no2_28-11-02_part46 ajceb_vol2_no2_28-11-02_part47 ajceb_vol2_no2_28-11-02_part48 ajceb_vol2_no2_28-11-02_part49 ajceb_vol2_no2_28-11-02_part50 ajceb_vol2_no2_28-11-02_part51 ajceb_vol2_no2_28-11-02_part52 ajceb_vol2_no2_28-11-02_part53 work stress among professionals in the building construction industry in nigeria work stress among professionals in the building construction industry in nigeria eziyi offia ibem, michael nwabueze anosike, dominic ezenwa azuh, and tim o. mosaku, (covenant university, ota, nigeria) abstract this study was undertaken to identify key stress factors among professionals in the building construction industry in nigeria. this is in view of the fact that to date, very little is known about work stress among professionals in the building construction industry in this country. the study involved the administration of a questionnaire to 107 professionals including architects, builders, civil/structural engineers and quantity surveyors randomly selected from 60 ongoing building projects in anambra, ogun and kaduna states, nigeria. the data were analysed using descriptive statistics, and findings show that the principal sources of stress were high volume of work, uncomfortable site offices, lack of feedback on previous and ongoing building projects, and variations in the scope of work in ongoing building projects. the paper suggests that taking responsibility for work which one has adequate capacity to handle, establishing realistic budgets and time frames for project delivery, provision of spatially adequate, visually and thermally comfortable site offices, adoption of appropriate job design practices and education of professionals in stress management will reduce the incidence of stress among professionals in the building industry in nigeria. keywords: work stress, building construction industry, professionals, nigeria introduction in the last few decades, the building construction industry has witnessed tremendous institutional and organizational transformation across the globe. continuous modification of building process, pace and complexity of work and increasing demand for higher productivity have become common features of this industry. these are in response to globalization of economy and markets, technological advancement and changing consumer preferences. in fact, the dynamic and complex nature of construction works, diverse backgrounds and hostile attitudes of participants are also believed to be contributing greatly to rapid changes taking place within the construction industry in general (wong et al, 2010). as a result, professionals and indeed the work force in this sector operate in an extremely competitive environment where projects are designed, constructed and delivered within tight budgets and time frames. all these have combined to make construction work mentally and emotionally demanding and stressful (wahab, 2010). work stress is known to impact negatively on productivity and job satisfaction among workers in different professions (mcvicara, 2003; ng et al., 2005; haq et al., 2008; lath, 2010). it is also believed to be a major contributor to absenteeism, low employee morale, high accident and turnover rates as well as increasing medical expenses of many organizations (wahab, 2010). hence, research into job-related stress has increased in recent years (whetten and cameron, 1991). notably, previous studies have shown that work stress can be physically and mentally harmful to workers and it is related to physical condition, organizational structure, interpersonal conflict, personal characteristics and nature of work (ng et al., 2005, haq et al., 2008; lath, australasian journal of construction economics and building ibem, e o et al. (2011) ‘work stress among professionals in the building construction industry in nigeria’, australasian journal of construction economics and building, 11 (3) 45-57 46 2010). there is also evidence in the literature suggesting that occupational stress has manifested itself in unsafe working practices, decrease in the quantity and quality of performance at work and reduction in performance accuracy (loosemore and waters, 2004; melia and becerril, 2007; halkos and bousinakis, 2010). therefore, there is a consensus that intense, continuous and repeated work stress can be inimical to individual and organizational productivity and competiveness in job performance, and thus deserves more research attention. stress is not limited to any particular profession (ng et al., 2005; lath, 2010). however, statt (1994) noted that construction work is the third most stressful profession after mining and police work. specifically, campbell (2006) found that in the united kingdom, construction professionals were increasingly viewing their work as being stressful. linda et al (2003) identified the nature of production processes that take place in the construction industry as being responsible for making construction work a dangerous and stressful occupation. this goes to suggest that work stress is a major threat to the attainment of sustainable growth in the construction industry in particular and economic development of any nation in general. there is a growing body of research literature on occupational stress among professionals and workers in the construction industry as previous studies suggest (campbell, 2006; leung, et al., 2007; lingard et al., 2006; leung et al., 2008; 2010) . interestingly, this body of contemporary literature has advanced our understanding on the causes of stress and how construction professionals in the west and asia were coping with it. they however do not provide adequate insight on the situation among professionals in the building construction industry in africa. in particular, the review of literature shows that very little research has examined stress factors among professionals in the building construction industry in nigeria. since stress perception is highly subjective and varies from one individual and context to another (wong et al., 2010), there is bound to be variation among professionals in the building construction industry in their perception of stress factors. this no doubt has implications for stress management strategies in the construction industry in general. also the urgency of attaining sustainable growth and national development calls for more studies on work stress, especially in developing countries, including nigeria. this paper reports on the result of research aimed at identifying stress factors among professionals in the building construction industry in nigeria. it identifies the key stress factors among architects, builders, civil engineers and quantity surveyors directly involved in building construction projects in nigeria. based on the findings, it suggests strategies to eliminate or reduce stress factors among professionals in the industry in this country. review of related literature the concept of stress has a long tradition in organizational and social literature (somerfield and mccrae, 2000). however, evidence in contemporary literature shows that stress has been defined and viewed from diverse perspectives. aitken and crawford (2007) noted that the exploration of the concept of stress began with the work of hans selye in 1936. selye in his work defined stress as the force, pressure, or strain exerted upon an object or a person that resists these forces and attempts to maintain its original state. he conceived of stress as a pathological human response to psychological, social, occupational and/or environmental pressures; and therefore concluded that stress is neither a simple nervous tension resulting from damage nor necessarily something to be avoided (selye, 1978). drawing from selye’s submissions, pulat (1997) and martino and musri (2001) opined that some amount of stress is necessary to generate enthusiasm and creativity for optimal productivity. they however cautioned that intense or too much stress in work environment poses great risk to workers’ safety, health and emotional stability. the foregoing submissions tend to suggest that stress is australasian journal of construction economics and building ibem, e o et al. (2011) ‘work stress among professionals in the building construction industry in nigeria’, australasian journal of construction economics and building, 11 (3) 45-57 47 an unavoidable consequence of modern living and is not necessarily a negative phenomenon as long as it is within a tolerable level that can engender enthusiasm, creativity and productivity. melia and becerril (2007) on the other hand indicated that stress is an experience expressed in one’s feeling of being strained while the health and safety executive (hse, 2007) defined stress as the adverse reaction people have due to excessive pressure or other types of demand placed on them. put differently, lath (2010) was of the view that every person including a child, an adult, employed or unemployed faces stress in his/her everyday life. he defined stress as any challenge that exceeds the coping abilities of the individual. from the occupational perspective, stress has also been defined as the physical and emotional responses that occur when workers perceive an imbalance between their work demands and their capability to meet such demands. in other words, stress is a harmful physical and emotional response that can occur when there is conflict between job demands on a worker and his/her capacity to meet such demands (brown, 2001; lath, 2010). the general inference that can be drawn from the foregoing definitions is that stress can be considered as an inevitable and unavoidable component of life. it can also be inferred that occupational or work stress is the type of stress experienced as a direct consequence of a person’s occupation. therefore, in this study, work stress is viewed as a human perception of conditions that scare, excite, annoy, threaten or strain individuals as a result of their occupation. in view of evidence in the literature on the negative consequences of stress among modern day work forces, a number of theoretical models on work stress have been developed. one such theory is the person-environment fit theory first proposed by french, robert and van harrison in 1982. according to this theory, stress occurs as a result of an incongruity between the individual and the ambient environment (melia and becerril, 2007). the key elements of this model comprise objective and subjective variables that could be found in the environment or the person. cox and mackay (1979) were of the opinion that stress is a highly individual phenomenon which exists as a result of a person’s appraisal of his/her involvement in the environment. they pointed out that stress arises as a result of an imbalance between the person’s perception of the demand placed on him/her and his/her perception of ability to cope. occupational stress may also be seen as comprising a three-dimensional syndrome of emotional exhaustion, depersonalization and reduced personal accomplishment (maslach et al., 1996). stress in this context is seen as a state of physical, emotional and mental exhaustion due to long-term involvement in situations that are emotionally testing (melia and becerril, 2007). maslach et al (2001) noted that individuals experiencing long periods of chronic job stress are likely to encounter physical and health problems, reduced productivity or effectiveness, lower levels of satisfaction and organizational commitment. this concept of stress suggests that long exposure to physically, mentally and emotionally testing activities could result in exhaustion which can lead to reduction in one’s level of productivity and accomplishment. the demand-control-support model developed by karasek in 1979 is the most common approach to understanding stress and its effect on psychological and physical health. it focuses on the interaction between job demands and workers’ potential control over their work schedule. in line with this theory, anderson (1976) noted that work stress is a consequence of man’s exposure to conflict with his fellow workers, disintegration of work process into isolated routines, shift work arrangement, automation, rapid technological change and urbanization. in essence, this model proposes that a combination of psychological job demands, decision making capacity, and social support in the work environment can help explain the various consequences of stress (karasek and theorell, 1990). this suggests that a combination of high job demand, low decision making capacity and social support, mechanization of work processes australasian journal of construction economics and building ibem, e o et al. (2011) ‘work stress among professionals in the building construction industry in nigeria’, australasian journal of construction economics and building, 11 (3) 45-57 48 as well as routine jobs can be sources of occupational stress, which is detrimental to people’s health and productivity at work. from the above theories, it can be inferred that the concept of work stress is viewed as a behavioural attribute that varies from one individual and context to another. it can also be inferred that work stress is a result of the gap between demands of the work environment and the capacity to cope with the challenges thereof (brown, 2001; lath, 2010). also as a common attribute of working life, stress can become a negative phenomenon if workers are unable to cope and lack social support. this can ultimately lead to a state of physical, emotional and mental exhaustion resulting in low productivity at work. viewed from a different perspective, several authors have also argued that stress can occur whenever there is a change in the equilibrium in man–machine –environment interaction, which may result in the distribution of generated stress among the components of a production system. since man is known to be the weakest component of the work-environment system, most common signs of stress are manifested in some notable human responses such as crying, smoking, excessive eating, drinking alcohol, fast talking, fear, anxiety, guilt, anger, grief, depression and disgust (lazarus, 1966; leung et al, 2005; yip et al., 2005; wahab, 2010). in hong kong for instance, high levels of job burnout have been identified among construction professionals. this has threatened their well-being and reduced industrial efficiency and long-term competitiveness of construction professionals in that country (yip et al., 2005). similarly, stress has also been identified as one of the root causes of low productivity of construction site workers (dainty et al., 1999; lingard and francis, 2004; wahab, 2010). moreover, recent studies show that construction workers experienced much more stress at their work place than at home, and this had negative effects on their health and productivity at work (wahab, 2010; halkos and bousinakis, 2010). with regards to stress factors in the construction industry, kenneth (2005) noted that construction project stress is the manifestation of factors that negatively erode values from the project, and thus make desired goal unattainable. work overloads, working long hours and role ambiguity are known to be leading causes of stress amongst professionals in construction projects (sutherland and davidson, 1989). statt (1994) asserted that multilevel subcontracting, time pressure; constant worker rotation and unstable work due to temporary contracts can contribute to psychosocial stress among workers. from a gender perspective, loosemore and waters (2004) found that male professionals in the construction industry suffer more stress in relation to risk taking, disciplinary matters and implications of mistakes, redundancy and career progression than their female counterparts while female professionals suffer stress due to opportunities for personal development, rate of pay, keeping with new ideas, business travel and accumulative effect of minor tasks. previous studies shows that the general sources of stress among construction sector workers are quantitative work load, tight time schedule for work, lack of career guidance, poor communication among participants and bureaucracy. others are inadequate room for innovation, unsatisfactory remuneration, ambiguity of job requirement, inadequate knowledge of project objectives, long working hours, tight schedules and unfavourable working conditions (leiter, 1991; ng et al., 2005). also lin and chan (2009) found that temperatures above 30°c and relative humidity above 74% posed health threats to construction workers in taiwan. they noted that physically overloaded construction workers were among the most vulnerable to the negative impact of temperature on their health and productivity. most recently, it was found that noise, cold, conflict with one another, unintended and unforeseen phenomena, search for optimal solutions consistent with client’s budget and time frame, reaching comprises, moving and rearranging work schedules and other potentially intolerable conditions constitute stressors to workers in the construction industry in nigeria (wahab, 2010). generally speaking, the sources of stress among workers in australasian journal of construction economics and building ibem, e o et al. (2011) ‘work stress among professionals in the building construction industry in nigeria’, australasian journal of construction economics and building, 11 (3) 45-57 49 the construction industry as found in contemporary literature can be classified into the five principal groups. table 1 shows a checklist of the different work characteristics and associated stressors. it is evident from this table that the key sources of stress include (i) personal characteristics related sources (ii) relationship related sources (iii) work-nature and time related sources (iv) organizational policy and position related sources (v) situation/ environmentally related sources of stress and others. working characteristics stressors organizational function and culture poor communication, task environment, problem-solving environment and poor development practices participants low participation in decision making career development and job status career uncertainty, stagnation, poor pay and work status, and job insecurity or redundancy role in organization role ambiguity, and conflict in role assignment and performance of task job content ill-defined work, high uncertainty in job process, lack of variety, fragmentation of work, under-utilization of skills, and physical constraints. workload and work place work over-load, work under-load, time pressure and deadlines, lack of control over pacing of work work time inflexible work schedule, unpredictable hours of work, long hours of work. interpersonal relationship at work social or physical isolation, lack of social support from other staff, conflict among staff, poor relationship with supervisors and managers preparation and training inadequate preparation for dealing with more difficult aspect of a job, concern about technical knowledge and skill. other problems lack of resources and staff shortages, poor working environment (e.g. inadequate temperature control, poor lighting, poor ventilation, etc) table 1 checklist of work characteristics and stressors complied by the authors from different sources including sutherland and davidson (1989); ng et al. (2005); wahab (2010) research methods the survey research method was adopted in this study. the target population was professionals-including architects, builders, civil engineers and quantity surveyors involved in ongoing building construction projects. kaduna, ogun and anambra states representing the north, west and east regions in nigeria respectively were selected as study areas. a preliminary survey was conducted earlier by the researchers to identify ongoing building construction projects in major urban centres in the selected states. altogether, 225 ongoing building construction projects of various categories were identified. from that, 20 building projects were randomly selected for the study from each state, representing around 27% of the identified building projects. random sampling was used in selecting 185 professionals for the administration of questionnaire. the cross-sectional survey was conducted between january and june 2008 with questionnaires administered to the aforementioned construction professionals working in building construction project sites visited. in order to get responses from the targeted population, some of the building construction sites sampled were visited more than once, and some of the professionals were traced to their offices. of the 185 questionnaires australasian journal of construction economics and building ibem, e o et al. (2011) ‘work stress among professionals in the building construction industry in nigeria’, australasian journal of construction economics and building, 11 (3) 45-57 50 distributed, 114 questionnaires representing around 62% of the distributed questionnaires were retrieved. however, seven of them were invalid and not used in the analysis. in developing the questionnaire used in the collection of primary data, extensive review of literature was carried out to identify work stress factors as found in prior studies. the different stressors in building projects were broadly classified according to job demand, physical factors, organizational factors, and job role factors in line with evidence in literature on stress factors in the construction industry in general (dainty et al., 1999; lingard and francis, 2004; leung et al., 2005; wahab, 2010). consequently, the questionnaire was designed based on the goal of the current research as well as findings from the review of literature. the questionnaire contained structured closed and open-ended questions. it was divided into two sections, with each section designed to elicit specific information from the respondents. section one was designed to elicit information on the personal profiles of the respondents while the section two dwelt basically on perceived work stress factors among professionals. in section two the open-ended question asked the respondents if they have ever experienced work stress in the course of their involvement in building design and construction activities. the closed questions on the other hand dwelt on work related stress factors, physical and environmental induced stress as well as stress due to organizational structures. respondents were provided with options of the different stress factors as identified in literature and were asked to identify by ticking the stress factors which according to their opinion contributed to their individual experiences of work stress. the data obtained in the survey was processed and analysed using the spss 15 for windows. descriptive statistical tools including cross tabulation, frequency count and percentages were used in the analysis of the quantitative data obtained from the close-ended questions while content analysis was used in the analysis of the open-ended questions and secondary data obtained from the review of literature. result and discussion profile of the respondents the result of the analysis shows that around 91% of the respondents were males as against 9% who were females. this underscores the dominance of male professionals in the building qualifications architects builders civil engineers quantity surveyors total (%) full professional *registration (arcon; corbon; coren, qsbrn) 4 6 8 2 20(18.5) *mniob/aniqs 15 3 18(17.0) masters degree 10 5 1 16(15.0) bachelor degree 7 4 14 5 30(28.0) higher national diploma 6 3 8 3 20(18.5) national diploma 0 2 0 1 3(3.0) total 27 35 31 14 107(100) table 2 highest academic and professional qualifications of the respondents source: field survey (2008) *arcon: architects registration council of nigeria, corbon: council of registered builders of nigeria; coren: council for the regulation of engineering in nigeria; qsbrn: quantity surveyors board of registration in nigeria (regulatory bodies for the practice of architecture, building technology, engineering and quantity surveying respectively in nigeria) mniob: member nigerian institute of building; aniqs: associate nigerian institution of quantity surveyors australasian journal of construction economics and building ibem, e o et al. (2011) ‘work stress among professionals in the building construction industry in nigeria’, australasian journal of construction economics and building, 11 (3) 45-57 51 construction industry in the study areas. the result also shows that 31%, 24% and 45% of the respondents were in construction sites in anambra, kaduna and ogun states respectively. some 33% of the respondents were builders, 29% civil/ structural engineers, 25% architects, and 13% quantity surveyors. table 2 shows the distribution of the respondents according to their highest academic and professional qualifications. around 19% of the respondents have full professional qualifications while 17% of them were corporate members of their respective professional bodies getting ready for full professional registration with the different regulatory agencies in nigeria. the result (table 2) also shows that around 43% of the respondents had academic qualification of a bachelor degree and above, and only 3%, mainly builders and quantity surveyors had the minimum academic qualification of a national diploma. the above result shows that a majority of professionals in the building construction industry encountered in the survey were highly qualified personnel. table 3 shows the distribution of the respondents according to number of years of site experience. most (67%) of the respondents had over 10 years of experience, 24% had between 6 years and 10 years experience, and only 9% had less than 6 years of professional site experience. this result shows that majority of those interviewed had reasonable years of experience in their respective professions and in building design and construction activities. this suggests that their perception of work stress is based on personal experience. site experience (years) architects builders civil engineers quantity surveyors total (%) 0-5 5 3 2 0 10(9.0) 6-10 15 4 6 1 26(24.0) 11-15 5 10 10 5 30(28.0) 16 and above 2 18 13 8 41(39.0) total 27 35 31 14 107(100.0) table 3 site experience of the respondents (source: field work, 2008) perception of work stress table 4 shows the respondents’ perception of work stress on building construction sites. an examination of the result reveals that most (94%) of the respondents have experienced work stress while 6% responded that they have not experienced work stress. the fact that such a majority of the respondents had experienced stress as a result of their work suggests that the data obtained on stress factors have a reasonable degree of reliability have you ever experienced work stress on building construction site? frequency percentage yes 101 94 no 6 6 total 107 100 table 4 perception of work stress among the professional (source: field work, 2008) work demand and environmental related stress factors figure 1 shows the responses of the professionals on the six work demand related stress factors investigated. the result shows that a high volume of work was the most significant work australasian journal of construction economics and building ibem, e o et al. (2011) ‘work stress among professionals in the building construction industry in nigeria’, australasian journal of construction economics and building, 11 (3) 45-57 52 related stress factor as identified by the respondents. this is followed by budget related pressures and ambitious deadlines respectively with 78%, 51% and 50% of the respondents indicating that these three factors were key sources of work stress. the result is consistent with evidence in the literature, and it is to be expected for a number of reasons. first is the nature and complexity of building construction work which overloads professionals and workers with work. second is that a majority of building construction sites sampled were multi-storey buildings and automobile service stations, which involve relatively high volumes of work at all stages. third is that construction workers in nigeria are known to work under tight budgets and time frame as most client want immediate delivery of their building projects in order to maximize profit on their investments. figure 1 work demand related stress factors (source: field study, 2008) however, contrary to evidence in the literature suggesting that number of working hours can be a key source of stress, it is obvious from figure 1 that the number of hours put in by the professionals in the building construction industry sampled in the study areas was not the leading source of stress. this is based on the result which shows that only around 40% of the respondents indicated that the number of working hours was a source of stress. this result may be explained by noting that the nature of training these professionals received exposed them to the rigours of long hours of strenuous academic and field work, hence long working hours was not viewed as a principal stressor by many of those interviewed. figure 2 physical work environment stressors (source: field work, 2008) australasian journal of construction economics and building ibem, e o et al. (2011) ‘work stress among professionals in the building construction industry in nigeria’, australasian journal of construction economics and building, 11 (3) 45-57 53 figure 2 shows the respondents’ perception of the different physical work environment stressors. it is evident from the result that of the eight physical work environment stressors investigated in this study, inadequate temperature control in site offices was the key source of stress among the professionals sampled. eighty per cent of the respondents identified inadequate temperature control in site offices as the key work environment related stressor. this is followed by lack of privacy in site offices (75%); safety/security measures on construction sites and spatial inadequacy of site offices (60%) as well as inadequate ventilation of site offices (50%). this result suggest that building construction sites in nigeria are characterised by inadequacies in space, ventilation, humidity and temperature control measures, which render them not very conducive for productive work. indeed high temperature as a key stress factor is understandable as nigeria is in the tropics and experiences temperature as high as 39 o c during the dry seasons stretching between november and march. it is also evident from the result that poor site condition, noise level and poor lighting of site offices were not critical sources of stress to professionals sampled in the study areas. although the result suggests that these are challenges; the majority of the respondents did not see them as threats or impediments to the effective discharge of their normal duties. in all, the result of physical work environment related stress appears to provide support for evidence in the literature (lin and chan 2009; wahab, 2010) suggesting that unfavourable working environment is a key source of stress among workers in the construction industry in general. figure 3 shows the respondents’ perception of stress factors due to their respective professional roles in the building construction process. an examination of this result reveals that 80% of the respondents indicated that variations in the scope of work was a principal source of stress while fragmentation of work structure was a source of stress to 75% of those interviewed. it is also evident from the result that 40% of the respondents claimed that lack of clarity in role was a source of stress while 25% and 21% of them indicated that job insecurity and insufficient skills respectively constituted stress to them. the result as obtained in figure 3 can be explained within the context of the fact that building projects in nigeria are most often inundated with variations due to errors in design and/or change in client’s need as buildings are being constructed. it can also be linked to the fact that building procurement is generally carried out in professionally divided sections such as architectural, structural, services, cost and others. as a result, the entire building construction process is seen as fragmented. this suggests that specialization among professionals in the building industry can be a source of stress. in fact this is in line with findings (wahab, 2010) indicating that a specialized job nature contributed to stress among artisans in the construction industry in nigeria. other notable stress factor identified in this study is lack of clarity of roles on sites (see figure 3). the fact that there is often conflict between architects, builders and civil/ structural engineers in building construction sites in nigeria can help to explain why about 40% of the respondents claimed that lack of clarity of role constituted a stress factors to them. this can also be linked to organizational factors such as poor planning and communication, which the respondents indicated were among the principal stress factors. in contrast, job insecurity and insufficient skills were not considered as key sources of stress among the professionals encountered in the survey. this is probably because most of them are highly trained and qualified professionals who are in short supply in nigeria, and thus job insecurity and insufficient skill are not major concerns. australasian journal of construction economics and building ibem, e o et al. (2011) ‘work stress among professionals in the building construction industry in nigeria’, australasian journal of construction economics and building, 11 (3) 45-57 54 figure 3 job role stress factors (source: field survey, 2008) organizational related stress factors figure 4 shows the result of the eleven organizational related stress factors investigated. it is evident from the result that a majority (80%) of the respondents claimed that lack of feedback on the performance of staff members on building projects handled by them was a key source of stress. this is followed by poor communication; inadequate staffing, poor planning and crisis management mechanisms in their respective organizations. the result on figure 4 suggests that most building construction and related firms in the study areas are characterised by poor communication, planning and crisis management mechanisms. there are also indications that the building construction firms from where the sample was drawn had challenges of inadequate staffing, lack of proper evaluation and monitoring of staff performance on project sites and inter-personal conflicts as this study suggests. figure 4 organizational related stress factors (source field survey, 2008) these inferences were arrived at because these organizational features were perceived as key sources of stress among the professionals sampled. other organizational related stress factors identified by a reasonable percentage of the professionals sampled were insufficient on-the-job training and inadequate equipment. it is evident from the above result, that most of the organizational related stress factors borders on bureaucracy, which ng et al. (2005) noted was australasian journal of construction economics and building ibem, e o et al. (2011) ‘work stress among professionals in the building construction industry in nigeria’, australasian journal of construction economics and building, 11 (3) 45-57 55 the most difficult stressor to manage. notably, the result however suggests that poor remuneration was not a key source of stress among most professionals in the building industry in the study areas. this appears to be inconsistent with findings in (ng et al., 2005) indicating that poor remuneration was a source of stress among construction workers. this is probably due to the fact that most of those sampled were highly qualified and scare professionals and therefore adequately remunerated. conclusions this study focused on work stress factors among professional architects, builders, civil/structural engineers and quantity surveyors in the building construction industry in nigeria. the findings show that the key stress factors among these professionals were high volume of work; lack of thermal comfort, privacy and adequate space in site offices, lack of feedback on previous and ongoing building projects, lack of security/ safety measures on site, variations in the scope of work and fragmentation of building work into specialized fields. other stress factors related to organizational structure were lack of feedback on staff performance on building projects, poor communication and inadequate staffing and others. indeed, the research has revealed that, most of the professionals involved in building projects planning and execution in nigeria experienced work stress from a range of sources. there is no doubt that the findings of this study have a number of implications that require attention in eliminating or reducing stress factors among professionals in the building construction industry in nigeria. as people perceive stress factors differently so also do professionals in the building construction industry in nigeria; therefore, a number of mitigation measures may be considered. first, it is important for building contractors to work closely with architects, cost consultants and clients to arrive at realistic budgets and deadlines for job delivery at the design stage of building projects, if the aim is to reduce the incidence of avoidable pressures associated with meeting ambitious deadlines, which most often may lead to stress, poor quality job and low productivity. second, construction firms aiming to reduce stress should give adequate attention to the comfort of professionals working on building construction sites. pragmatic and workable strategies are needed to improve the level of security and physical working environment of professionals on building construction sites. this calls for deliberate policies by organizations in the building industry to improve employees’ working conditions and evaluate their performance to develop confidence among professionals in coping with challenges of work stress. furthermore, variations in the scope of work while the construction work is in progress can be reduced by engaging appropriate job design practices which ensures minimum variations due to human errors. the involvement of all the professionals at the design and construction stages of building projects could ensure that tasks performed by the different professionals are identified as a whole unit of a job rather than as fragments. references aitken, a., and crawford, l. 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(1989) ‘stress among construction site managers – a preliminary study’, stress medicine, 5, 221-235 wahab, a. b (2010) ‘stress management among artisans in construction industry in nigeria’, global journal of researches in engineering, 10 (1) 93-103 whetten, d. a. and cameron, k. s. (1991) developing management skills, 2 nd ed, harper collins, new york, ny, 23-35 wong, j., toe, m.and cheng, y. k. (2010) ‘cultural determinants of stress in the construction industry’ in proceedings of 2010 international conference on construction and real estate management, 1-3 december 2010, brisbane, queensland, viewed 12 th march, 2011 from http://eprints.qut.edu.au/ yip, b., rowlinson, s., kvan, t. and lingard, h. (2005) ‘job burnout within the hong kong construction industry: a cultural perspective’ in proceedings of the cib w92/t23/w107 international symposium on procurement systems held at las vegas, nevada, usa http://eprints.qut.edu.au/ innovation performance and its impact on profitability among different sectors in the australian construction industry 1 innovation performance and its impact on profitability among different sectors in the australian construction industry mary hardie (school of construction, property and planning, university of western sydney, australia), graham miller (school of construction, property and planning, university of western sydney, australia), karen manley (faculty of the built environment and engineering, queensland university of technology, australia) and stephen mcfallan (commonwealth scientific industrial research organisation, australia). abstract a the brite (building research information technology and environment) project was established by the australian cooperative research centre for construction innovation to encourage innovation in the construction industry. while innovation is generally perceived to be broadly beneficial, there has been little formal study of its occurrence or impact in australian construction or of the factors which foster an innovative atmosphere within an enterprise. in order to benchmark innovation performance, the brite project conducted a survey in 2004 into the nature, incidence and variety of technological and organisational innovations in various sectors of the industry. with some exceptions, the survey found that clients and consultants engaged in significantly higher levels of innovation than did suppliers, main contractors or trade contractors. within the industry sectors those organisations classified as high innovators favoured the adoption of advanced management practices and had formal evaluation systems in place to judge their progress. they reported significant positive impacts on their profitability from innovation and can therefore provide instructive examples for the rest of the industry to follow. keywords: construction innovation, innovation performance, profitability effect, innovation blockers, industry sectors introduction a it is important to recognise that innovation in construction is not confined to new technological inventions. innovation has been defined as a “non-trivial improvement in a product, process or system …… which is novel to the company developing or using it” (slaughter 2000). thus innovation may range through such things as management or organisational programs, incremental or evolutionary systems development, iterative design and production processes or entirely new construction materials or components. an innovation may be new to the world, new to the country, new to the industry or new to the organisation adopting it. for the survey the adoption of an improvement from another industry and applied to the construction industry is included whether or not substantial changes need to be made to the idea in its new setting. the absolute frequency of individual innovation events is difficult to judge because the innovation process may involve several stages each of which could possibly be regarded as an innovation in itself. for this reason it was considered more useful to concentrate on the measurable benefits of innovation and whether or not it is deemed to have occurred rather than seeking to quantify its rate of occurrence. the importance of innovation to the construction industry at all levels is now widely accepted. innovation has frequently been found to have strong links with economic performance and growth (gann 2003). ideas can be generated in any of several ways, but the creative process requires certain favourable conditions if it is to produce realisable improvements. such realisable or measurable benefits are necessary if an innovation is to be regarded as successful. the connection between innovation and profitability has been acknowledged by diverse sources (flynn et al. 2003; steele and murray 2004; van der panne et al. 2003). the brite survey tested, among other things, the strength of the relationship between innovation and profitability. survey information a the full brite innovation survey report 2004 is available at http://www.brite.crcci.info/publications/index.htm. a comprehensive description of the survey methodology and a copy of the questionnaire are included in the survey report. the study focussed on the commercial building and civil engineering sectors and did not include residential construction. organisations approached to complete the questionnaire were http://www.brite.crcci.info/publications/index.htm 2 drawn from public sector construction and roads agencies, plus their pre-qualification lists for contractors and consultants, together with the membership lists of eight industry associations. consequently the questionnaire respondents were likely to be dominated by medium sized enterprises and are unlikely to have included the very small or „micro‟ section of the industry. the survey sample was drawn from 3,500 organisations in the states of new south wales, queensland and victoria. one third of this population was sampled. the surveys were sent by mail and addressed to individuals at senior management level. 383 completed surveys were received for what is considered to be an acceptable overall response rate of 29%. information was collected on the respondents‟ perceptions of the determinants of innovation in the industry. innovation was specifically defined to include both technological and organisational improvements. incremental as well as radical or breakthrough changes were both regarded as innovations. innovations were further classified as „new to the organisation‟, „new to the industry‟, „new to the country‟ and „new to the world‟. after analysis of the survey response, respondents were classified as high, medium or low innovators according to an index compiled from the degree of novelty and profitability of their innovations, along with the number of advanced managerial practices adopted and the level of investment in research and development. perceptions of the principle drivers and blockers to innovation were the subject of further questions in the survey. rates of adoption of advanced management practices, as well as technological and human resources strategies were also recorded. innovation and research activity a the survey reported a „new to industry‟ rate of technological innovation of 18% which is a comparable result to an economy-wide rate of 17% for a recent new zealand study (statistics new zealand 2004). measuring innovation rates is problematic because of the differences in the way innovation events can be defined. the new zealand study was considered a useful comparator because it relied on basic assumptions quite similar to those of the brite survey. the degree of innovation novelty was classified according to whether the reported change was new to the organisation, new to the industry generally, new to the country or new to the world. overall 25 respondents or 6% of the total reported „new to the world‟ technological innovations. 17 of the 25 were consultants, indicating that these were the key source of high level technical innovation. interestingly, consultants were also the group with the highest percentage reporting no technological innovations indicating that the consultant group was diverse in its makeup and was involved in different sub sectoral areas. no main contractors reported „new to the world‟ innovations but they did report high levels of „new to the country‟ innovation and this is indicative of their local competitive focus. 10 respondents or 2.6% reported „new to the world‟ organisational innovations. consultants produced half of these high level organisational innovations and main contractors, by contrast, again listed none. these are self reported assessments and not all sectors are likely to keep a close watch on international developments in their field. main contractors and trade contractors, in particular, seem to have largely focussed on organisational comparisons with their local competitors rather than national or international developments and this is what might reasonably have been expected. more respondents reported no organisational innovations than reported no technological innovations (31% as against 25%). it is possible that technological innovations are easier to recognise and therefore more readily acknowledged. widely regarded as a key indicator of technological innovation is commitment to research and development (r&d) (fraser and zarkada-fraser 2001; gann 2000). the brite survey found that while one-quarter of the industry invests in r&d, the actual performance of r&d is much lower. the industry tends to rely on research done by organisations lying outside its formal boundaries. these are typically the csiro and university research organisations, as well as, the co-operative research centre for construction innovation. perhaps as a result of this outsourcing, industry sectors varied in their awareness of the australian government‟s r&d tax concession, although in all sectors the awareness of the scheme was low. the survey reported a very low successful claim rate of 15%. the very high ‟don‟t know„ response (49% of all respondents) about eligibility for r&d tax concessions (see figure 1 below) may indicate lack of knowledge of the 3 scheme, high compliance and verification costs and concerns about strictly administered program guidelines. consultants, suppliers/manufacturers and trade contractors all reported ‟don‟t know„ rates of over 50%. the discrepancy between the reported level of r&d and the successful claiming of the tax concession indicates problems with either the administration or the publicising of the tax concession. the brite project has brought this finding to the attention of the appropriate government and industry bodies. eligible for r&d tax concessions 0 10 20 30 40 50 60 70 c lie nt s c on su lta nt s c on tra ct or s s up pl ie rs /m an uf ac tu re rs tr ad e c on tra ct or s p e rc e n ta g e yes no don't know figure 1: ability to claim r&d tax concessions innovation determinants a another significant finding from the brite survey is that a key determinant of innovation outcomes can be found in the range of business strategies adopted. the strategies surveyed were identified from an extensive literature review (blayse and manley 2004) and from industry workshops held in brisbane. they included: actively encouraging your employees to seek out improvements and share ideas; recruiting experienced employees; recruiting new graduates; participating in apprenticeship programs; providing or supporting training programs for your employees; use of multiskilled teams; enhancing your business's technical capabilities; introducing new technologies; investing in research and development (r&d); participating in the development of industry standards and practices; protecting your business's intellectual property; delivering products/services which reduce your clients' costs; increasing your market share; building relationships with existing clients; attracting new clients; and providing a broader range of services to your clients. all sectors other than clients reported adopting more than half the strategies listed and clients were slightly under half. this is probably due to some of the strategies not being relevant to large public sector clients who are not normally concerned with market share or the delivery of products. 4 average number of important business strategies 0 2 4 6 8 10 12 c lie nt s c on su lta nt s c on tra ct or s s up pl ie rs /m an uf ac tu re rs tr ad e c on tra ct or s business strategies hr strategies technology strategies marketing strategies figure 2: sector adoption of business strategies a significant positive correlation was found between the number of business strategies employed by a firm and the number of advanced practices adopted, in other words, organisational innovation. the advanced practices listed were once again identified from a literature review and workshops. they consisted of: long-term collaborative arrangements with other businesses; quality certification (eg iso 9000); staff training budget; written evaluation of new ideas in order to develop options for your business; documentation of technological/organisational improvements developed by your business; written strategic plan; computer networks (lan or wan); web site; computerised systems for estimating, inventory control, modelling, asset analysis, project management, etc; 3-d cad; computerised asset analysis (eg. hdm4); computerised project management; digital photography; office-to-site video links or video conferencing; on-line-remote-constructionmanagement; intelligent systems; alliance contracts; risk-sharing/performance-incentive contracts; design and construct contracts; design/build/fund/operate (dbfo) contracts or public-private partnerships (ppps); managing contractor arrangements; and partnering on projects, or other relationship forms of contract. a correlation was also found between the use of formal evaluation programs to monitor innovation value and high level technological and organisational innovation. however, only 15% of respondents were currently using such programs. this identifies a suitable area of action for those organisations seeking to raise their level of innovation performance. there was some consistency across industry sectors with regard to the principal drivers of innovation within the industry. „improving efficiency/productivity‟ and „responding to client/customer needs‟ were considered the most important drivers by all five sectors. similarly, „reducing cost‟ and „reducing time‟ were given low significance for innovation by all groups. this does not mean that reducing cost and time were unimportant to the respondents but that they were not of themselves the issues that drive the search for innovation. in terms of obstacles to innovation, consultants were more likely to see the cost of the initiative as an obstacle (particularly the high innovators) while contractors in general saw ‟conservative stakeholders/clients„ as a major obstacle. trade contractors were more likely to see ‟time„ as an obstacle and suppliers indicated there were other obstacles they had to deal with. 5 innovation drivers 0 10 20 30 40 50 60 im pr ov in g ef fic ie nc y/ pr od uc tiv ity im pr ov in g te ch ni ca l p er fo rm an ce im pr ov in g qu al ity im pr ov in g ac cu ra cy r ed uc in g co st r ed uc in g tim e r es po nd in g to c lie nt /c us to m er n ee ds m ee tin g re gu la tio ns o r s ta nd ar ds o th er p e rc e n ta g e clients consultants contractors suppliers/manufacturers trade contractors figure 3: main innovation drivers per sector innovation obstacles 0 5 10 15 20 25 30 35 40 45 c os t o f i ni tia tiv e in su ffi ci en t t im e c on se rv at iv e st ak eh ol de rs /c lie nt s la ck o f s ki lle d st af f p oo r st af f a tti tu de s in su ffi ci en t b en ef its in ad eq ua te g ov t p ro gr am s to s up po rt in no va tio n lo w v ol um e of a va ila bl e w or k o th er p e rc e n ta g e clients consultants contractors suppliers/manufacturers trade contractors figure 4: main innovation obstacles per sector 6 on the matter of sources of innovative ideas, suppliers were less likely to gather ideas or information about new technologies or advanced practices for their business from previous projects and, like trade contractors, they were more likely to source ideas from suppliers than were other sectors. clients were more likely to gather ideas or information about new technologies or advanced practices for their business from conferences/workshops and inhouse staff (see table 1). trade contractors, perhaps not surprisingly, saw their trade associations as a significant source of innovative ideas. it may be concluded therefore that professional and trade associations are a suitable avenue for spreading information ideas throughout all industry sectors and especially those that are currently under-performing. clients consultants contractors suppliers/ manufacturers trade contractors in-house staff 87 73 66 59 64 previous projects 57 39 42 13 45 professional or trade associations 39 45 42 40 54 suppliers 39 17 18 41 51 conferences/workshops 70 40 37 35 36 clients or customers 26 35 37 38 34 technical support providers 48 29 28 21 30 research institutions 22 14 10 8 3 journals/magazines 13 38 34 27 34 consultants 43 20 28 10 15 overseas sources 4 24 19 27 15 general contractors 9 6 9 6 4 trade contractors 0 5 12 22 9 competitors 4 18 30 22 27 table 1: innovation sources by sector (%) the sectors varied considerably in their attitudes to the important business strategies listed in the survey questionnaire. clients were more likely to invest in r&d and recruit new graduates than the other sectors. indeed almost all clients who responded to this part of the survey said that they had training programs in place for their workforce. trade contractors were most likely to be involved with apprenticeship training and consultants least likely. this is a consequence of the traditional delivery in australia of trade and university education through separate systems. it may be that future training systems could develop that are hybrids of the two current systems but at the moment such systems are structurally difficult because of varying federal and state government responsibility. clients were somewhat more likely than other sectors to support most of the business statements listed in the survey. this result was statistically significant. the business statements listed were: we have robust relationships with key organisations in the industry; we actively monitor international best practice in our field; we actively monitor advances in related industries that might be applicable to our business; we have a formal system for transferring project learnings into our continuous business processes; when we make changes, we measure how well the changes have worked; we reward staff for maintaining networking linkages with strategically useful industry participants; and we have a formal system to encourage staff to share ideas. rewarding staff for maintaining linkages with other industry participants was an under-utilised policy throughout the industry. this is something that managers might like to consider as a precondition for innovative practice. 7 the client sector was more positive about the industry‟s capacity for innovation than were the other sectors. they were less likely to label other industry groups as blockers of innovation (see table 2). clients considered that „funders‟ were more likely to encourage innovation than block it. all other groups disagreed. clients displayed a more positive attitude to main contractors than trade contractors did. main contractors, in turn, were unimpressed with trade contractor's innovation performance. a certain level of mutual distrust appears to exist between these groups. all sectors exhibited a tendency to nominate other groups as encouragers of innovation more frequently than they nominated blockers. in general, sectoral attitudes appear to be largely positive towards the role of the differing groups within the industry. clients consultants contractors suppliers/ manufacturers trade contractors + + + + + large/repeat clients 48 26 63 13 52 22 54 16 69 5 one-off clients 30 22 32 25 24 25 30 21 22 28 main contractors 61 9 43 17 46 12 49 14 30 32 trade contractors 22 13 20 18 24 25 40 13 35 16 manufacturers 30 9 38 7 44 9 60 6 55 5 other suppliers 17 4 18 6 22 6 35 3 38 5 architects 30 13 66 5 55 6 57 8 43 23 building designers 48 4 45 10 44 11 48 8 39 22 engineers 78 4 60 12 52 13 41 24 35 27 quantity surveyors 13 13 27 20 12 29 22 19 14 28 developers 52 0 38 19 41 17 29 19 36 24 project managers 70 4 40 19 30 22 37 16 35 22 funders 48 9 10 32 15 24 11 30 15 28 insurers 9 30 1 51 5 35 8 48 7 35 letting agents 0 13 7 22 6 17 8 27 8 27 organisations that set industry standards 35 22 22 28 26 27 22 32 31 27 government regulators 48 26 63 13 52 22 54 16 69 5 table 2: perceived encouragers and blockers of innovation by sector (%) the results on advanced business practices, business strategies and business statements illustrate the breadth of the data collected by the survey. detailed analysis of these results is being undertaken for future papers. impact on profitability a in total 93% of respondents reported a positive impact on profitability resulting from their most successful innovation in the past three years. almost half of these experienced a „moderate improvement‟ in profitability (see figure 5). this effect was spread fairly evenly throughout the different industry sectors with no significant differences between the sectors. it is possible that the effects of innovation produce other positive outcomes that are not immediately reflected in the organisation‟s „bottom line‟. increased market share, for example, may take some time to result in a profitability impact due to costs related to expansion. extrapolating from those respondents who did report „significant‟ or „great improvement in profitability‟ the survey results indicate that businesses may be able to increase their profitability by: adopting a greater number of advanced practices; implementing a formal innovation strategy; or employing a greater number of knowledge strategies. 8 profitability impact 0 10 20 30 40 50 60 no e ffe ct s us ta in ed p ro fit ab ili ty m od er at e im pr ov em en t i n pr of ita bi lit y s ig ni fic an t i m pr ov em en t i n pr of ita bi lit y g re at im pr ov em en t i n pr of ita bi lit y o th er p e rc e n ta g e clients consultants contractors suppliers/manufacturers trade contractors figure 5: profitability effect of most successful innovation characteristics of high innovators high innovators across all sectors had a number of characteristics and practices in common. these include: placing a significant value on employee, technology and knowledge strategies; using a broad range of sources of innovation ideas; having a formal innovation evaluation program; relying on research institutions for innovative ideas; recruiting new graduates; capturing project learnings for ongoing reference; reducing client costs; and monitoring international competition. businesses wanting to improve their innovation performance should therefore consider adopting similar behaviours to those of the high innovators within their sector. this is the most significant finding that can be gleaned from analysis of the survey response. sectoral differences a clients were over represented in the survey‟s high innovator group. this result was influenced by the fact that many of the client groups surveyed were large public sector repeat clients. this was due to the fact that in australia the government sector clients account for most of the road industry and a significant portion of the commercial building industry. there were also a greater than expected number of suppliers in the low innovator group. this is contrary to the findings of some innovation literature which generally sees suppliers as drivers of innovation (arditi et al. 1997; abd el halim and haas 2004; kangari and miyatake 1997). 9 innovation group by industry sector 0 10 20 30 40 50 60 70 c lie n ts c o ns u lta n ts c o nt ra ct or s s up pl ie rs /m an uf ac tu re rs t ra de c on tra ct or s p e rc e n ta g e high innovators mid range low innovators figure 6: level of innovation performance by sector the innovation index which was used to define each sector‟s performance was based on four measures. these were the degree of innovation novelty, the impact of innovation on profitability, the level of adoption of advanced practices and the importance placed on investing in r&d. the client and consultant sectors on average performed positively on the innovation index. main contractors on average performed poorly on level of innovation profitability and on number of advanced practices adopted but otherwise their average ratings were positive. suppliers/manufacturers and trade contractors as a sector performed below the industry as a whole on those factors which made up the innovation index. nevertheless there were some high innovators among each industry sector and the practices of these high innovators are able to provide instructive examples for the low innovators in each sector. conclusion a the importance of fostering innovative practice in the construction industry has been widely acknowledged. the optimum way of encouraging innovation is, however, likely to vary with the industry sector being considered and the uptake of any innovations is also likely to be variable. despite the variability in innovation performance between the industry sectors, recurring patterns do indicate common ground among those organisations regarded as successful innovators. determining the characteristics of these high level innovators was one of the principal motives behind the brite survey. the identification of the strategies already in use among high innovators is an aid in lifting the performance of the industry generally. survey results lead to several indicative strategies for the improvement of innovation performance in the various sectors of the australian construction industry. these are particularly useful for those sectors currently lagging in innovation performance. contractors, suppliers and others who wish to improve their innovation performance may benefit from following some of the practices shown by the survey to be already in place in high innovator groups. these include:  raising general organisational skill levels with employee training programs and through the recruitment of new graduates;  maintaining a strong focus on profitability and therefore enabling an atmosphere where innovative activity can thrive;  actively monitoring developments within the industry at the appropriate level, locally and/or internationally; 10  having formal systems in place to capture project based learnings for ongoing use within the organisation;  providing a supportive atmosphere for staff who generate new ideas;  putting in place formal evaluation procedures to gauge the success of advanced technologies and practices as well as any negative repercussions they may have;  increasing both direct and indirect investment in r&d;  fostering linkages with research institutions and universities;  adopting a broad range of technology, knowledge and human resources strategies; and  surveying a wide spectrum of sources of innovation ideas. the adoption of such innovative strategies needs to penetrate to all levels of the industry if the effect is to be significant and lasting. several messages can be drawn from the brite survey sector analysis. government agencies can be of considerable assistance in fostering the innovation process. by acting through the medium of industry associations they can assist skill development. this would be particularly useful because low innovator groups were shown in the survey to be largely dependant on trade and industry associations for new ideas. greater resourcing of education and training is also likely to assist in lifting innovation performance given the strong association between the spectrum of knowledge sources used and level of innovation performance. more effective targeting of tax and other measures to encourage r&d is indicated as requiring attention, given the current low uptake of these schemes in the construction industry. extrapolating from the survey results, another important finding is the primacy of general industry profitability in producing an atmosphere conducive to innovative practice. sectors of the industry where financial security is least reliable were also least likely to innovate or to create high level innovations. at the risk of stating the obvious, constrained resources tend to result in defensive practices and risk aversion. this in turn leads to an avoidance of new ideas and a stubborn adherence to current practice. wellplaced confidence in the success and security of the industry is therefore seen as a prerequisite for innovative practice. continued industry profitability, equitable distribution of the gains made through innovation and a regulatory system which allows for new solutions are all significant factors in the creation of an „innovation-friendly‟ construction industry throughout all sectors. references a abd el halim, o. a., and haas, r. (2004). "process and case illustration of construction innovation." journal of construction engineering and management, 130(4), 570-575. arditi, d., kale, s., and tangkar, m. (1997). "innovation in construction equipment and its flow into the construction industry." journal of construction engineering and management, 123(4), 371-378. blayse, a. m., and manley, k. (2004). "key influences on construction innovation." construction innovation, 4(3), 143-154. brite report 2004. edited by manley, k. cooperative research centre for construction innovation brisbane australia. available at http://www.brite.crcci.info/publications/index.htm last accessed 28 december 2005. flynn, m., dooley, l., o'sullivan, d., and cormican, k. (2003). "idea management for organisational innovation." international journal of innovation management, 7(4), 417-442. fraser, c., and zarkada-fraser, a. (2001). "the philosophy, structure and objectives of research and development in japan." construction management & economics, 19(8), 831-840. gann, d. (2000). building innovation, complex constructs in a changing world, thomas teleford publishing, london. gann, d. m. (2003). "guest editorial: innovation in the built environment." construction management & economics, 21(6), 553 555. kangari, r., and miyatake, y. (1997). "developing and managing innovative construction technologies in japan." journal of construction engineering and management, 123(1), 72-78. slaughter, e. s. (2000). "implementation of construction innovations." building research and information, 28(1), 2-17. http://www.brite.crcci.info/publications/index.htm 11 statistics new zealand. (2004). "innovation in new zealand." statistics new zealand, wellington. steele, j., and murray, m. (2004). "creating, supporting and sustaining a culture of innovation." engineering, construction and architectural management, 11(5), 316 322. van der panne, g., van beers, c., and kleinknecht, a. (2003). 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�!�������������������� � �! ��������� �.�� � ����������� ����� ���� ���������� ��#� ������� ���� ��������� ����������������#� ) �������������..�� ���� ����.��#� � &������# ���� ����������� � ��� �������� ,����8cc? employee preferences for work-life benefits in a large new zealand construction company employee preferences for work-life benefits in a large new zealand construction company emily morrison, (nziqs, new zealand) derek thurnell, (unitec institute of technology, new zealand) abstract the construction industry is a challenging environment in which to work, with job characteristics that are linked to work-life conflict, and it is important for its future sustainability that initiatives to support employee work-life balance are undertaken. 121 head office and site-based employees within a large new zealand construction company rated their preferences for work-life benefits, and the results were compared with those of a similar previous (australian) study. the most preferred work-life benefit factor (as for the previous australian study) was found to be ‘wellness and personal development’. results suggest that company provision of a wide variety of work-life benefits from which employees can choose during different stages in their life and career is ideal. qualitative results suggest some worklife conflict associated with working long hours and weekend work exists. it is proposed that to attract and retain valuable employees, the new zealand construction industry must provide useful work-life benefits, reasonable working hours, and supportive workplace cultures in line with such initiatives. keywords: work-life balance, new zealand, construction company, human resource management introduction due to its project based nature, the construction industry can be a particularly challenging environment in which to work. jobs can be highly stressful, with pressures such as achieving tight programme deadlines, meeting the needs of multiple stakeholders, dealing with disputes, and maintaining the safety of all individuals on site (lingard & francis 2004a). furthermore, long working hours and weekend working are an integral part of many jobs in the industry. many of these job characteristics are linked to work-life conflict, considered to be a lack of ‘fit’ between employees and their life responsibilities, and the goals of their organisation (becker & huselid 1998). certain workplace attributes such as work-life balance initiatives (amongst others) are related to reduced work-life conflict (eby et al. 2005). as such, it is posited that it is important for the future sustainability of the construction industry to undertake initiatives to support employee work-life balance. lingard and francis (2005) assessed employee preferences for work-life balance benefits in two australian construction companies and suggested that further study be carried out in other countries. this research surveyed managerial and professional employees’ preferences for work-life benefits in a large construction company in new zealand, and the results were analysed and compared with lingard and francis’ (2005) findings in australia. work-life balance work-life balance is defined as the ‘the ability of individuals to pursue successfully their work and non-work lives, without undue pressures from one undermining the satisfactory experience of the other’ (noon & blyton 2007, p.356). the concept of work-life balance has evolved in response to a changing culture where work has become more demanding of both sexes and free time has become less available, in turn increasing pressures in both domains causing endemic work-life imbalance (dallimore & mickel 2006; lewis, gambles & rapoport 2007; families and work institute 2008). rates of employment have increased for women and remained constant for men resulting in less time available outside of work. for some time society has been shifting away from the traditional male breadwinner model of work (brough et al. 2008) and dual-earner households have become the norm, where both australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 13 partners work and contribute to family responsibilities (eby et al. 2005; families and work institute 2008). increasingly, the younger generation of working parents expect more flexible working practices and are more mindful of not over-committing themselves and achieving work-life balance (loosemore, dainty & lingard 2003; lingard & francis 2004b). in addition, the percentage of single parents in the workforce has also risen, and an ageing population has resulted in an increase in elderly care demands (de cieri et al. 2005; families and work institute 2008). at the same time, work intensification has increased the pressures within the workplace. due to these societal shifts, pressures in both work and life outside of work are at an all time high (bardoel et al. 1999; mcpherson & reed 2007). the right work-life balance is different for everybody depending on their circumstances, personality, desires, and stage in life (mcpherson & reed 2007). moreover, work-life balance is multi-faceted and can be addressed on multiple levels (de bruin & dupuis 2004). whilst some think it is an individual issue, others believe it is a responsibility for organisations to address, or believe it should be addressed and/or regulated by government, while some believe it is a shift in societal norms that is needed (dallimore & mickel 2006; lewis, gambles & rapoport 2007; kossek, lewis & hammer 2010). purportedly, work-life research has not significantly helped improve the array of work-life balance issues that are faced by employees and employers today, and there is arguably a lack of theory and model development, a lack of exploratory research, and hence a lack of understanding of why certain relationships exist (eby et al. 2005). in response to the above-mentioned societal changes and increasing work-life conflict, employers have begun implementing work-life benefits; these initiatives are aimed at helping improve work-life balance. work-life benefits can be broken down into subsets; four work-life balance categories have been identified: flexible work arrangements; leave arrangements; dependent care assistance, and general services (frone 2003). implementing work-life balance policies which accommodate a diverse range of employees purportedly leads to having higher quality employees, which in turn increases company performance and competitive advantage (kossek et al. 2010). work-life balance policies attract and maintain employees, which leads to cost savings through decreased turnover, and if work-life benefits contribute to reduced stress, reduced work-life conflict, and increased well-being, the whole organisation experiences improved performance (casper & buffardi 2004; eby et al. 2005; kossek et al. 2010). however, ‘there is a lack of consensus about whether the positive effect of work-life benefits is universal (i.e. experienced by all employees, irrespective of their individual characteristics or circumstances) or whether the effect of work-life benefits differs for particular sub-populations of employees’ (lingard & francis 2005, p.1047). what employees say they prefer, and what employees actually do once the options are available, can be different, and evidence of a gap between the organisational provision of work-life balance initiatives and actual employee usage of the initiatives has recently emerged. utilisation is dependent not only on availability, but also on other issues, such as organisational support. the difference in uptake is possibly due to the perceived level of supportiveness of the workplace culture for using such policies (de cieri et al. 2005; dallimore & mickel 2006; brough et al. 2008). people often do not use benefits because they feel that usage may have a negative effect on their career path; therefore it is key that management communicate and make clear their objectives and expectations (thornthwaite 2004). work-life balance in new zealand work-life balance issues in new zealand are similar to those reported internationally. a new zealand national work-life balance survey found that just over half of employees experienced work-life balance, but a significant number of employees experienced work-life conflict, and australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 14 found it difficult to achieve work-life balance for a variety of reasons. a major source of conflict was that many people worked long hours and unpaid additional hours, and that many new zealanders would like more time away from work and flexible start and finish times (department of labour 2006). most of the research on work-life balance focuses on alternative work arrangements with far less research on wellness, care-giving support, and crisis assistance. in new zealand, flexible work hours and location are the work-life benefits most often offered, followed by work and life information, while child/elderly care is offered significantly less often (kossek et al. 2010). findings from a 2008 survey of new zealand employers showed an increase in the uptake and awareness of work-life benefits overall since the previous 2006 survey (equal employment opportunities trust 2008). however, there are perceived barriers to implementation of work-life benefits in new zealand, the largest being ‘needing everyone in the workplace at the same time’ and being ‘too complicated’ (department of labour 2006, p. 36). the results from a survey of new zealand companies showed that benefits were able to be implemented over a diverse range of businesses, that organisational culture was important for their success, and that communication from managers was important for employee awareness and use of the benefits. from the organisation’s perspective, the policies had to be economically sustainable and were important for retaining dedicated employees (new zealand business council for sustainable development 2006). these findings reinforce those of other work-life balance studies which suggest that there is no one-size-fits-all policy that works across all business (yasbek 2004; lingard & francis 2005). work-life balance in the construction industry interestingly, much of the work-life balance research has occurred within the australian construction industry, due to the substantial amount of works from the same authors (see lingard & sublet 2002; francis 2004; lingard & francis 2004a, 2004b, 2005, 2009; lingard 2008; lingard et al. 2008; mackenzie 2008; brown et al. 2009; lingard, francis & turner 2010a, 2010b). a survey of employees in professional and managerial roles within the australian construction industry indicated that workplaces were not perceived to be supportive of the need to balance work with life outside of work, and it is suggested that work-life balance policies are virtually ineffective if the organisational culture does not strongly value such initiatives (francis 2004). furthermore, townsend et al. (2006) found that employees think work-life balance problems do exist in the construction industry. they suggested that reform should happen in the following areas: government and/or organisation regulation of working hours; formal work-life balance policies and informal support by supervisors; and employee control over working time. turner, lingard and francis (2009) identified workplace culture, project resourcing, and schedule demands as barriers to achieving work-life balance in the construction industry, and identified collaborative project alliance contracts, flexible working hours, and project management support as supports. a respondent in research carried out in australia with a focus on wellbeing in commercial construction appositely summarises the construction industry working environment with regard to work-life imbalance: ‘people in the industry...are collectively weary and generally sad about the personal cost they endure as a consequence of their work... ongoing pressure that has a detrimental impact on physical and mental wellbeing, are taking a serious toll...unrealistic programming appears to be the root cause of work/life conflict’ (mackenzie 2008, p. 53). australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 15 judging by the australian research, there is a significant amount of work-life imbalance in the construction industry. however, extensive research on work-life balance in the construction industry in new zealand does not exist. as lingard and francis (2005) asserted, knowledge about employees’ preferences for work-life benefits can aid in the development of effective work-life balance initiatives, and this research aimed to investigate this, so that the needs of employees in the new zealand construction industry are better understood. research objectives this research aimed to identify employee preferences for work-life benefits within a large new zealand construction company, and compare the results with those of a similar study undertaken within two large australian construction companies (lingard & francis 2005). therefore, the research design was based on that of lingard and francis’ (2005) study, and was carried out in a broadly similar manner in order to ensure that the data was comparable. there is a dearth of research regarding which types of work-life benefits employees in the new zealand construction industry prefer, and knowledge about employees’ preferences may help people within the construction industry better understand the wants and needs of employees. research context: lingard and francis’ (2005) research lingard and francis (2005) collected data from professional and managerial employees of two different organisations (a large private civil engineering and building construction company, and a public sector organisation involved in large infrastructure construction) to measure employees’ preferences for work-life benefits. their results were compared according to gender, age, and family structure; they concluded that ‘distinct sub-populations of employees differ in terms of their preferences for work-life benefits. in particular, employees’ preferences differ according to their age and stage of family development’ (lingard & francis 2005, p.1055). research methods data collection due to constraints regarding accessibility and permission, an opportunity sample of employees within one large new zealand construction company was used. the company is relatively large, and is involved across all construction industry sectors and regions of new zealand. by using an opportunity sample from one construction company, generalisations may not be valid; the generalisability of the findings to other large new zealand construction companies would depend on how similar the companies are. however, collecting data from one company was considered appropriate, as this has advantages, for example ‘that context variables such as organisational culture, policies and procedures are controlled’ (lingard & francis 2004b, p. 21). all the company’s professional and managerial staff in the auckland region were emailed with the questionnaire instrument. the email included a description of, and reason for, the survey. the first page of the survey contained a consent clause to which the respondent was required to agree before carrying out the survey. questionnaire design section 1 was made up of closed questions which requested demographic information. no questions were mandatory; that is, there were no forced responses. section 2 comprised twenty closed questions where respondents were asked to rate their preference for a variety of work-life benefits using a 5 point likert scale where: 1=not at all useful, 2=of limited use, 3=moderately useful, 4=useful, 5=very useful. based on lingard and francis’ (2005) study, the work-life benefit items were drawn from a wide variety of sources (biggs 1998; scheibi & dex 1998; moen et al. 1999; grandey 2001; hill et al. 2001; saltzein et al. 2001; thornwaite australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 16 2002, all as cited in lingard & francis 2005). as with lingard and francis’ (2005) study, participants were asked to ignore the likelihood of future usage when indicating their preferences. two open questions were included at the end of the questionnaire, where employees could provide additional feedback and suggest additional work-life balance initiatives. to avoid the need for additional ethics approvals, not all of the demographic questions from lingard and francis’ (2005) study were used; to avoid asking respondents to reveal information that was considered to be too personal, respondents were not asked to reveal family status and birthplace. demographic information collected from respondents included: age; gender; number of years worked in the construction industry; type of employment (full, part time or contract); job role, and work location (site-based or head office). data analysis employees’ perceptions of the utility of each of the twenty work-life benefits rated in section 2 were analysed by determining their mean rating scores and standard deviations. mean rating scores were also calculated for the four different categories of work-life benefit, based on the factors established by lingard and francis (2005) – ‘childcare support’, ‘alternative work arrangements’, ‘crisis assistance/support’, and ‘wellness and personal development’. the mean scores of the four factors, firstly overall, then by age and gender, were then compared with lingard and francis’ (2005) results. mean scores were also analysed by work location (i.e. head office and site-based), which was not done in lingard and francis’ (2005) study. a content analysis was carried out on the qualitative data; the responses to the open questions were coded by topic, and were considered in the discussion to assist in drawing inferences regarding the results from section 2 of the questionnaire. findings demographic information of a possible 174 respondents, 121 complete and usable questionnaires were returned (a 70% response rate). table 1 shows the demographic characteristics of the sample. table 1 demographic characteristics of sample (n=121) * includes project, construction, site, and package managers and project leaders ** includes commercial managers, quantity surveyors and estimators age n % type of employment n % under 30 years 22 19 full-time work 104 92 30-39 years 30 25 part-time work 2 2 40-49 years 31 26 contract work 7 6 50-59 years 26 22 60 years + 10 8 work location on site 85 71 gender head office 35 29 male 108 90 female 12 10 job description project managers* 40 33 years worked in construction foremen, site managers 8 7 0-9 35 30 site administration 8 6 10-19 27 23 commercial managers** 41 34 20-29 28 23 engineering services 7 6 30 years + 29 24 upper management 6 5 other 11 9 australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 17 the mean age of the sample was undeterminable as responses were only given according to age bracket. the modal age was 40-49 years. of the 120 responses to the question on gender, 108 (90%) were male while only 12 (10%) were female. only 17% of females were over 50 years of age, whereas 32% of males were over 50 years of age, a gender distribution which indicated a younger cohort of females in general, similar to the gender/age profile in lingard and francis’ (2005) study. there was also a similar gender mix to that of lingard and francis’ (2005) study (which had 88% males and 12% females). the low proportion, yet younger cohort of females suggests that these large construction companies are still largely male dominated, but that more females may be starting to enter the industry. considering the number of years worked in construction, a relatively even distribution of respondents existed. of the 113 responses regarding type of employment, the vast majority (104 respondents) had full-time working arrangements. site-based employees made up 71% of respondents, while 29% were based off-site (in the head office). the largest groups of employees were quantity surveyors, estimators, and commercial managers (34% of respondents), and project managers, construction managers, site managers, package managers, and project leaders (33% of respondents). work-life benefit preference mean scores the mean preference scores and standard deviations of each work-life benefit (based on respondents ratings of how useful they thought each benefit would be for them personally) are shown in table 2. the 4 factor groupings based on those identified by lingard and francis (2005) are also indicated. the five benefits perceived to be the most useful overall had the smallest standard deviations, which indicated that they were not only the most preferred, but also the most agreed upon by employees. four of the five lowest scoring benefits had relatively large standard deviations, which indicated that there was less agreement regarding employee preference for these benefits; in other words they possessed a greater variation in perceived utility. that the highest overall mean score was for ‘allowing for flexible work e.g. starting and finishing half an hour earlier or later’ is not surprising, as flexible working arrangements relating to hours have been reported as by far the most desired (for 91% of new zealanders) work-life benefit (department of labour 2006; mcpherson & reed 2007). the qualitative data reinforces this, as a relatively large number of comments regarding flexible working options were made by respondents. there is evidence to suggest that providing such worklife benefits could be beneficial on many levels. having more time-flexible working options has been linked to employee loyalty, fewer missed deadlines, and decreased stress and time off work (halpern 2005). furthermore, flexible workplaces have higher rates of employee job engagement, job satisfaction, intention to stay with the company and mental wellbeing (families and work institute 2008). the high mean scores for ‘allowing for special family leave e.g. to care for a sick dependent’ (4th highest mean score), and ‘offering temporary part time work options during a family crisis’ (5th highest) lend support to other findings from new zealand which describe a demand for a wider scope of flexible work options including ‘career breaks, extended maternity and paternity leave, paid dependency leave, job share, subsidised health-care and leave for community, sports and volunteer work’ (new zealand business council for sustainable development 2006, p.3). one respondent from the present study recognised some of the adverse effects of a successful career in the industry, and pointed out that the changing workforce and subsequent provision of more flexible working arrangements may have positive effects for all employees: australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 18 ‘the key issue in construction is that our personalities are generally "goal driven". to achieve success... requires intense focus. this tends to fill our industry with [people] who leave behind them a trail of broken relationships whether with spouse or children or family. ...the industry has been dominated by men over most of [my career] and the "absent" workaholic father has been extremely common. as more women have entered the workforce, child care issues have become more prevalent. these may force more flexible working habits that are useful for all employees.’ factor work-life benefit mean value standard deviation w allowing for flexible work hours e.g. starting and finishing half an hour earlier or later 4.23 1.00 w reimbursing the costs of work related courses and further study 4.13 1.04 w providing a wellness programme i.e. health checks, guest speakers, fitness challenges 4.05 0.87 cr allowing for special family leave e.g. to care for a sick dependent 4.02 1.03 a offering temporary part time work options during a family crisis 3.91 1.04 ch providing scholarships for employees' children 3.85 1.41 w offering a fitness programme e.g. discounted gym memberships 3.6 1.14 cr providing an employee assistance programme for employees with family problems 3.5 1.20 cr ensuring people take their annual leave regularly 3.36 1.13 cr providing a legal information service 3.23 1.07 ch providing child care facilities 3.12 1.47 ch offering extended parental leave 3.1 1.49 ch providing care for children during school holidays 3.08 1.48 ch providing assistance with child care costs 3.08 1.54 ch offering care on short notice for a child or other dependents 3.08 1.39 a increasing flexibility in work location e.g. working from home/telecommuting 3.07 1.39 cr providing an information and referral service to assist with care of dependent children 2.88 1.35 cr providing an information and referral service to assist with care of elderly parents 2.61 1.36 a offering part time work options e.g. approximately 25hrs/week 2.59 1.35 a introducing job sharing where one job is split between 2 people working fewer hours 2.13 1.15 table 2 work-life benefit preference scores (with factors indicated) key: w = wellness and personal development cr = crisis assistance / support a = alternative work arrangements ch = childcare support considering the wider scope of flexible work options, it might then be expected that the following benefits would have received higher ratings as well: ‘offering extended parental leave’ (12th highest mean score), ‘increasing flexibility in work location e.g. working from australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 19 home/telecommuting’ (16th ), ‘offering part time work options e.g. approximately 25hrs/week’ (19th), and ‘introducing job sharing’ (lowest mean score). there are likely to be different reasons for these unexpectedly low scores, although it is impossible to decipher the reasons for these due to the nature of survey. the fact that 90% of respondents were men may have influenced the scores for ‘offering extended parental leave’, ‘offering part time work options’, and ‘introducing job sharing’, since traditionally and typically it tends to be women who reduce their working hours to care for dependents, by, for example, ‘taking career breaks or seeking part-time employment while children are young’ (lingard & francis 2009, p.129). hence a large proportion of men may not find these benefits very useful. the second highest mean score of the benefit ‘reimbursing the costs of work related courses and further study’ is not unexpected, as the provision of this benefit is highly valuable. company funding of work-related courses and continuing education is likely to be useful to a wide-ranging, large number of employees, as the high mean rating score and low standard deviation indicate. similarly the third highest mean score for ‘providing a wellness programme i.e. health checks, guest speakers, fitness challenges’ is also likely to appeal to a large number of employees from various demographic groups. in support of the quantitative data, there were a relatively large number of qualitative responses (9 out of 41) expressing interest in health and fitness initiatives. as one respondent said: ‘fitness incentives can create good team bonding and are a very worthwhile method of making people aware of what they are missing out on and also help a greater work / life balance.’ work-life benefit factors table 2 earlier showed the mean preference scores for the 20 benefits, together with the 4 factor groupings. the benefits were grouped into factors in order to gain insight into whether certain categories of benefits might be more useful to employees overall, and by different demographic groupings. the factors as defined by lingard and francis’ (2005) study were relied upon for the research. table 3 provides a direct comparison of the mean values and standard deviations for the four factors. mean value standard deviation factor l&f (2005) current (2011) l&f (2005) current (2011) wellness and personal development 3.39 4.00 0.92 1.04 crisis assistance/ support 2.51 3.44 0.93 1.23 alternative work arrangements 2.41 3.17 1.06 1.44 childcare support 1.95 3.17 1.12 1.47 table 3 comparison of work-life benefit factor preferences (after lingard and francis 2005) ‘wellness and personal development’ rated as the most useful overall factor, with the lowest standard deviation, followed by ‘crisis assistance/support’, then ‘childcare support’ and ‘alternative work arrangements’ (which were both jointly least preferred factors). it is important to note that, although these were least preferred, the value of the mean rating score still indicates that respondents perceived those benefits to be slightly more than ‘moderately useful’. ‘wellness and personal development’ having the highest mean score is not surprising; benefits that fall into this category are likely to be useful to a wide range of employees, and their family structure, age, or gender may not significantly limit how useful they are. there were many qualitative comments supporting the usefulness of benefits in this category. australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 20 as shown in table 3 above, the results regarding the factors’ relative importance and variation in standard deviations are strikingly similar to lingard and francis’ (2005) results. interestingly, judging from the mean values, all of the factors showed a slightly lower score in lingard and francis’ (2005) australian study, which, on face value, suggests that the australian respondents found all of the factors slightly less useful than the respondents in the current (2011) new zealand study. this difference may be real, but also may be due to other factors, such as cultural differences in terms of interpreting or expressing preference using the rating scale, as well as perhaps that employees’ awareness in general of work-life benefits has been raised in the interim period between lingard and francis’ (2005) study and the current (2011) study. notably, the standard deviations in both studies got larger as the mean values decreased. this indicates that, in both studies, ‘wellness and personal development’ was not only rated as most useful, but respondents were also in the highest amount of agreement regarding the utility of this factor compared to the others. comparisons by age a comparison of both studies’ mean values of respondent preferences for work-life benefit factors by age is presented in table 4. mean value <30 years 30-39 years 40-49 years 50-59 years 60+ years l&f 2005 current 2011 l&f 2005 current 2011 l&f 2005 current 2011 l&f 2005 current 2011 l&f 2005 current 2011 w 3.68 4.43 3.49 4.03 3.37 4.05 3.09 3.67 2.82 3.75 cr 2.44 3.2 2.39 3.7 2.55 3.45 2.82 3.5 2.05 3.1 a 2.49 3.34 2.51 3.46 2.06 3.02 2.57 2.98 1.83 2.95 ch 1.76 2.72 2.16 3.85 2.22 3.44 1.62 2.79 1.07 2.34 table 4 comparison of work-life benefit preferences for different age cohorts (after lingard and francis 2005) key: w = wellness and personal development cr = crisis assistance / support a = alternative work arrangements ch = childcare support ‘wellness and personal development’ was by far the most preferred factor for all age cohorts in both studies. although relative importance of the ‘wellness and personal development’ factor among age cohorts is not identical between the two studies, they are very similar. employees in the ‘under 30 years’ age group expressed the strongest preference for the factor ‘wellness and personal development’ in both studies. age cohorts 30-39 and 40-49 preferred the factor slightly less, and the age groups 50-59 and 60+ preferred the factor less than those younger than 50 years of age. this indicates a general diminishment of importance for this factor with age. in both studies, the 60+ age cohort expressed the least interest in ‘alternative work arrangements’, ‘crisis assistance support’, and ‘childcare support’. the 30-39 year age cohort expressed the greatest interest in these three factors, but this was not the case in lingard and francis’ (2005) study (although compared with the other age cohorts, the 30-39 age group did show a relatively strong preference for these factors in their study). that the order of preference for various benefits varied by age group indicates that the utility of different benefits varied with age. for example, ‘childcare support’ was found to be the least preferred factor for the 50-59 year and 60+ age brackets, whereas it was found to be australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 21 the second most useful factor for the 30-39 year age cohort, behind ‘wellness and personal development’. this was to be expected, as respondents were asked to rate the benefits according to how useful they thought that they would be to them personally, and respondents over 50 years of age are likely to have far fewer needs for childcare support than the 30-39 year age group. comparisons by gender a comparison of both studies’ mean values of respondent preferences for work-life benefit factors by gender is presented in table 5. mean value work-life benefit factor female male l&f 2005 current 2011 l&f 2005 current 2011 childcare support 1.74 3.71 1.58 3.09 alternative work arrangements 2.89 3.95 2.33 3.08 crisis assistance/ support 2.4 3.82 2.51 3.39 wellness and personal development 3.84 4.29 3.84 3.97 table 5 comparison of preferences for work-life benefit by gender (after lingard and francis 2005) in both studies, both genders expressed their highest preference for the factor ‘wellness and personal development’. females expressed a higher preference for all factors, whereas this was not the case in lingard and francis’ (2005) study. this difference may be due to a different make-up of respondents’ family structures between the two studies (although this cannot be explored as this research did not request information regarding respondents’ family structure, due to ethics approval constraints). employees with partners and dependent children in lingard and francis (2005) preferred the childcare support benefits the most, whereas those without dependent children preferred them the least. this may explain why females in the current research rated ‘childcare support’ the lowest; as this female cohort were generally younger than the males, they are less likely to have children. the relative importance of factors was the same in each study. this once again shows that the perceived usefulness of different types of benefits varied amongst the different demographic groups. comparisons by work location table 6 shows the mean preference scores for each of the work-life benefit factors by work location. no comparison can be made with lingard and francis’ (2005) study, as they did not analyse their results by work location. factor mean value site based (n=86) head office (n=35) wellness and personal development 3.97 4.08 crisis assistance/ support 3.46 3.38 alternative work arrangements 3.16 3.19 childcare support 3.14 3.18 table 6 work-life benefit factor preferences mean scores for different work locations the relative importance of the 4 factors was identical for site (n=86) and head office (n=35) based employees. although the head office employees’ scores were slightly higher (i.e. they found the factors slightly more useful) than those of site-based employees, this finding suggests that the benefits are apparently valued equally by employees in both work australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 22 locations, and that differences in preference for the various benefits does not stem from the type of working environment, but may be more associated with respondents’ demographic characteristics such as age, gender, and family structure. since site-based employees tended to work longer hours than head office employees, it might have been expected that site-based employees might show a stronger preference for work-life benefits, but the results did not support such a presumption. open questions answers to one or both of the optional open ended questions were provided by 41 out of 121 respondents. having more social events including sport, recreation, and entertainment (with and without family), was suggested by twelve respondents. more fitness initiatives such as weight loss programmes, sponsored events, and incentives were suggested by nine respondents. the third most discussed topic (mentioned by seven people) regarding worklife balance initiatives was the need for reduced working hours and/or reduced weekend work. flexible work options such as flexible working hours were considered desirable by six respondents. work-life benefits – implications of findings the quantitative results indicate that employee preferences for different types of work-life benefits varied among different demographic groups. these findings are in agreement with a conclusion from lingard and francis’ (2005) study which stated that ‘there is no “one size fits all” solution to work-life balance in the construction industry’ (p. 1053). although the provision of a multitude of work-life benefits is desirable, initiatives can be expensive for companies to implement. because of this, organisations tend to offer different work-life benefits to reflect the particular needs of employees (bardoel et al. 1999). qualitative responses showed employee interest in a wide variety of different work-life benefits, the most prevalent being: social events; fitness and health initiatives; reduced working hours/weekend work, and flexible work options. as suggested by townsend et al. (2006) ‘employee voice presents as an important resource for managers and policy-makers in determining work-life balance policies for industry, workplaces and individual employees’ (p. 2). information retrieved from employees can provide valuable insight for companies who wish to understand the needs and preferences of their workforce. it is important to note that the provision of work-life benefits alone is not effective without other supports in place. a large body of research (eaton 2003; de cieri et al. 2005; dallimore & mickel 2006; smith & gardner 2007; kossek et al. 2010) shows that if an organisation wants to provide effective and usable work-life benefits, it is extremely important to ensure that the organisational culture, managers and supervisors show support for such initiatives. employee perception of organisational support for an individual’s worklife balance has been related to increased job satisfaction and reduced work pressure, both of which reduce leaving intention (forsyth & polzer-debruyne 2007). conclusions many of the findings are consistent with those of lingard and francis (2005), the most significant being that the strongest preference by work-life benefit factor, both overall and within the various demographic groups, was for ‘wellness and personal development’. it is likely that this is the case because these work-life benefits are appropriate for a wide variety of demographic groups. furthermore, as with lingard and francis (2005) findings, employees’ preferences for work-life benefits vary among different demographic groups. consistent with other studies, these findings support the notion that there is no ‘one-size-fitsall’ policy appropriate for all companies or group of employees, and that the provision of a wide variety of work-life benefits from which employees can choose during different stages in their life and career is ideal. australasian journal of construction economics and building morrison, e and thurnell, d (2012) ‘employee preferences for work-life benefits in a large new zealand construction company’, australasian journal of construction economics and building, 12 (1) 12-25 23 the results suggest that there is some work-life conflict associated with working long hours and weekend work. it is important that the new zealand construction industry continues to address these issues in order to find a balance that is suitable to employees, companies, and the industry as a whole, so as to provide and maintain sustainable working environments. as with lingard and francis’ (2005) study, this research relied upon respondents’ subjective reports of their preferences for different work-life benefits. it did not attempt to ascertain whether or not such benefits would actually be used, and, if so, what impact their use would have. further research could address whether or not employees feel the organisational culture, supervisors and managers support the work-life benefits provided by the company, and investigate whether employees are aware of all available benefits, and how they are used. furthermore, the study did not explore employee perceptions of their own work-life balance or conflict. future research could investigate the prevalence of work-life balance or conflict according to job role and location. references bardoel, e.a., moss, s.a., smyrnios, k. and tharenou, p. 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(eds.) managing mayhem: work-life balance in new zealand, dunmore publishing, wellington new zealand business council for sustainable development (2006) work-life balance report: how member companies are addressing work-life balance, viewed 17th december 2010 http://www.dol.govt.nz/worklife/research/work-life-balance.asp noon, m. and blyton, p. (2007) the realities of work, palgrave, basingstoke smith, j. and gardner, d. (2007) ‘factors affecting employee use of work-life balance initiatives’, new zealand journal of psychology, 36 (1), 3-12 thornthwaite, l. (2004) ‘working time and work-family balance: a review of employees’ preferences’, asia pacific journal of human resources, 42 (2), 166-184 townsend, k., bailey, c., brown, k., bradley, l. and lingard, h. (2006) ‘how would employees 'construct' a balance between work and non-work life? work-life balance in the construction industry’, in procs 14th international employment relations association conference, hong kong. viewed 7 th may 2011 http://eprints.qut.edu.au/9137/ turner, m., lingard, h. and francis, v. (2009) ‘work-life balance: an exploratory study of supports and barriers in a construction project’, international journal of managing projects in business 2 (1), 94 111 yasbek, p. (2004). the business case for firm-level work-life balance policies: a review of the literature, report for the department of labour. viewed 17 th november 2010 http://www.dol.govt.nz/pdfs/firmlevelwlb.pdf http://www.dol.govt.nz/worklife/research/work-life-balance.asp http://eprints.qut.edu.au/9137/ http://www.dol.govt.nz/pdfs/firmlevelwlb.pdf untitled from focus on price to the pyramid of innovation, information, cooperation, value and trust: a success story of five swedish building material manufacturers. jan sundqvist, halmstad university, halmstad, sweden abstract in the building sector, value for the customer, is often regarded as being value for money and this, in turn, is achieved by means of competitive tendering. however, there are companies that also focus on innovation as a competitive parameter in their contribution; hereafter referred to as innovative companies. five managing directors from innovative companies in sweden were interviewed about how innovation is dealt with in their respective companies. as well as the importance of information, this study points to two additional important factors for innovation, namely cooperation with a carefully chosen partner and the transference of values to the employees. those innovative companies made careful choices and use means of information, cooperation, value and vision to create innovation in order to build trust for the company and for its products and services. keywords: innovation, information, benchmarking, cooperation, value, vision, trust introduction the construction sector has shown to be capable of building complicated structures. however, it has also, at the same time, been accused of being non-innovative and conservative. governmental reports have been written on the subject, such as, for instance, rethinking construction, (egan report in uk, 1998) and skärpning gubbar (pull up your socks chaps, sou 2002:115 in sweden). the complaints came about due to low innovation and high costs in the sector. innovation research connected to the building sector is, however, very small and undeveloped compared with other businesses. (winch, 2003; barrett and sexton, 2003) the building sector comprises of many activities from numerous groups of people such as contractors, designers, architects, subcontractors, material manufacturers, engineering companies and so on. this variety of actors, each with their own task to perform, makes the building sector both complex and fragmented. the sector can also feature strongly coupled networks involved in projects and loosely coupled networks outside the projects. those involved cooperate intensely while the project is running, but stop when the project is completed (dubois and gadde, 2002). cooperation within the sector can often be characterised by the exchange of standard products and concentration on details such as delivery dates and the colour of cabinet doors (dubois and gadde 2000). idea generation and problem solving, therefore, rarely exist between contractors and material manufacturers. cooperation with diffusion and the adoption of ideas is, more or less, only seen between material manufacturers (sundqvist et al, 2007, gann 2000). value for the customer in the building sector is often regarded as value for money that, in turn, is achieved by means of competitive tenders whereby “the works are procured to the lowest-price bidder with little or no guarantee (or even incentive) of future work” (cox and thompson, 1997, pp 129). consequently, relations often have a short-term focus where both parties try to get as much out of a contract as they can. some companies use generic management methods such as total quality management (tqm). they are oriented towards continuous improvements (chen and jones, 2007) and have a built in system to acquire new ideas of products and services. the employees are encouraged to suggest changes in production and improvements of products or services in order to improve performance. some companies, however, perform better in terms of new products and services. they have, for instance, better innovation processes while others have poorer performance i.e. poorer innovation processes. these processes are connected to management decisions and, as they are established from experiences of what works well for the company, they follow on from learning and knowing in action. this knowledge is, therefore, vital 11the australasian journal of construction economics and building [vol 8, no 2] 2 for innovation processes. the activities involved in these processes are very much a management decision, as the companies must resource and hence pay for them (tombesi, 2006). the use of information, as well as the processes to manage it, varies greatly (drew, 1997). innovation is more about knowing than acting (drucker, 2002), which means that information is vital. the knowledge of innovation in the building sector is mainly based upon other industries and has not been sufficiently remade into a construction field to accomplish a firm framework (barrett and sexton, 2003). innovative companies often use values and vision to promote specific behaviour among the employees. among those values, the following are often found: honesty, willingness to change, and being open and non-hierarchical, being decisive, and setting clear responsibilities (ministry of economic development 2002). the purpose of this study is to study processes of innovation, information, cooperation, value and vision used in innovative companies within the building sector. methodology the empirical base in the study is interviews with managing directors from five building material manufacturers in sweden. the managing director (md) is the leader of a company, just as a conductor leads an orchestra. the md is responsible for how the company is run as well as the resources that are used (tombesi, 2006). this is achieved by means of allocating resources such as employees and machines and, also, by using his or her experience and interest; for instance, their experience of managing innovation processes because innovation is more about knowing than doing (drucker, 2002). the managing director, therefore, puts his or her mark on the company and positively or negatively influences the processes of the company, depending on how experienced the md is. the perspective of managing directors has been utilised in a large study (sundqvist, 2002) and this has led to four articles that have used data from the study (sundqvist et al, 2003; sundqvist et al, 2004; sundqvist, 2004; larsson et al, 2006). in addition, there has been one additional article based on interviews (sundqvist et al, 2007). the interviews in this study were semistructured and lasted 60–90 minutes. they were tape-recorded and transcribed for analysis. all interviewees were asked the same questions. the companies are active in the following areas of manufacturing see figure 1: company type of production employees 1 kitchen cupboards 450 2 reinforcement 200 3 prefabricated wood elements 770 4 prefabricated wood elements 140 5 prefabricated concrete elements 1200 table 1 companies interviewed companies that could be regarded as innovative, due to continuous development of new products and processes or services, were looked for. innovative in this sense mean that at least 1 new or significantly improved product, service or process must have been achieved per year. innovativeness was not allowed to be thought of as new colours or change of hinges or similar minor changes of more or less cosmetic type. the companies were chosen in two steps: 1) companies suggested by experienced people knowing building material products and 2) studies of the suggested companies and their products over the internet. there were no pre-interviews, or any other kind of prechecking of the companies before the interviews. all five selected were chosen and interviewed. they are briefly presented below. company 1: change in range of kitchen products, such as cupboards, doors etc. company 2: new wall elements for passive houses company 3: new solution system for reinforcement work at site company 4: new shower floor for bathroom volume elements company 5: new facing of houses 12 the australasian journal of construction economics and building [vol 8, no 2] focus of interviews the interviews covered four processes: innovation, information, cooperation, and values & vision. two of the processes, innovation and information, had been studied before and were described in an article by larsson et al (2006). the article claimed that better processes in innovation seem to be linked to better processes in information/benchmarking whilst poorer innovation is linked to poorer benchmarking processes. since benchmarking is a way of dealing with information, there was an obvious interest in information. consequently, there were expectations regarding the issues of innovation and information but no expectations at all for the other issues. the five issues are presented briefly below. innovation. how do the companies work with development in terms of developing new products or new services or adapting to more effective processes? development activities in a company are dependent on the beliefs and experience of the managing director. information. some companies, more than others, try to find information about the environment surrounding the company such as, for instance, competitors and their products, and about new building projects. some companies go further than this and use benchmarking. how often are requirements from the customers incorporated when developing goals? cooperation. with whom does the company have long-term cooperation? why are those partners chosen? is the cooperation used to develop products, services or processes? values and vision. to what extent are values and vision used in the company and why are they used? is development included in the vision? presentation of companies in order to give background information about the companies involved and the ideas that have come from the managing directors interviewed, a brief presentation of the companies is given below. company 1 was founded in 1929 and began by manufacturing all kinds of cabinets. during the second world war, the company changed to produce kitchen cupboards in standard modules that could be assembled according to the needs of the customer. currently, the company has approximately 450 employees and an annual turnover of sek 680 million (eur 73 million.). company 2 was founded in 1919 to produce steel. in the early 1930s it began producing reinforcement products. over the years, it has developed into a company that manufactures by the processing of steel into reinforcement products. the company has approximately 200 employees and an annual turnover of sek 700 million (eur 75 million.). company 3 started in1944 as a local saw mill. since then, it has developed into a company with its own forests, sawmill, planing mill, villa production, the manufacture of prefabricated wood elements, and a real estate section with dwellings for letting. the company has an annual turnover of sek 1.4 billion (eur 150 million.) and has 770 employees company 4 was founded in 1924 as a local sawmill with some house construction during summertime when there was no snow. today, the company has developed into a major producer of multi-storey timber frame buildings. it has 140 employees and a turnover of sek350 million (eur 38 million). company 5 is a manufacturer of prefabricated concrete elements. it was founded in 1942 to manufacture concrete. it currently employs 1200 persons and its annual turnover is sek 2 billion (eur 214 million). the company carries through projects of frame erection from idea to final mounting. its aim is to develop and bring industrial methods to the building process. the company produces complete frame buildings including outer walls. these elements are combined with building concepts for dwellings, offices, parking, multi-storey car parks, hotels and schools. a french group now owns the company and has factories all over europe. the primary components are slabs, walls, beams and columns interviews the material is treated process by process to create a picture of how these companies act. a provisional presentation was done in this way. it gave a good view of management thoughts in innovative companies. the same concept is, therefore, continued. 13the australasian journal of construction economics and building [vol 8, no 2] innovation the managing directors of companies 2, 4 and 5 said that they put several million swedish kronor into development each year. two of them, companies 4 and 5, talked about a specific percentage of their turnover aimed for development. this way of allocating money for development gives me an impression that development is seen as a possibility and, therefore, as an asset, instead of a cost affecting the economical balance. see table 2 development is also done together with universities. three of the companies (2, 4 and 5) claim that they have a university as a partner. company 4 said: “the products get more trustworthy when a university is behind you”. this statement is interesting because it pinpoints the importance of trust in a company and what it has to offer. this is important for the company, as well as for the customer. through the involvement of a university, products and other solutions will be regarded as being derived from, or connected to, research and, thus, will probably be regarded as being more respected and trustworthy than other products without those contacts. the value, however, of this connection in terms of money is difficult to estimate. last summer, representatives of the company and the university made a trip to the usa and presented multi storey buildings made of wood. a canadian company became interested in the way these houses were being erected, perhaps influenced by the presence of, and cooperation with, the university. a danish company has already started production of this system in denmark. another example of cooperation with the university is a newly developed prefabricated bathroom floor. “in all of our developments, we ask ourselves”, the md said, “does this idea benefit the customer?” with this statement the md emphasized the importance of having the benefit of customer in mind when developing products. the foundation on which product and process innovations are created is the technological knowledge in the company. technological knowledge, however, is not only built up via internal learning processes. many companies are turning to external sources to find the knowledge needed to bring in product and process innovations. subsequently, successful organising and the accomplishing of partnerships with external technology source organisations can often be of major importance to success in technological dynamic surroundings (sherwood and covin, 2008). two managing directors (companies 2 and 4) explained that they use the technique of continuous improvements. the md of company 2 said that their company needs to improve productivity by 3-4% each year. the md continued to explain about their building process and how they had lowered the administration cost for building projects. their construction partners, he said, have no administration, or none in principle, at least. the administration is run by company 2. their staff follows a calculation model given by the construction partner. the two companies trust each other and let the construction work go ahead on an open account. the cost is lowered, due to less administration and the competitiveness is, thereby, increased. the managing director of company 3 explained the problem they have when marketing reinforcement. “there are many traders that just offer bulk products”, he said, “and they offer these at low price and no service”. company 3 will not go down to the price level of the traders. instead, the company is testing a new way of tendering their products. their idea is to transform their product into a service by, namely, producing and mounting the product on site, with their people doing the work. the md has also extended his thinking to include other companies in order to discuss mutual tenders from a combined group of companies, whose tender to the customer would be reinforced concrete poured into a mould with reinforcement mounted and all that is required. their idea seem to be quite close to what companies offering sliding form casting do: building a mould, mounting reinforcement, and pouring concrete. in sliding form casting this is normal procedure, but not elsewhere. the md of company 3 is thinking “outside the box”. the managing director of company 1 focuses on the employees instead of products. he said: “one doesn’t have to work with development of the company if one works, instead with the development of people. other things come automatically. everyone has a built in power”. his idea is to make the internal work run smoothly. development is in their strategy plan. he aims at promoting certain behaviour and, thereby, respect for each co-worker as an 14 the australasian journal of construction economics and building [vol 8, no 2] individual. company 5 expressed a similar opinion. more of this can be seen under the issue of promoting values. company 1 company 2 company 3 company 4 company 5 innovation in sek millions or % of turn over we spend some millions on research and development plus our own time we have a written aim that 3% of our turnover shall go to research and development i think that 1% of our turnover, which means 20 25 million sek are spent on development innovation together with university we have a joint project (cbbt) together with some other companies. the project is run by växjö university. a year ago we went to the usa together with a professor from luleå university. the products become more trustworthy when a university is involved. we work a lot with cbi, because of their knowledge of cement and concrete. when it comes to our concepts we mostly cooperate with the royal tech, but also with chalmers and lund innovation examples one doesn’t have to work with development of a company if one works, instead, with the development of people. the other things come automatically. everyone has a built in power. continuous improvement is part of our culture. we deal with it all the time. we need to improve productivity by 34% per year. we are working on a joint solution for reinforced concrete i.e. selling reinforced concrete to the user instead of only one product as concrete, reinforcement or moulds we try to improve and develop our products continuously and we always ask ourselves does this idea benefit the customer building of arena concepts such as ice hockeystadiums, sports centres, football arenas and such like have grown. it has become a new product. innovation examples my role is to make the internal cooperation function, because then there will be innovation as a consequence in our building process we lower the cost of administration. our partners on site have no administration. we run it for them, at least most of it. there is a calculation model to use, showing the costs for each operation. no running double. we are offering reinforcement mounted and ready for pouring the concrete, as a test for the joint solution. our leaders of projects work closely with the university both to influence and to be influenced. in this way a bathroom floor has been developed. we want to have 10% new/changed products a year and at least one new facade innovation examples we don’t have any unique products in our range, so we mustbe competitive with what we make, produce and brand. we have worked a lot with our brand. innovation examples development is in our strategy. we use balanced score card does this increase the value to the customer? table 2 uses and examples of innovation 15the australasian journal of construction economics and building [vol 8, no 2] information all companies collect information, for instance, via subscriptions and data showing future construction projects. they also get information from their market department when visiting customers. the md of company 1 explained that their products are quite simple. see table 3. according to him, everybody knows each other on the market and news travels fast. he said: “the technical level of our products is low and there are no unique products, so we have full control”. companies 2 and 3 go a little bit further. they benchmark. the managing director of company 4 was eager to receive information about faults in production that could be due to faulty production planning. he has regular meetings every month with people from the market and production department. his interest in development is regarded here as taking care of improvements. these improvements can also be seen as being of value to the customer; improved products, in the long run, often mean better products. company 5 keeps an eye on competitors’ new products by inspection. the action of the managing directors shows that they regard information gathering as important. company 1 company 2 company 3 company 4 company 5 reflections on information we don’t have any formalised routines regarding the handling of information. we use intranet, extranet and internet. information is perishable stuff to be handled continuously. our company publishes something called "saw-blade", twice a year. all companies present their subjects. the paper is distributed to customers and employees. in general terms we take in subscriptions for information, we use publications, and we get info directly from the customers. i get information continuously. i have all the info in my head. my ideas are there. i get reports from all the sites every month. obtaining information information is obtained from the sales people. they are supposed to bring back ideas and information from the customers. they are obliged to bring information in writing. when we get information about faults, we often try solutions on an apartment to see how it works. use of information we market products that are quite simple. everybody knows what the others are doing on the market. news travels fast. therefore, it could be said that there are no unique products. we use benchmarking for some areas and we also have a profitability list, where we compare them against us. we benchmark our sister companies. we watch our competitors’ products by inspection. table 3 use of information 16 the australasian journal of construction economics and building [vol 8, no 2] cooperation all of the mds explained that they have ongoing cooperations. some of these have been going on for many years. company 2 gave an example of a consultant firm that has been working with them in developing their multi-storey timber constructed building. see table 4. the md gave another example of their construction partner, whereby they developed a mutual administration; namely, that company 2 would run the administration for the construction company. company 2 has a real estate firm within their group of companies, with whom they cooperate company 3 offered a similar example about a transport company that takes care of all their logistics, including developing internal processes. the managing director of company 5 explained that their company has long term agreements connected with stairs and service for mounting equipment such as cranes and hoists. cooperation with real estate firms was on the agenda for both companies 4 and 5. it seems as though both companies see possibilities in cooperating with real estate firms, opportunities for new ideas and solutions and also, hopefully, for future sales. three of the companies (2, 4 and 5) claim that they have the university as a partner with whom they cooperate. company 4 said: “the products get more trustworthy when a university is behind you”. this statement points at trust in a company and what it has to offer, which is important for the company, as well as for the customer. through the engagement of a university, the company and its offerings will probably be regarded as being more respected and trustworthy than other companies without those contacts. last summer, representatives of the company and the university made a trip to the usa and presented the company. company 1 company 2 company 3 company 4 company 5 cooperation examples we have a long-term agreement with a transport company. they take care of our logistics. we have worked with the designing consultant for some years now, but there is no long-term agreement for the next 10 years or so. there are long term agreement connected to sales of stairs with two major contractors, but no agreement connected any product other than stairs cooperation examples we do roadmaps and trends and check now and then. cooperation examples we talk with our retailers and tell them how we want our products to be presented and distributed, and the shops to be built, thereby, finding ways to do this together. we are discussing a joint solution / cooperation with a group of concrete producers. it is one matter to market concrete and reinforcements separately and another matter to market them together. we are setting up cooperation with a real estate company that has not kept up with the development. we make concrete stairs and we have some 3-years based agreement with two major contractors. cooperation examples it is important to make our internal cooperation function smoothly, and how to look at me as an individual. we cooperate with a competitor in a developing project for a 7-flat multi-storey building. it is mixture of their system and ours. we are discussing starting up cooperation with two major real estate owners. we have some cooperation concerning our mounting devices such as cranes and hoists. table 4 cooperation 17the australasian journal of construction economics and building [vol 8, no 2] values and vision transferring values seems to be important to these managing directors. the md of company 1 remarked: “values are the fundaments to act from”. the md of company 2 said that “everybody in the company must be down to earth and have a sound economical thinking”. see table 5. the md of company 4 commented: “everybody in the company should get into the way of thinking how their counterpart will react to what they are doing”. the md of company 5 was on the same track when he explained: “our values are connected to relations in the work processes in our company. honesty and openness are two examples. learning and responsibility are two more. in total, there are six values”. it would appear that the managing directors consider values as tools to steer the behaviour of the employees, thereby, also influencing the outcome. as well as regarding values to be the fundaments from which to act, company 1 also indicated that personal development is important to create innovation – “if one works, instead, with the development of people, the other things will come automatically. everyone has a built in power”. vision involves planning. the managing director of company 1 said: “our company has a normal planning process, where one looks for changes that might be there. is there a need for an introduction?” see table 4. the md of company 2 showed his new 3-year plan for the company. it was to be launched one year earlier than expected because their goals were reached in the year 2007 instead of in 2008, as planned. “we use long term planning in terms of yearly budgets”, he said, “usually a 4-5 year perspective”. company 5 also deals with 3-year plans as well as using roadmaps and trends that are checked now and then. planning seems to be a lower priority than development. company 1 company 2 company 4 company 5 transferring values everyday happiness, to me, is very much about how we humans behave towards each other. it is important. it is about how we should cooperate and how things should function. it’s also about how to see each other as an individual. values are the foundations to act from. everybody in the company should be down-to-earth, and have sound economical thinking. everything that the company gains will be invested in the business. everyone in the company should get into the way of thinking how their counterpart in the same situation would react to what you are doing. this way of thinking must be done without being unnatural our company is a merge of many firms with their varied cultures. therefore, we try to create a common culture of our own. our values are connected to relations in the work processes within our company. honesty and openness are examples of this. learning and responsibility are others. there are six such values. vision we want to be the obvious choice for customers seeking bon vivance and everyday happiness via their furnishing. we are going to be the leading producer of prefabricated multi-storey timber buildings in scandinavian countries. we are going to be the leading supplier of concepts and frames based on concrete, with good economy for us and for the customers. architectural freedom and security. culture our products should represent everyday happiness, both when using them and in contact with us. everyday happiness stands very much for how we humans behave towards one another. anyone from the shop floor can come in at any time. we say that often, and we want to have the same spirit in the whole company. we want to down-to-earth and set a good example. there are three core values at lindbäcks: knowledge, engagement and driving force. another fundamental principle when being a shareholder in lindbäcks is to be active in the company. we don’t want any passive shareholders. reflections on planning we have a normal planning process where we look for changes that could be there. is there a need for introductions? we use long term planning in terms of yearly budgets. usually we have a 4-5 year perspective. we have long term aims, but not for longer than 3 years. table 5 transferring values (no comments from company 3) 18 the australasian journal of construction economics and building [vol 8, no 2] summary of interviews it would appear that the managing directors of these companies eagerly look for ideas for development. they use techniques and activities that aim for development. the following points are prime examples of innovative ideas for a company to avoid standing still: • cooperation with important partners for development of the company: firstly, universities and, secondly, real-estate firms. • no cooperation was found between the innovative building material manufacturers and contractors to develop products • no communication was found between the innovative building material manufacturers and contractors connected to development of products. • the use of continuous development as a means to small improvements, • system solutions, meaning joint offering from a few companies to customers instead of each company offering their product. • developed administration as a way of developing processes and, thereby, cutting costs and becoming more competitive • the development of new concepts. • research & development (r & d) as a percentage of the companies’ turnover. universities are chosen as the number one partners for development as they contribute not only with knowledge, but also with reliability and through the transferring of trust to products and customers. values seem to be seen as carriers of important messages, which have influences on outcomes of the company. findings development is important to these managing directors. it appears to be a tool to win customers instead of focusing on price. new solutions for products, concepts, continuous improvements and services seem continuously to be put forward. the managers give the impression that they seek possible ways in which to avoid a price focus and they use development as a tool to do it. the managing directors seem to have found important partners for future development of their respective companies. three out of five of the innovative companies had partnership with universities three out of five of the innovative companies had cooperation with real estate firms or were in the opening stage of it. no cooperation was found between the innovative building material manufacturers and contractors to develop products, and therefore it was natural that no communication was found between them in connection to development of products. four out of the five companies use generic management tools such as total quality management, benchmarking and the balanced score card the concept of value also seems to be used to transfer certain behaviour to the employees and is, perhaps, also used as a tool to convey information and create a reliable company. the value of the customer seems to be kept in mind, because a company should act and appear to be trustworthy the managing directors actively seek information about market needs, products, and performance. development not only applies to products but also to the employees; the latter in terms of education and transferred values. conclusion innovation processes and information processes influence each other. it would appear that better innovation processes are connected to better processes of information and, conversely, poorer information processes lead to poorer innovation (larsson et al, 2006). this study indicates two other factors that are connected to innovative companies i.e. innovative managers: cooperation and transferring of value, which means that relations to customers as well as employees are involved. the managing directors apparently act to influence the employees in their companies in a certain way. they want their companies to develop, to be attractive to customers and also to employees. they seem to have been successful because innovation as well as information combined with cooperation and transferring values at these companies, appear to have created trust for products and for what the company represents. 19the australasian journal of construction economics and building [vol 8, no 2] trust, in this sense, means partner trust, which can be defined as “the extent of trust placed in the partner organisation by member of a focal organisation” (zaher, mcevily and perone, 1998, pp 142). however, “trust is a psychological state comprising of the intention to accept vulnerability based upon positive expectations of the intentions or behaviour of another” (kadefors, 2004, p176). it is considered to be a psychological state. discussion the overall train of thought in this discussion is whether the “pyramid” of innovation, information, cooperation, value and trust could be a way to move from the hitherto almost exclusive price focus in the building sector, to an approach that focuses on the benefit of value to the customer through development of products. it has been shown that all these five innovative companies act in a rather similar manner. the thought-processes of their managing directors seem to be similar. somehow, these managing directors seem to think more broadly and have more unusual thought processes than less innovative managing directors. three out of five companies have universities as a partner to develop products. three out of five companies had started, or were about to start, cooperating with real estate firms, presumably to develop their company and increase the compatibility this article attempts to grasp some of the thinking that is done by managing directors. to start with, it would be fair to say that the article agrees with the fact that innovation in a company very much depends on what kind of developmental ideas the md has for the company. these ideas require to be translated into action in the company. innovation is, therefore, a management question (tombesi, 2006). perhaps managing directors use the company’s vision as a tool to guide and influence their employees towards the future, whereby the future involves some kind of development. the md of company 4 said: “we are going to be the leading producer of prefabricated multi storey timber buildings in scandinavian countries”. their previous vision was to be leading producer in sweden. both visions have a built in guide and an aim for development to influence and inspire their employees for the future. however, this is not quite enough to reach this objective. the md of company 5 expressed that they need a common culture in their company. in company 4 an important maxim is: “always remember how the customers would react upon what you are doing”. company 1 expresses it very direct by saying “values are the foundations to act from”. this way the companies have a vision to inspire and influence and a foundation to act from through the values that are transferred to the employees. everything seems very straightforward. to continue the line of action, some of the managing directors approach universities who, in turn, are, of course, interested in working together with the industry. who would not be? after carrying out some successful projects together, the joint working relationship gradually deepens and develops into cooperation. consequently, these companies seem to cooperate with universities as partners i.e. being close instead of at arm’s length distance. some kind of trust between those involved will also probably start growing (wood et al, 2002). in this process, the company finds a partner to help with development and design, and the university finds a partner to present academic material from. it becomes a winwin situation. everybody gets something because it benefits everybody. there is also something for the customer in this partnership. a product that is developed and designed in conjunction with a university will probably be regarded as very trustworthy because research is involved. research in this sense means more than just testing. there is almost an inbuilt guarantee, for instance, in the belief concerning the designing of big loads and stresses. the contacts established with a canadian and danish company, which the md of company 4 spoke of, could be examples of the trust created by partner companies through a good, well-designed, economical product. the danish company have made an agreement with company 4 and have started production following their design. the canadian company have started discussions. the value of the partner, a university in this case, is difficult to estimate but the md probably does not want to be without it. this is of importance when increasing the technological base of the company (sherwood and covin, 2008). the innovative companies seem to focus on development. they have continuous 20 the australasian journal of construction economics and building [vol 8, no 2] improvements. they also focus on productivity. they are competitive, which can be seen by their growth but they do not enter into the usual price tendering in the sector. value to the customer and economy for the customer seem to be their answers. this is interesting, because there are costs connected to development; costs that will affect the price. however, development, on the other hand, usually influences the perceived value positively, because there are more points of values in the product. this brings us back to the title as to: whether the “pyramid” of innovation, information, cooperation, value and trust could be a way to move away from the hitherto almost exclusive price focus in the building sector, to an approach that focuses on the benefit of value to the customer through development of products. see figure 1. trust, in this sense, means partner trust. this has been the focus of various researchers (sherwood and covin, 2008, madhok, 1995) because it should make the partners’ technological knowledge easier to reach when it comes to knowledge acquisition. trust is seen as being important to open up possibilities for reaching distant co-operative processes. when people trust each other, they might, unprompted, start constructive interaction (kadefors, 2004). it would appear that the companies have found a pathway that has put them in a forefront position in their market niche because their sales have increased. the managing director of company 4 expressed the importance of bearing the benefit of customer in mind when developing products. the customers seem to appreciate their developed products because the sales increased. four out of five of these companies seem to have created, or are about to create, an almost unique product and/or service that is offered to the customers. subsequently, their products and/or services will probably not be as price sensitive as those offered by other companies. company 5 endeavours to position itself both by developing and by branding its products. these companies, as a result, seem to have found a way to get around the focus on price at the same time as developing what they have to offer. figure 1 the pyramid of innovation, information, cooperation, value and trust. 21the australasian journal of construction economics and building [vol 8, no 2] references barrett, p., sexton, m. g., (2003). a literature synthesis of innovation in small firms: insights, ambiguities and questions. construction management and economics, 21, pp 613 – 622 chen, c. c. and jones k. t., (2007) management tools. who uses them and how effective are they?. the cpa journal. august 2007. 77. 8 drucker, p., (2002). the discipline of innovation. august 2002, pp 95 – 103. harvard business review. harvard. usa drew, stephen a. w., (1997). from knowledge to action: the impact of benchmarking on organizational performance. long range planning, vol. 30, no 3, pp 427 – 441. dubois, a. and gadde, l.-e. (2000) supply strategy and network effects – purchasing behaviour in construction industry. european journal of purchasing and supply management, 6, 207–215. dubois, a. and gadde, l.-e. (2002) the construction industry as a loosely coupled system: implications for productivity and innovation. construction management and economics, 20, pp 621–623. egan, j. (1998) rethinking construction. department of the environment. transport and the regions. london. england gann, d. m, (2000) building innovation: complex constructs in a changing world, thomas. telford books, bodmin, cornwall kadefors., a., (2004) trust in project relationships – inside the black box. international journal of project management. vol 22, pp 175 182 larsson, b., and sundqvist, j., and emmit, s., (2006). component manufacturers perceptions of managing innovation, building research and innovation, 34 (6), pp 552 564 madhok., a., (1995) revisiting multinational firms’ tolerance for joint venture: a trust-based approach. journal of international business studies. vol 26 (1). pp 117 – 137. ministry of economic development (2002) firm foundations – a study of new zealand business practices and performance, ministry of economic development, wellington. sou 2002:115 (2002) the swedish building commission, skärpning gubbar! – om konkurrensen, kvaliteten, kostnaderna och kompetensen i byggsektorn (pull up your socks chaps! about competition, quality, costs and competence in the building sector). stockholm sundqvist, j. (2002). insikter för framgång. esi, örebro university, örebro. sundqvist, j., ahlström söderling, r., lindhult, e., wijkman, p., (2003). from resources to practices – a study of the use of best practices in manufacturing companies in sweden based on a survey from new zealand., proceedings the 17th nordic conference on business studies in reykjavik, august 14-16. sundqvist,,j., larsson, b., sanner, l., (2004). do building material suppliers use information technology less often or less efficiently than other lines of business? proceedings 1st international conference on construction project management, toronto. sundqvist, j. (2004). low innovation among building material suppliers: the natural level of the trade? the australian journal of construction economics and building, vol 4, no 1. sundqvist, j., larsson, b., and lindahl, g., (2007) cooperation in the building sector between building material manufacturers and contractors to develop products. the australian journal of construction economics and building, vol 7, no 2. tombesi, p. (2006) good thinking and poor value: on the socialization of knowledge in construction. building research & information, 34(3), 272–286. zaheer., a., and mcevily., b., and perrone., v., (1998) does trust matter? exploring the effects of interorganizational and interpersonal trust on performance. organization science. vol 9 (2). pp 141 159 22 the australasian journal of construction economics and building [vol 8, no 2] building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes viewpoint building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes michael ting, (university of melbourne) abstract in china, development of building regulations has largely been motivated by a desire to maintain the booming construction industry which has sustained strong economic growth. as a result, the government has fallen behind on ensuring quality and safety in residential housing projects. the devastation left by the wenchuan and yushu earthquakes was a grim reminder of this. this essay aims to draw out some of the regulatory mistakes that have been made and proposes solutions to the issues raised. regulators must refocus their attention on protecting the public and lay the legislative groundwork for healthy development in the sector. keywords: wenchuan earthquake, quality and safety standards in china, construction law of the people’s republic of china introduction the past 30 years has seen the ascendency of the chinese economy to being one of the most watched and significant economies in the world. a large part of china’s economic success has been attributed to the development of the property and construction industry (chen 2010). however, in the wake of two devastating earthquakes in wenchuan and yushu, which led to the collapse of countless buildings, serious questions have been raised as to the adequacy of construction regulation in china. this essay examines these questions and discusses some of the key deficiencies in the way construction practices are regulated in china. the earthquakes serve as a background to this discussion by focusing attention on the impact that deficient regulation has on people’s lives and therefore my analysis will be primarily on residential construction. the rural location of the earthquake also provides the opportunity to discuss the impact of construction regulation outside of the urban setting, and how the differences in buildings and their construction methods are reflected in the relevant building codes. a technical analysis of seismic building codes on the adequacy of various seismic modelling methods is not the aim of this paper. rather this essay aims to take a detailed look at the regulatory environment of residential construction specifically, and how these laws are enforced. the structure of this discussion is as follows; part ii will provide some background to the development of china’s construction industry, and canvass the current state of construction law in china. the main legislative instrument to be analysed will be the construction law of the people’s republic of china (1997) as well as various building codes that form the basis of residential construction in china. part iii is an analysis on some of the deficiencies in china’s regulatory landscape. two key failings are discussed; an inconsistent system of regulation; and a lack of adequate supervision to ensure proper enforcement of the law. finally, part iv proposes some changes to china’s construction law, focusing on systemic and legislative reform. australasian journal of construction economics and building ting, m (2010) ‘building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes’, australasian journal of construction economics and building, 10 (3) 62-75 63 the state of construction law in china the nature of china’s construction industry at the turn of the 21st century, the construction industry had a significant effect on the growth of china, accounting for around 7 per cent of the country’s gross domestic product (li et al 2003: 527). total output of the construction industry grew at nearly 20 per cent annually between the years 2000 and 2003 (li et al. 2003, biz china 2010). the strength and importance of the construction industry is relevant to our discussion for three main reasons. first, a robust system of regulation facilitates sustainable growth by demanding high quality, efficiency and transparency. the chinese government has recognised this and has repeatedly singled out the development and reform of construction regulation as the key factor for sustaining the growth of the construction industry. in a speech introducing a conference on building codes, the vice premier of china, mr zeng peiyan, stated that construction investment was very important for china’s economic growth and he hoped that china could improve construction standards and the legal system (national work conference for fixed construction standards 2007). second, these figures demonstrate the size of the industry and therefore the corresponding enormity of the task of crafting laws which encompass the entire country. this task is made more complicated not only because china has such a vast population and landmass, but also because china is extremely diverse in climate, geology and hazard conditions. third, the rapid development of the construction market has meant that irregular practices have spread quickly and taken root in the culture of the industry. it is not uncommon for construction projects to be lubricated with kick backs and other gratuities (hoenig 2009). such wide-spread practice casts a long shadow. irregular conduct invariably leads to poor build quality and dangerous defects. persistent quality issues leads to dissatisfaction and lowers public confidence in building construction. the collapse of so many buildings when the wenchuan earthquake struck is an unfortunate result of an industry that has been unregulated for the majority of its existence. china’s scheme of regulation for quality and safety in the construction industry in order to maintain order and develop this vital industry, the national people’s congress of china (the ‘npc’) promulgated the construction law of the people’s republic of china on 1 november 1997. this was the culmination of nearly 13 years of legislative drafting and over 20 years since china’s open-door policy, which shifted the nation’s communist economic model towards a market system. the passage of this law was particularly difficult because of the complexity of regulating the sprawling industry as well as defining the scope of application. although the complete scope of the construction law is contentious, especially in relation to specialised civil projects, it is generally accepted that the construction law regulates activities involving the construction of any kind of house building which means ‘facilities that have a roof, beams [sic] posts, walls and a basement to form inner space to meet the needs of people for production and life’ (chen 2002: 277). thus, the construction law represents the highest piece of legislation which governs the residential construction industry and will be the focus of our discussion. the main objective of the construction law is to maintain order and ensure quality and safety for residential construction. article 1 states: this law is enacted for the purpose of tightening supervision over and administration of construction activities maintaining order of construction market, ensuring australasian journal of construction economics and building ting, m (2010) ‘building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes’, australasian journal of construction economics and building, 10 (3) 62-75 64 construction quality and safety and promoting sound development of the construction industry. to this end, the construction law prescribes three primary mechanisms to ensure compliance. first, all professionals engaged in construction activities are required to meet certain qualifications. design and construction enterprises must only engage in construction activities within the scope permitted by their qualification grade (construction law 1997 art. 13). the second condition is that most construction projects require permission from the state prior to commencement of building works (construction law 1997 art. 7). third, projects are generally required to be supervised (construction law 1997 art. 33). the construction law sets up the general scheme of regulation for ensuring quality and safety in the residential construction industry but the details of acceptable construction practices are left to state safety standards (construction law 1997 art. 3). these state safety standards are the equivalent to australian standards and operate to prescribe satisfactory materials, design and construction methodology. there are some 5000 engineering construction standards in china (national work conference for fixed construction standards 2007), 503 of which relate to residential construction (notice of the 2009 national construction standards, quality, supervision, law enforcement and inspection briefing 2009). the primary standard for residential housing is the design code for residential buildings 2003. in addition to these standards, official government policy documents can prescribe further detail on building practices. these policy documents are issued on an ad hoc basis and are often in response to poor performance or public dissatisfaction. for example, in response to sub-par building standards revealed by a 2009 nationwide audit of building quality, the ministry of housing and urban-rural development issued a notice prescribing specific procedures for project managers to follow (notification of the requirements for acceptance of good quality residential household projects 2009). the actual status of these policy documents is ambiguous, largely due to the fact that they are broad in nature and lack specific direction. wenchuan, yushu and subsequent developments during the years of rapid growth, regulators had little time to consider the adequacy of the laws which regulate this vital industry. the chinese government was forced to pause and think on this issue on 12 may 2008 when the most devastating earthquake since the founding of modern china struck wenchuan in sichuan province. whilst it cannot be denied that the wenchuan earthquake was severe registering eight on the richter magnitude scale questions were raised both domestically and internationally as to whether there were sufficient measures in place that might have mitigated the impact of this disaster. approximately 70 000 people were killed in the disaster, mostly by collapsed buildings, and millions more were displaced from their homes (shi 2008). importantly, sichuan is a largely rural province in the middle of china’s landmass, with the majority of its population made up of migrant workers who work in the main cities on the east coast (china’s statistics on urbanisation 2004). such large loss of life, despite the relative sparseness of the area, gives an indication of the grim failures of building design and construction. the ambit and adequacy of the quality assurance measures had never before been put to the test on a scale to that of the wenchuan earthquake in 2008. the disaster highlighted some deficiencies in the system and swift government reform followed. the national code for the seismic design of buildings (2001) was updated, additional laws were enacted to cope with earthquake and disaster mitigation and countless policy announcements pledged that lessons were learned. australasian journal of construction economics and building ting, m (2010) ‘building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes’, australasian journal of construction economics and building, 10 (3) 62-75 65 yet, in early 2010, a magnitude seven earthquake struck yushu county in nearby qinghai province killing over 2000 people (united states geological survey 2010). far fewer deaths were reported in this disaster compared with the earthquake two years prior, however, the impact of the disaster should not understated. the yushu epicentre was merely 600 kilometres from wenchuan and despite the two years of frantic reform and seismic fortification, there were clearly persistent issues with the regulation of china’s residential industry. major issues the primary aim of building codes is to protect the public and prevent loss of life (merritt & ricketts 2000; rules for preparation of construction standards 1999). this means that buildings designed under the code should, at a minimum, not collapse, even if earthquake forces exceed design specifications (merritt & ricketts 2000; construction law 1997 art. 60). therefore, the extent of damage and loss of life in both earthquakes might lead us to presume that the chinese building standards were inadequate to properly fulfil its function. indeed, this was the call from many international observers in the immediate aftermath of the quake (lee 2008). however, reports have since emerged that structures designed and built according to the relevant building standards performed surprisingly well under the pressure of the earthquakes (miyamoto 2008). for example, a middle school built in 1996 before the implementation of the construction law and the code for the seismic design of buildings (2001) suffered sudden collapse during the tremors of wenchuan, but the primary school next door, built in 2007 and compliant with current design standards, remained standing with only minor damage (miyamoto 2008). some have even found that buildings in wenchuan that complied with the prescribed building standards ‘were able to resist shaking greater than what they were designed for.’(paterson, del re & wang 2008: 4) in fact, experts have noted that china’s building codes are generally on par with international standards (australian broadcasting company 2008). this observation demonstrates that regulators in china have put in place adequate laws for the protection of the public. yet the question remains as to why so many buildings collapsed in the two earthquakes. the answer to this and why it is likely that buildings will continue to suffer from quality and safety issues in the future is that although the laws are adequate to meet the demands of an extraordinary disaster, laws are not being implemented adequately. this is either attributable to a lack of understanding on the part of builders and designers, or a lack of supervision to curb a culture of short-cuts and mismanagement. incoherent regulation proliferation of building regulation building standards form the bulk of china’s construction regulation. these safety standards ostensibly operate like standards in australia in that they provide the detail on acceptable building practice which statutes lack. however, their actual function in china is ambiguous. this is because since the initiation of china’s policy on standardisation through the standardization law of the people’s republic of china in 1988, there has been a massive proliferation of residential building standards at both the national and provincial level. the wenchuan disaster accelerated this process. in the past five years alone, 1276 new construction standards were brought into force, bringing the number of national engineering construction standards to 4950 by the end of 2009 (national work conference for fixed construction standards 2007). this staggering amount of regulation highlights the great potential for confusion of construction standards. yet, it appears that the creation of new standards is seen as a mark of success for china, as officials have announced that formulation of these codes signifies significant progress for the sustainable and healthy development of the construction industry (national work conference for fixed construction standards 2007). the large volume of standards, policy and other laws in the industry invariably results in an inconsistent regulatory message. this is particularly the case after the wenchuan disaster, when officials scrambled to announce new measures. new laws australasian journal of construction economics and building ting, m (2010) ‘building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes’, australasian journal of construction economics and building, 10 (3) 62-75 66 were implemented over the old with no guidance as to which to follow. for example, the requirements for acceptance of good quality residential household projects was promulgated in 2009 in response to concerns raised since wenchuan, however, the regulations on the quality of construction projects had already operated since 2000. both laws are still effective and purport to ensure quality of residential construction through supervision. yet they differ in the wording of similar provisions. in the older regulation, inspectors were expressly required to sample ‘trial pieces and other relevant materials involved in structural security’ (regulations on the quality of construction projects 2000 art. 31), but in the 2009 notice, inspectors are given a long list of areas to inspect, none of which relate to structural security (requirements for acceptance of good quality residential household projects 2009 art. 2). clearly, the enthusiasm to regulate the industry has not been met with equal attention to consistency. the lack of consistency is a concern for ensuring wide-spread adherence to the building codes. indeed, it is not argued that the standards created by regulators have been inadequate, rather that there has been no effort to making these standards easier to understand and implement by builders and designers. this is particularly a problem for the rural population, where houses are often erected by local builders who have little knowledge of the building standards and even less desire to read the multitude of standards that might be relevant for a project. lack of clear hierarchy another issue which affects the ability of contractors and designers to implement building standards is the absence of a clear legislative hierarchy. whilst the construction law and national standards comprise the majority of the regulation, policy announcements often interpret these instruments to give further guidance on the provisions. however, policy announcements may originate from a number of different sources in the large bureaucracy that governs construction in china. the below flow-chart illustrates the multitude of sources for construction policy and regulation in china (zuo & zillante 2007: 357): australasian journal of construction economics and building ting, m (2010) ‘building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes’, australasian journal of construction economics and building, 10 (3) 62-75 67 this diagram represents the different governmental departments that can influence the regulation of construction activities. therefore, although the ministry of construction is generally responsible for controlling the industry, there is the potential for each department to issue separate policy announcements having ambiguous legislative force on the growing volume of building standards which regulate the industry. enforcement issues despite some flaws in the way regulation is promulgated and formulated, the content of the laws themselves is generally considered to be adequate to meet reasonable demands. yet, no matter how adequate the laws, the wenchuan and yushu disasters demonstrated that they were not being enforced. a number of factors have contributed to the failure of enforcement in the building industry. the phenomenal growth of china’s economy has outstripped the capacity for the government to supervise construction projects. the sheer size and population diversity of the country further multiplies the task of enforcing the law. moreover, china’s construction sector has developed unregulated for a longer period than the construction law has been operative. business practices proscribed by the construction law had already been established in the culture of the industry. in the mid-1990s some 63 per cent of all corruption cases investigated in china involved construction projects (hoenig 2009: 2). yet, despite these long-standing problems, china’s legislative framework has failed to adequately address them. though the construction law provides for the supervision of construction projects1; enforcement is piecemeal and insufficient. article 30 stipulates that the state [shall] apply a system of supervision over construction projects. the state council may define the construction projects over which supervision shall be enforced. (emphasis added). herein lies the problem; whilst contractors and designers are required by law to adhere to the quality and safety provisions in the construction law and other instruments, there is no mandatory scheme of supervision to ensure compliance. nor is there comprehensive regulation to specify which projects should be supervised. some regulations suggest supervision shall be implemented for projects which are invested in by the government, state-owned enterprises and foreign capital (notice on launching the work of supervision of construction 1988), whilst others require supervision of ‘national key construction projects, large and medium scale projects of public utility…and projects built with the loans and assistance funds of the foreign governments or international organisations’ (regulations on the quality of construction projects 2000 art. 12). the lack of compulsory supervision is not merely an oversight of the drafting committee; voluntary supervision is expressly stated in article 53 of the construction law: enterprises may, on a voluntary basis, apply for certification of quality assurance to the administrative department for supervision over…product quality. the consequences of such a policy was seen when the wenchuan earthquake hit in 2008. anecdotal evidence of engineers who visited the scene reported how buildings built right next to each other, with the same orientation and similar design, met drastically different ends. miyamoto (2009: 5), one of the first foreign engineers to visit the earthquake zone in wenchuan, observed: 1 supervision is required by the government on certain projects. supervisors/inspectors are certified according to national standards and graded according to their professional experience, facilities, number of personnel, equipment etc. they are not government employees but usually employees of a company engaged in inspection/supervisory services and hired by developers to supervise their project. australasian journal of construction economics and building ting, m (2010) ‘building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes’, australasian journal of construction economics and building, 10 (3) 62-75 68 on an eerily, quiet, abandoned street, we come across a half collapsed, 5-story concrete apartment building. the corner of the structure totally collapsed into the street. it appears that the soft story columns failed and lost their capacity to support the structure above. interestingly, immediately next door is an almost identical building with minor damage. construction quality and possibly some vital structural details are the likely difference here. such quality and details were observed and enforced in the standing building, whilst were likely overlooked in the collapsed one. these stories suggest failure of appropriate supervision. quality supervision which, if applied to the two buildings equally, might have saved the occupants of both buildings. the extent of the supervision inadequacies was revealed in a nationwide survey conducted in 2009 where only 64 per cent of construction projects surveyed complied with the relevant laws, 32 per cent failed to meet minimum requirements in certain areas and 4 per cent of projects failed to satisfy any of the inspectors’ standards (notice of the 2009 national construction standards, quality, supervision, law enforcement and inspection briefing 2009). these figures might even be considered generous as the survey only inspected 90 of the major cities in china and did not survey rural areas; the areas which were hardest hit in both the wenchuan and yushu earthquakes. the survey underlines the lack of consistent enforcement of minimum quality standards during the construction of projects. an additional failing in china’s system of supervision is the limited scope of the supervisor’s functions as stipulated by the construction law. under article 33, the project developer ‘shall inform in writing…the items under supervision and the limits of power for supervision.’ the supervisor therefore is to supervise only items of the project as instructed by the developer. should the developer not want any attention to be drawn to a certain aspect of a project, the developer is at liberty to restrict access to the supervisor. furthermore, the role of the supervision unit is not solely focused on ensuring construction quality but also encompasses supervision over the ‘construction period and [the project’s] use of construction funds’ (construction law 1997 art. 52). therefore a supervision unit’s role is diluted by having to engage in time and cost management, and its ‘main’ responsibilities may be even be circumscribed further by the project developer. such provisions do not provide the adequate conditions for strict and wide-spread adherence to construction regulation. suggested reform the regulatory environment in the residential construction industry can make improvements to many of the identified issues. the wenchuan and yushu tragedies were unfortunate wake-up calls for change and the government has shown a willingness and enthusiasm for reform of the construction sector. many of the new regulations that have been issued since 2008 have promoted the development of a higher level of building regulation (law of the people’s republic of china on the earthquake prevention and disaster relief 2008 art. 65). the government even declared 2009 as quality and safety year. despite china’s many announcements renewing its commitment to ensuring that such disasters do not happen again, one cannot help but notice a pattern of reactionary regulation. as discussed in part iii, more laws, standards and policy announcements is not the solution to a crisis of implementation. improving the implementation of the laws should be addressed by making sure builders and designers fully understand the standards expected of them and that there are adequate supervisory measures to ensure compliance with the regulations. this problem should be met with two main changes: (i) institutional change to the way laws are formulated and promulgated to reduce the regulatory inconsistency; and (ii) tighter measures should be created for supervision units to ensure compliance with standards. australasian journal of construction economics and building ting, m (2010) ‘building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes’, australasian journal of construction economics and building, 10 (3) 62-75 69 the need for regulatory consistency unification of building codes the rising volume of regulation surrounding the residential construction industry is a bewildering hurdle for builders, especially in rural areas, to overcome. however the greatest threat to robust regulation in the industry is the inevitable inconsistencies that such a proliferation of new laws will create. a prime example is the building regulations for the construction of aged care housing. the ministry of housing and urban-rural development promulgated the code for design of buildings for elderly persons in 1999, and in 2003 issued the code for design of residential building for the aged to regulate the same area. both codes are still effective, and this overlapping regulation is potentially a source of confusion for builders engaged in construction of aged care housing. one solution to reducing the volume of laws and improving the consistency of the regulatory message would be to adopt a single building code which applies to residential construction in all provinces. the current residential building code only prescribes building standards for standard long-term dwellings (design code for residential buildings 2003 arts. 1–2), and should be expanded to at least include residential buildings for transient and special purpose housing including dormitories, kindergartens and aged-care facilities. this will require the various government departments which currently regulate the industry to work together to formulate a comprehensive and consistent building code. a good model for china’s reform is the building code of australia (‘bca’), which is a twovolume code encompassing a wide range of building types. the bca divides the different types of buildings into 10 classes and prescribes standards according to their purpose and characteristics. the first three classes relate to residential housing, including both long-term and transient dwellings (bca 2009: 39-40). this does not merely mean that the various codes will be packaged together in the one document. rather it will it will force the various government departments involved in construction management to work together to produce a unified regulatory message. this will reduce the overlapping of policy notices and conflicting interpretations. in addition, it will also eliminate the doubling-up of building codes that currently exist. instances similar to the regulations for aged care housing can be avoided. furthermore, by distilling the large volume of residential standards and codes into a single document, builders will have an easier time navigating the regulatory landscape. this will hopefully produce an environment where builders are fully aware of the responsibilities expected of them. performance oriented codes in addition to unifying building regulation, the nature of the code itself can be improved. current codes are drafted in a prescriptive manner such that the provisions require rigid adherence to certain building standards and practices. deviation from these strict rules leaves open the possibility of civil and criminal penalties. given china’s population, climate and geological diversity, a nation-wide unified code with highly prescriptive provisions is likely to make adherence to the standard quite demanding. this is especially true for rural construction where builders might use materials and construction methods not outlined in a prescriptive code. therefore, instead of formulating a code which specifies particular building practices, there should be a move towards a more performance oriented model. a performance code specifies the performance requirements, but leaves materials and methods for the designer to choose (merritt & ricketts 2000: 37). typically, a performance code is structured in three parts characterised by three questions. the highest layer and first question is an objective statement, asking what is to be accomplished. the second layer is a functional statement which asks why the objective is to be accomplished. level three are the performance requirements which outline how the functions and objectives are to be achieved. for example, in the area of structural security, the objective might be to ‘safeguard people from injury caused by structural failure.’ (bca australasian journal of construction economics and building ting, m (2010) ‘building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes’, australasian journal of construction economics and building, 10 (3) 62-75 70 2009 [b01]) the function of a building in this matter should be to ‘withstand loads and other actions to which it may be reasonably subjected.’ (bca 2009 [bf1.1]) some performance requirements could be to ‘remain stable and not collapse’ (bca 2009 [bf1.2]). note that the performance requirement does not prescribe a particular building solution; rather it asks the builder or designer to solve the problem. a code formulated in this way gives flexibility to the contractor to construct a building according to local specifications as long as it fulfils the performance requirements. a criticism of performance codes is that they do not provide sufficient guidance as to actual building solutions. performance codes are ostensibly of limited utility in a country like china with a large rural population whose building designers and contractors might have little concern for finding building solutions themselves. however, formulating a performance code does not necessarily preclude the code from providing suggestions on particular building solutions that would automatically satisfy the performance requirements of the code. for example, the bca is a performance oriented code, but suggests ‘deemed-to-satisfy’ provisions which if followed would be automatically compliant with the performance requirements of the code (bca 2009: 15–6). therefore, structuring china’s uniform building code with performance goals does not necessarily mean builders will forgo the quick and clear guidance of prescriptive codes. instead, by adopting similar ‘deemed-to-satisfy’ provisions it will provide both a quick and flexible guide to the to the country’s diverse construction industry. in fact, a performance code will not be a completely foreign concept to china’s current regulation. article 17 of the rules for preparation of construction standards (1999) expressly provides that codes should be formulated according to a three tiered structure similar to that of performance codes. therefore, should the government adopt performance oriented codes, the emphasis of the rules will change, but the drafting process and structure of the codes will remain the same. the result of formulating such a code would be a more consistent, accommodating and easy to understand law which would likely lead to an increase in the implementation of building standards. making sure builders understand the code is but one part of the necessary reform required to ensure proper compliance with quality and safety standards. indeed, if a unified performance code was to be adopted, greater supervision must be implemented to certify building practices not provided in the ‘deemed-to-satisfy’ provisions and enforce consistent and wide-spread compliance with the code. enforcement reform strengthening the structure of regulation in china is a major step to ensuring higher quality and safer buildings. however, regardless of whether the government adopts a uniform building code in china, greater and more consistent enforcement will still remain a key issue. as mentioned in part iii, there are number of factors that has led to a crisis of law enforcement in china. a soaring economy has created a booming construction industry and gave incentives for irregular business practices. the strength of the sector has outpaced the government’s capacity to maintain adequate supervision over construction projects. whilst china might not want to restrict the growth of its economy for the sake of greater law enforcement, the government can impose better laws to reign in some of the detrimental practices that have taken root in the industry. current legislative efforts have been weak, and despite rhetoric from leaders about improving supervision, no rigorous reforms have materialised. three key legislative amendments must be made to strengthen the enforcement of building regulations. first, the construction law must be amended to make supervision of construction mandatory for all residential projects. the wenchuan and yushu earthquakes demonstrated that the supervision of only select buildings is a policy which is highly prejudicial to residential and rural housing. at present, typically only buildings funded by the chinese government are required to have supervision units present during construction (regulations australasian journal of construction economics and building ting, m (2010) ‘building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes’, australasian journal of construction economics and building, 10 (3) 62-75 71 on the quality of construction projects art. 12). such a policy is unsustainable for the future growth of the industry. as the construction sector develops, a greater proportion of building is likely to be undertaken by private enterprise, making the current legislative framework even more outdated. without legislative measures to mandate supervision of construction work, there is a real risk that quality and safety will suffer. the second amendment is to redefine the scope and powers of supervision units. article 32 of the construction law currently requires supervision units to take on cost and time management responsibilities in addition to maintaining quality. moreover, in article 33, developers can further circumscribe which areas of the project a supervision unit can inspect. these provisions must be removed to provide supervision units the independence to comment candidly on the true quality of construction work. third, in the wake of the wenchuan and yushu earthquakes, there should be express provision in the construction law for supervision units to inspect the structure of a building for seismic design compliance. china, by virtue of its size and geographical location, has a long history of high magnitude earthquakes. however, even after the two earthquakes, there is still no regulation which requires inspectors to specifically check for seismic code compliance. to give force to these legislative amendments, the government must commit more to developing the supervision sector. given the boom in the construction industry, the government should ensure that there is a corresponding demand for supervisors. this will give much needed incentive for people to enter the field and lessen the burden on government to micromanage the construction industry. this will require more training of supervisors. the government can further promote demand for supervisors by creating better information infrastructure for construction projects. if people are more aware of the quality and safety record of developers, there is a greater incentive for developers to maintain high standards. these are just a few suggestions that can further implement the overall objective of greater enforcement. encouraging supervision of construction projects is the primary tool for the chinese government to ensure greater and more consistent enforcement of its laws. amending the construction law to reflect its policy announcements should be the first step to laying the foundation to better quality and safety for residential property. conclusion the construction industry has been a large part of china’s economic success. however, the speed of growth for the sector has outpaced the regulatory framework. as a result, there are fundamental legal issues that provide cause for concern about the safety and quality of buildings, especially for rural housing. these concerns were fully realised in two major earthquakes in 2008 and 2010. the disasters highlighted serious problems in the way building regulations were formed and promulgated. inconsistencies and a lack of legislative hierarchy made it difficult to decipher which standards to follow. existing laws which provided for supervision of construction projects failed to consistently enforce quality and safety standards. although the government has acted swiftly to enact new laws to meet the challenges revealed by the two earthquakes, there needs to be a paradigm shift in their approach to regulation. instead of promulgating volumes of prescriptive rules on building design, there should be a concerted effort to unify standards. key legislation needs to be updated to reflect the changing construction industry and a greater focus needs to be placed on independent supervision of projects. wenchuan was an unfortunate wakeup call for an overzealous industry and a government comfortable with the fruits of an economic boom. there needs to be a refocusing of priorities on quality and safety of occupants. of course implementing the changes outlined here will not immediately improve the quality and safety of residential construction, but they will at least lay the foundation for the healthy development of china’s construction industry. australasian journal of construction economics and building ting, m (2010) ‘building on shaky ground: quality and safety in china’s construction industry in the wake of the wenchuan and yushu earthquakes’, australasian journal of construction economics and building, 10 (3) 62-75 72 acknowledgement this author wishes to thank mr matthew bell for his comments, guidance and support in helping to get this article written. bibliography australian broadcasting company (2008) ‘spotlight on china’s building codes’ asia pacific focus, 25 may 2008 as 1170, standards australia biz china (2010) the tenth five-year plan of the construction industry, newspaper, china daily, 28 may 2010, <http://bizchina.chinadaily.com.cn/guide/industry/industry5.htm> builders will be jointly and severally liable for the collapse of the construction unit (2009) ministry of housing and urban-rural development of the people’s republic of china (mohurd), news release, 25 december 2009 building code of 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(2007) ‘building surveying in china – lessons learned from australia’, australian institute of building surveyors conference, november 2007, adelaide australia, 351–66 2 viewpoint an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint dr harry m. karamujic, (university of melbourne, australia) abstract residential mortgage products (also known as home loans) pricing has been long understood to be something of a „dark art‟, requiring judgment and experience, rather than being an exact science. in the last decade, a lot has changed in this field and more and more lenders, primarily the larger lenders, are increasingly looking to make their pricing as exact as possible. even so, inadequate pricing of residential mortgage products (in particular its substandard risk pricing) has been seen as one of major causes of the global financial crisis (gfc) and subsequent spectacular banking collapses. the underlying theme of the paper is to exhibit how contemporary lenders, in practice, price their residential mortgage products. while discussing elements of the pricing calculation particular attention was given to the exposition of how contemporary lenders price risks involved in providing home loans. because of the importance of basel capital accords to how financial institutions assess and quantify their risks, the paper provides an overview of basel capital accords. the author envisages that the paper will (i) help enhance comprehension of the underlying elements of the pricing calculation and the ways in which these elements relate to each other, (ii) scrutinize how contemporary lenders identify and quantify risks and (iii) improve consciousness of future changes in interest rates. keywords: home loan pricing, home loan products, basel capital accords, cost plus pricing technique, risk quantification, risk pricing, provisioning introduction the australian home loan industry is characterised by a very homogenous products offering, a strong risk-pricing discipline, a highly concentrated industry structure, and products (home loans) that are almost fully commoditised 1 . in 1997, beyond commodity status, the council on financial competition‟s syndicated study, identified the following three hallmarks of commoditisation in the retail financial services industry leading to rapid industry consolidation: (i) increasing price elasticity of individual borrowers, (ii) pressure on profit margins across the core product set, and (iii) strategic emphasis on cost reduction. when discussing pricing, it is important to have in mind that pricing is only one element of the marketing mix and, as such, must be assessed as part of a wider picture. the other marketing mix elements are distribution, process, product and promotion. activities such as the introduction of a new product or new distribution channel are generally very costly, and the impact of these types of changes will generally take some time to start making a difference. in contrast, the impact of pricing-related initiatives is, typically, almost instantaneous. for example, a change in price for fixed rate home loans (frhls) would impact on all new home loan sales, while a change in price for variable rate home loans would have an impact on the whole portfolio. of course, in a real life situation, all of the marketing mix functions need to work together cooperatively i.e. pricing without promotion and adequate product mix and process cannot produce much in isolation. nevertheless, relative to other less competitive and homogenous industries, home loan borrowers are typically more price sensitive, which makes pricing more relevant and more often used by lenders as a driving force for various marketing initiatives. 1 for more on home loan products see karamujic (2009), chapter 5. http://financial-dictionary.thefreedictionary.com/bank http://financial-dictionary.thefreedictionary.com/risk australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 61 overall, home loan pricing entails pricing interest rates and fees 2 . fee pricing, in general, is much more static and by and large significantly smaller contributor to the overall price. consequently, the focus of this paper will be on home loan interest rates pricing. more precisely, the paper aims to show how lenders price their home loans i.e. determine home loan interest rates. while discussing elements of the pricing calculation, particular attention was given to how contemporary lenders identify and quantify risks. the author believes that with a bit of adjustment a very similar approach can be adopted by other disciplines (such as property), which currently employ significantly less sophisticated methods of risk assessment and risk quantification. in addition to discussing home loan pricing in the next section, in section iii we will present an overview of basel capital accords. finally, in section iv, the paper concludes. home loan pricing a study conducted by council on financial competition (2005) showed that the majority of lenders have, historically, devoted few or no resources to developing sound pricing models. this may be due to the fact that home loan product pricing has been long understood to be something of a „dark art‟, requiring judgment and experience, rather than being an exact science. in the last decade, a lot has changed in this field and more and more lenders, primarily the larger lenders, are increasingly looking to make their pricing as exact as possible. their attempts are supported by council on financial competition (2003) research, which shows that lenders who use quantitative pricing techniques as part of their pricing process can boost their bottom-line earnings by as much as five to seven per cent. in doing so, lenders have a number of pricing techniques at their disposal: 1 cost plus pricing, 2 market pricing, 3 promotions pricing, 4 tiered pricing, 5 timing pricing, 6 relationship pricing, 7 product range pricing, and 8 premium pricing the cost plus pricing technique sets prices at a mark-up to a minimum price allowable. the paper focuses on cost plus pricing technique because it is the basis for all other pricing techniques i.e. all other pricing techniques discuss different margin (mark-up) combinations, which primarily depend on the lender‟s business goals and associated pricing strategies3. cost-plus pricing technique the underlying motivation of the cost plus pricing technique is to determine the minimum cost of providing a home loan. on the critical side, even well constructed cost plus pricing totally ignores the question of demand and provides only an acceptable price floor. within this framework, if we are to set the lender‟s margin to equal the return on equity at the lender‟s hurdle rate (minimum rate of return on lenders‟ equity acceptable to the lender), the analysis represents the break-even analysis. this analysis does not take into account factors such as the competitive landscape and a borrower‟s value to the lender. nevertheless, it 2 such as transaction fees, lending fees (application and monthly service fees) and sundry fees (such as reference fees and bank cheque fees). 3 for more on other pricing techniques refer to karamujic (2009), chapter 6. australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 62 provides a useful tool for determining product level profitability. furthermore, the technique can be very useful in quantifying losses from products offered below cost to ensure they are being recouped elsewhere. for example, a lender may offer basic products well below the break-even point with the understanding that profits from cross-sold products will compensate for the loss. in this case, basic products serve as “loss leaders”. the basic cost plus pricing technique can be expressed as: hbp = cof + llp + lm + cos +coc, (1) where hbp represents home loan baseline price, cof represents cost of funds, llp represents loan loss provision charge, lm represents the lender‟s margin, cos represents costs of sales, and coc represents corporate overhead costs 4 . cost of funds (cof) an internal banking term interchangeably used with cof is the funds transfer pricing rate (ftpr). it is important to note that financial markets, although dominant, are not the only source of funds. even though a certain proportion of lending will be funded by deposits held by the lender, for pricing purposes the lender‟s benchmark base yield curve (bbyc) is represented by a weighted average of funds sourced from financial markets, across the required maturity spectrum. as its name states, the ftpr is devised, among other things, to enable meaningful funds transfer between different business units (normally between the treasury and various retailer business units, generally divided in line with the lender‟s borrower segmentation). the total ftpr across all defined maturity points is comprised of the bbyc and product-based risk adjustments. ftpr = bbyc + ras, (2) where ras represents risk adjustments. there may be instances, permanent or temporary, where it is necessary to make adjustments to the bbyc rate using an ra in order to transfer any risk associated with particular products or to reflect changes to the lender‟s overall relationship to the bbyc. ras will normally occur for reasons of liquidity risk and optionality risk. the risk premiums generated by the risk transfer processes must be explicitly set for each product and their appropriateness must be monitored. any ras adopted by a lender must be supported by an appropriate analysis and approved by the lender‟s management prior to implementation. to ensure the liquidity risk is adequately reflected through the fund transfer pricing process, a liquidity premium should be added to the bbyc. this is mainly influenced by the premium price in financial markets for longer-term funds 5 , financial markets valuation of the lender‟s creditworthiness 6 and/or periodic changes in global capital flows 7 . overall, liquidity risk can be defined as financial risk due to uncertain liquidity. lenders‟ treasury departments are 4 an interesting example how simplified version of the calculation can be utilised is provided by kosonen (1997). 5 there is „natural‟ interest rate premium in financial markets for longer term funds. 6 according to moody (2010), its creditworthiness analysis focuses on the fundamental factors of lender‟s long and short term risk profile: “the foundation of moody's methodology rests on two basic questions: (i) what is the risk to the debtholder of not receiving timely payment of principal and interest on this specific debt security?, and (ii) how does the level of risk compare with that of all other debt securities?” 7 such as the one triggered by the gfc. according to ellis (2009) the following three are the major causes of the gfc: the misperception and mismanagement of risk; the level of interest rates; and the regulation of the financial system. australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 63 generally the ones that assess the best representative spread to the bbyc, at all maturity points, and that apply liquidity premiums across the bbyc at the appropriate points. for all products, the liquidity premium must be based on the contractual maturity as opposed to the term to the next repricing. the liquidity spread to the bbyc is normally reviewed annually. by allowing a product-related option to be embedded in product change schedules of the lending contract, the lender faces an additional interest rate risk. the two most common examples of optionality entailed within a home loan product are: early repayment or prepayment, and repricing. an example of early repayment optionality is when a borrower has the implicit or explicit ability to terminate all or part of a “fixed term” home loan contract without incurring the payment of economic cost 8 . this would definitely impact on the pricing base and hence the optionality risk has to be calculated and added as an ra. a repricing optionality arises when, for example, a borrower is given the option to reprice a product (i.e. change the interest rate) at specified time intervals. loan loss provision (llp) loan loss provisioning (llp) is a part of the cost structure of providing a home loan that encompasses all the risks associated to providing lending products, except those related to liquidity and optionality. the lender‟s home loan llp is comprised of the following two components: (i) a specific provisioning cost (risk costs associated to cycle related long-term losses) and, (ii) a general provisioning cost (related to risk costs of losses already present within the portfolio but not yet specifically identified). as with any other cost that the lender faces, the aim is to minimise these risk costs, subject to provisioning a sufficient amount of capital that enables the lender to cover possible losses for activities that entail an element of risk. the llp cost is typically the second largest home loan pricing calculation cost element, hence the lenders are very keen to do everything they can to reduce the cost of achieving capital adequacy (the implicit logic is that the higher the risk involved, the greater the capital backing required). therefore, the lender‟s aim is optimal provisioning, which, if achieved, would contribute to total cost reduction. equally, sub-optimal provisioning will most definitely increase total costs of operations and thus the cost of providing home loans. australian prudential regulatory authority (apra), as its name states, is the prudential regulator of the financial services industry in australia. its primary task is to oversee banks, credit unions, building societies, general insurance and reinsurance companies, life insurance companies and friendly societies. in respect of provisioning, apra (2010) specifies that australian deposit taking institutions (adis) that are predominantly banks: “should have sound provisioning policies to ensure asset values, earnings and capital are accurately reported. an adi's provisioning policy should cover both specific and general provisions. specific provisions should be raised whenever reasonable doubt exists over the recoverability of particular exposures. general provisions cover the risks which are inherent in an adi‟s business but which cannot be attributed to particular exposures.” the expertise of risk quantification, relating to the llp, is based on the concepts of expected losses (el) and unexpected losses (ul). the notion of specific provisioning relates to the concept of els, while the notion of general provisioning relates to the concept of uls. principally, at a portfolio level, specific provisioning relates to average write-offs of the particular class of home loan being priced. for example, if home loan write-offs and post recoveries reached 10 per cent once every ten years, and were at 0 per cent for the other nine years, the gross specific provision charge should be one per cent (being a simple 8 economic cost is a fee that is charged by the lender for the early termination of the fixed rate home loan contract. australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 64 average over the observed period) of the outstanding amount (the total amount owed to the lender, at the particular point in time) for the particular class of home loans considered. on an individual (account) basis, specific provisioning is the estimate of shortfall between the face value of the debt and the estimated future cash flows, including the estimated realisable value of securities, if any. therefore, to get the gross specific provisioning amount for an individual home loan, we need to multiply the loan-specific el rate and the outstanding home loan amount. there are two main methods used for specific provisioning for home loan products, namely the term product methodology and the revolving product methodology. the term product methodology applies to all home loans except line of credit (loc) home loans. the term product methodology (elterm) is defined as: elterm = ead x nlrterm, (3) where eadterm represents exposure at default and nlrterm the net loss rate. the ead is defined as the amount of outstanding principal, fees and interest owed at the time of default. on the other hand, the nlr is an expected cumulative net loss rate for the remainder of the loan term, and is calculated as: nlr = glr x (1rcr), (4) where glr is a gross loss rate (estimated from the actual data and based on historically observed loss rates) and rcr is the portfolio level estimate of the recovery rate. contrary to the term product methodology, the revolving product methodology (elrpm) applies only to loc home loans and is calculated as follows: elrpm = ead x pd x lgd, (5) where pd represents the probability of default (the probability that a loan or group of loans will become irreversibly delinquent over a prescribe period of time) and lgd represents loss given default (percentage of exposure which will be lost after all recovery efforts, including legal expenses, time value of money and recovery expenses). the lgd is calculated as: lgd = 1 – rcr. (6) as previously mentioned, in contrast to specific provisioning, general provisioning is derived to cover losses already present within the portfolio, but not yet specifically identified. in the most general terms, apra (2010) views general provisions in the following terms: “a general provision should be established to address latent losses known to exist in the credit portfolio but which cannot be ascribed to individual facilities. when creating and determining the level of general provisions, an adi should consider the following: (a) the general provision should not act as a substitute for the establishment of adequate specific provisions or the recording of an appropriate charge-off for bad debts; (b) the general provision should be calculated in a prudent and conservative, but not excessive manner, so that it addresses an acceptable range of estimated losses; and (c) the estimate of latent credit losses known to exist in the credit portfolio should reflect consideration of all significant factors that affect the collectibility of the credit portfolio as of the assessment date.” due to its importance to the stability of the financial system, apra is very vocal in stating that where it assesses that the level of general and/or specific provisions generated by an australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 65 adi‟s own methodology is not adequately reflecting loss expectations in the credit portfolio, nor correctly measuring impaired assets, earnings or capital adequacy, it will discuss these concerns with the adi. following discussions between an adi and apra, the adi may be required to adjust its level of general and/or specific provisions and/or amend its provisioning methodologies. notionally speaking, general provisioning can be catered for by using two methods, namely risk capital 9 method and regulatory capital 10 method. in its pure form the total of credit risk 11 , market risk 12 , operational risk 13 , interest rate risk in the banking book 14 and business risk 15 capital is referred to as “risk capital”. nevertheless, for the purposes of this paper, the risk capital represents a calculation of the capital required to act as a buffer against ul for credit, market and operational risks, at a prescribed minimum confidence level. furthermore, to simplify the analysis and because the focus of our attention are home loans, for which the credit risk typically represents the largest risk, we assume that market and operational risks are not present. consequently, the risk capital is equal to the credit risk capital. the total of risk capital plus pension risk 16 , dividends and intangibles 17 capital is referred to as “economic capital”. according to the risk capital methodology, the ul amount is the loss of the worst-case scenario, more specifically, the difference between the worst-case scenario loss and the mean. to notionally illustrate the risk capital methodology let us use the same example as before i.e. assume home loans that lose, post recovery, 10 per cent once every ten years, and 0 per cent in the other nine years, within the same estimated risk exposure environment. as previously determined, the specific provision charge would be one per cent. furthermore, if we are to assume that the lender is aiming to have a 100 per cent confidence interval, i.e. to be fully covered, it would need to cover for the 90 per cent interval of the residual gap between the worst-case scenario loss (10 per cent) and the mean loss (1 per cent). with the worst-case scenario loss being 10 per cent and the mean loss being one per cent, the ul amount would be 9 per cent. consequently, the product level gross amount of risk capital required is 9 per cent multiplied by the outstanding loan amount. in practice, the confidence interval is directly related to the lender‟s credit rating. for example, the national australia bank‟s (nab‟s) current credit rating of aa implies that the bank-wide capital should go to a 99.97 per cent worst-case scenario, allowing a probability 9 the term risk capital method is purposely used to differentiate from the regulatory capital method. other commonly used, and probably more precise, term to depict this method is “calculation of the regulatory capital in accordance to the basel ii‟s internal ratings-based (irb) approach”. 10 also known as “calculation of the regulatory capital in accordance to basel i or the basel ii‟s standardized approach”. 11 the risk arising from a borrower‟s failure to meet the term of any contract with the lender or otherwise fail to perform as agreed. 12 the risk arising from adverse market movement in the trading book which arises from money market dealing and position 13 the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. 14 the risk arising from adverse movements in interest rates on the structural interest rate position in the banking book. 15 the risk to earnings and capital arising from the lender‟s exposure to potential operating losses following an unexpected reduction in revenue that cannot be offset by a corresponding timely decrease in expenses. 16 the risk that assets are insufficient to meet the lender‟s legal and moral obligations to the current and former members of the relevant pension schemes. 17 in addition to capital to support the inherent risks, the applicable solvency standards require holding of sufficient capital to meet shareholder dividend payouts and intangibles such as unamortised goodwill, asset revaluation reserves, future income tax benefits and capitalised expenses. australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 66 of only 0.03 per cent of the historical worst-case scenario not being covered. in this view, capital represents the amount needed as a cushion against hard times. formally, the calculation of ul amount (also known as the gross risk capital amount (grca)) can be defined as the standard deviation of the default expectancy of a loan: grca = ul = (el x (lgd – el)) 1/2 (7) and el = pd x lgd (8) thus, to calculate the ul amount for a single exposure (ulamt) we use grca amt = ulamt = ead x uli, (10) where uli is the rate of ul for a single exposure. at a portfolio level, the calculation of ul portfolio amount (ulp) is conducted over the aggregated exposure, given the approach assumes a portfolio level pd. thus: grca p = ulp = eadp x ulp (11) following calculation of portfolio-level ulp, to calculate ul for all portfolios (ulpo), we need to correlate ulp to the total lender‟s portfolio loan loss likelihood. grcapo = ulpo = ulp x √corr (12) finally, the grcapo at the required confidence level (grcarcl) is calculated by multiplying the correlated ulpo amount by the appropriate number of standard deviations of the required confidence level. grcarcl = ulpo x nsd, (13) where nsd stands for number of standard deviations. after deriving the grca, to get the net risk capital amount (nrca) we need to subtract the capital benefit (the revenue earned from investing the allocated provisioning capital, as apra allows limited usage of the allocated capital) amount from the grca. finally, the risk capital charge amount (rcca) equals the nrca multiplied by the lender‟s hurdle rate 18 . as previously indicated, an alternative way of calculating the ul amount is by using the regulatory capital method. the regulatory capital method aims to cater for the same reasons of capital adequacy as the risk capital method, however instead of primarily being determined by the lender‟s risk profile, it is set in isolation of the lender‟s risk profile by the regulatory authority, in australia by apra. in doing so, apra arrives at the single minimum amount of capital the lender is required to hold, applicable to the particular lending class (such as the secured and unsecured lending classes). this minimum amount of capital is defined by the capital adequacy accord, agreed to in 1988 (also known as basel i). according to basel i, the lender must hold capital that is no less than 8 per cent of riskweighted assets. credit exposures are risk-weighted according to the three broad types of counterparty (government, banks and all others). the accord specifies five general 18 the hurdle rate can be defined as the minimum returns on regulatory or economic capital expected to be achieved to provide a sufficient return for the use of the lender‟s capital. achieving returns equal to, or above, the hurdle rate means that shareholder value is being created. australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 67 categories of risk weights: 0, 10, 20, 50 and 100 per cent. the sum of risk-weighted assets plus risk assessed from off balance-sheet business is then related to the lender‟s capital base. the resulting risk ratio is used as a measure of capital adequacy. in respect to the capital allowed to be used for the capital adequacy provision, for supervisory purposes, the allowed capital can be disaggregated into two tiers, namely tier 1 (t1) and tier 2 (t2) capital. t1 capital is comprised of the highest quality capital and includes: paid-up ordinary shares, non-repayable share premium accounts, general reserves, retained earnings, noncumulative irredeemable preference shares and minority interests in subsidiaries. on the other hand, t2 capital represents other capital, which falls short of some of the characteristics of the core capital. based on differing degrees of permanence associated with the respective capital instruments, t2 capital can be divided into two further tranches. upper t2 capital is comprised of general provision for doubtful debts, asset revaluation reserves, cumulative irredeemable preference shares, perpetual subordinated debt and mandatory convertible notes. lower t2 capital is ranked behind upper t2 capital and entails limited life redeemable preference shares and term subordinated debt. to calculate the gross regulatory capital amount (grgca) for a particular exposure we need to multiply the outstanding amount of the loan by at least 8 per cent, and adjust it with the applicable risk weighting. the net regulatory capital amount (nrgca) is equal to the grgca less the capital benefit amount (the revenue earned from investing the allocated provisioning capital, as apra allows limited usage of the allocated capital). finally, to get the regulatory capital charge amount (rgcca) we need to multiply the nrgca by the lender‟s hurdle rate. ultimately, the total llp charge (this amount is to be inputted into equation (1)) entails the general provisioning (the ul cost charge, expressed as loan amount per centage of either rcca or rgcca) cost per-centage charge and the specific provisioning cost (el) percentage charge. in closing, it is important to note that since home loans (being secured lending products) generally have better risk profile compared to other lending products, the risk capital method (being based on an internal assessment of risk) is the method most home lenders would prefer to use. lender’s margin the lender‟s interest rate margin can be defined, in principle, as the difference between the interest rates on lenders‟ borrowings and their lending rates the lender‟s margin can be viewed as either gross or net margins. the gross margin is the difference between the cofs and the lending interest rate, and the net margin is the difference between the gross margin and all other costs that lenders face in developing, supporting and eventually closing the home loan. other costs other costs, as presented in equation (1), include the costs of sales (cos) and corporate overhead costs (coc). cos are comprised of home loan distribution, payment and processing costs. during the tenure of a home loan, lenders incur significant coc for activities such as general analysis, risk-related overview and analysis, etc. as a result, a portion of overall the cocs is distributed to various costs centres during the course of the year. a simplified example the cost plus pricing technique let us now put all of that wonderful exposition into a simplified practical example, and look at recent history to see how the various components of the cost plus pricing technique (in particular llp and cof) drove typical home loan interest rates at the time. australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 68 (bps) basis points june 2004 june 2005 june 2006 june 2007 june 2008 june 2009 cost of funds (cof) 1 549 566 596 642 781 325 loan loss provision (llp) 2 97 94 89 68 74 120 lenders margin (lm) 3 273 282 271 262 263 217 cost of sales ( cos) 4 5 5 5 5 5 5 corporate overhead costs (coc) 4 5 5 5 5 5 5 interest rate 929 951 966 981 1,128 672 table 1: an example the cost plus pricing technique assumptions 1. represented by 90 days bank bills interest rate. sourced from rba (2010). 2. the total nominal lending provisions as a percentage of the total gross loans and advances. sourced from apra (2010b), table 5. 3. the total nominal retained profits as a percentage of the total assets. sourced from apra (2010b), table 5. 4. cos and coc are predominantly fix costs. they are estimated at 5 bps each across the observed period. as shown in table 1, the loan pricing landscape underwent some dramatic changes between 2004 and 2009. in particular: (i) cof continued increasing until 2008 and then as a consequence of rba‟s response to the gfc (from september 2008 to april 2009, the rba reduced the cash rate by 4.25 per cent) experienced a significant fall, (ii) llps continued falling until the emergence of the gfc (the market had largely forgotten about the concept of risk), which resulted in a sharp increase in provisioning (increased by 77 per cent, from june 2007 to june 2009), and (iii) lms were quite stable for the most of the observed period, with the exception of sizable fall recorded in 2009 as a consequence of the gfc (tightening of the wholesales markets forced funding costs up, while heightened risk aversion induced lenders to fight harder for lower risk opportunities). an insight into the future as we look to the future, the price makeup will change again and may look as shown in table 2. (bps) basis points november 2010 june 2011 june 2012 cost of funds (cof) 1 420 480 500 loan loss provision (llp) 2 110 110 100 lenders margin ( lm) 3 210 250 270 cost of sales ( cos) 4 5 5 5 corporate overheads ( coc) 4 5 5 5 interest rate 750 850 880 table 2: possible future changes in typical mortgage lending interest rate assumptions 1. cof represented by 180 days bank bills interest rate as of march 2010. in line with the shape of the capital markets yield curve; we expect moderate increases in cof for both 2011 and 2012. australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 69 2. as financial markets stabilize and banking risk profiles improve, conservatively we expect provisioning cost to reduce by 10 bps in 2010, stay unchanged in 2011, and then also reduce by additional 10 bps in 2012. 3. with stabilization of wholesale credit markets and ongoing improvement in domestic economic performance, lending margins are expected to improve. we forecasted for ongoing improvements during the observed period, and return to long run average by 2012. 4. cos and coc are predominantly fix costs. they are estimated at 5 bps each across the observed period. perhaps of most interest in gaining some insight into the future direction of interest rates is to look at which of the key drivers‟ discussed above are going to have prominent influences over the next few years. in regards to future movements in typical home loan interest rates we expect: (i) a modest upward push driven by expected increase in cofs and lms, and (ii) partly offsetting downward push due to eventual reduction in llps. an overview of basel capital accords main objectives of basel capital accords are to promote safety and soundness in the financial institutions by ensuring maintenance of sufficient capital levels, supporting development and implementation of adequate policies and processes, and ensure continuance of robust governance practices to safeguard against all types of risk. the name „basel‟ comes from the swiss city of basel, which is where the bank for international settlements (bis) developed the original framework, known as basel i. principally, the development of basel i came about in response to concerns by bank regulators that some banks, especially internationally active banks, did not properly understand risk and thus posed a systemic risk to the global banking system. the accord was initially intended to only apply to banks in the world's richest ten countries, nevertheless the accord was eventually adopted by almost every country in the world. in short, basel i aimed to ensure a standard level of banking safety and security by requiring institutions to have sufficient capital to cover their risks. the accord was introduced in 1988 and is also known as the capital adequacy accord of 1988. it prescribes the holding of core t1 of no less than 4 per cent of risk-weighted assets (with common equity (ce), also known as core t1 capital ratio, of 2 per cent), and total regulatory capital (trc) of no less than 8 per cent of risk-weighted assets 19 . major critiques of basel i are that it focus on credit risk and that the bulk of a bank's assets are subject to the same capital charges, no matter how risky they are. as the international financial system has grown more sophisticated and complex, the initial accord‟s focus on credit risk has become insufficient. subsequent events led to a recognition that more sophisticated standards are required to take into account industry advances and, as a result, the bis began to review the basel i framework. the regime was refined and made more sophisticated, and the risk weightings more granular, in 2004 with basel ii. for example, it allowed banks with the appropriate systems and historical data to use an internal ratings-based (irb) approach to assess the risks of a particular lending 20 . on the other hand, the basel ii‟s standardised approach continued using basel i practice of setting specific risk weights for certain types of credit risk. the risk weight categories prescribed under the standardised approach are the same as those used under basel 1 with an addition of new 150% rating, which is allocated for borrowers with poor credit ratings. 19 applicable risk weight are: 0% for short term government bonds, 20% for exposures to the organisation for economic co-operation and development (oecd) member countries‟ banks, 50% for residential mortgages and 100% weighting on other personal and unsecured commercial loans. 20 the basel ii accord comprises of three interrelated segments that are known as the "three pillars". for more on the three basel ii pillars and different basel ii approaches see bis (2006). australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 70 the overall objective of the basel ii was to promote safety and soundness in financial institutions by ensuring the maintenance of sufficient capital levels, along with supporting policies and processes and robust governance practices to safeguard against credit, operational, market and interest rate risks. by allowing lenders to match their capital to the level of risk, the basel ii led to more pragmatic and competitive pricing outcomes. nevertheless, over time it became obvious that basel ii has several major shortcomings, namely: (i) it became an international competition for consultants: how to help banks allocate less capital, (ii) it was accused of boosting procyclicality of the banking industry21, (iii) it created significant incentives for banks to move risky assets to unregulated parts of the holding company, and (iii) banks took advantage of the opportunity to transfer risk to investors use securitization22. the analytical portion of the paper focuses on the two presently established accords: basel i and basel ii. those regulatory frameworks represent decades-long effort at perfecting minimum capital requirements calculations. unfortunately, as recent events clearly indicate, those rules have not proved as useful in preventing bank illiquidity as a result of the gfc. for example, just five days before the bankruptcy of lehman brothers in september 2008, it boasted a basel-type t1 capital ratio of 11 per cent; significantly above the regulatory minimum. when the share price collapsed, counter-party confidence ebbed away much faster than the capital adequacy ratio would suggest. at its 12 september 2010 meeting, the group of governors and heads of supervision, the oversight body of the basel committee on banking supervision, announced a substantial strengthening of existing capital requirements. this proposal has been dubbed “basel iii”. according to the basel iii proposal, the total risk capital (trc) can be presented as: trc = t1 + t2 + cb + ccb + csib (14) where t1 represents tier 1 capital, t2 represents tier 2 capital, cb represents capital conservation buffer, ccb represents countercyclical capital buffer, and csib represents capital for systemically important banks. on the other hand, the t1 is comprised of common equity (ce) and other t1 (ot1). t1 = ce + ot1 (15) possibly the most important change that comes with basel iii is setting of much stricter minimum standards for ce. something similar did exist in the past, but it was set very low, at just 2 per cent. compared to basel i and basel ii, according to basel iii, ce is the main thing that matters. furthermore, various dubious things which currently count as t1 or t2 capital, but should not, will be phased out over a period of 10 years, beginning in 2013. according to the proposal, the minimum requirement for ce is 4.5 per cent, for ot1 is 1.5 per cent and for t2 is 2 per cent. on the whole, the new standards for ce are significantly tougher than the old standards for t1 capital in total. in addition to strengthening ce requirements, there is a cb of another 2.5 per cent. most, if not all banks, should strive to be well above that buffer. if there‟s some kind of crisis and banks are forced to write down a lot of bad loans, they can eat into the buffer. that will bring extra regulatory oversight, and those banks won‟t be able to pay dividends. assuming full allocation of ce, banks will need to have 7 per cent ce, 1.5 per cent ot1, and 2 per cent t2, i.e. 10.5 per cent trc. 21 for more see imad (2010) , and gordy and howells (2004). 22 to see how it functioned in ireland see coates (2008). australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 71 furthermore, when credit in an economy is growing faster than the economy itself, a ccb comes in play. principally, ccb requires banks to hold more capital in good times. this countercyclical capital framework is intended to contribute to a more stable banking system, which will help dampen economic and financial shocks. that countercyclical buffer won‟t be set by the bis; it will be left up to national regulators. according to preliminary comments made in media, one can probably expect oecd countries to enforce it up to the maximum of 2.5 per cent. in view of that when the economy‟s is doing well, banks are going to need 9.5 per cent ce, 1.5 per cent ot1, and 2 per cent t2, i.e. 13 per cent trc. finally, according to bis (2010) “systemically important banks should have loss absorbing capacity beyond the standards announced…”. it still not know how high csib will be, but the chances are that when an announcement comes, the biggest banks are going to need significantly more capital. work continues on this issue in the bis‟s financial stability board and relevant basel committee work streams. it is important to note that the above outlined impacts will not be implemented immediately, instead the standards start being phased in on january 1, 2013, with a ce requirement of 3.5 per cent. that rises to the final 4.5 per cent in 2015. other parts of the structure take longer, but they‟re all phased in by january 1, 2019. with respect to commenting on the proposal, at least at this early stage, the following statements made by the atca (2010) make a lot of sense “…the fact that the proposals are dubbed basel iii suggests that regulators have been here twice before! the record of bankcapital rules is crushingly bad in the wake of new types of securitisation instruments, excessive risk taking, self-measurement of risk and financial markets' volatility… in the days when banks could not rely on governments to save them, they carried huge capital buffers to protect themselves against losses and drops in confidence. in the late 19th century a typical american or european bank had an equity buffer, i.e. core capital, equivalent to 15-25% of its assets! as recently as the 1960s british banks held more than a quarter of their assets in low-risk, liquid form, such as cash or government bonds. are we in the end -if not via basel iii then basel iv -likely to return to 19th century levels of capital adequacy? this would no doubt have significant consequences for the valuation of banks and the unencumbered survival of large capital financial institutions.” conclusion the purpose of this paper has been to expound how, in practice, lenders price their home loans, i.e. how they determine their home loan interest rates. the paper started by outlining the importance of home loan pricing, its major components and objectives. the cost plus pricing technique was then examined. particular attention was given to the cost plus pricing technique because it is the basis for all other pricing techniques i.e. all other pricing techniques only focus on different margin (mark-up) combinations. having gone through a rather detailed discussion of how contemporary lenders identify and quantify risks, the inevitable conclusion is that a lot that has been outlined, with some modifications, can also be used to enhance the ways other disciplines, such as construction and property, assess, quantify and price their risks. due to a number of references made to it while discussing llp, the paper provided an overview of basel capital accords. given the debates about the housing market that have been raging since the gfc, the eventual impacts of the proposed basel iii, as the newly proposed measures are phased in, will be very closely monitored. after more information becomes available, an interesting possibility for further research would be to assess the impact of the implementation of basel iii on llp costs and home loan interest rates. overall, the author hopes that the paper will help demystify the underlying elements of the pricing calculations (such as cofs and llps) and the ways in which these elements relate to each other. consequently, the paper should also contribute towards better understanding of the likelihood and probability of future changes in home loan interest rates. australasian journal of construction economics and building karamujic, h m (2010) ‘an investigation into the fundamental drivers of pricing of residential mortgage products – a risk pricing viewpoint’, australasian journal of construction economics and building, 10 (4) 60-72 72 references apra (2010) prudential standards and guidance notes for adis, http://www.apra.gov.au/adi/prudential-standards-and-guidance-notes-for-adis.cfm, viewed january 2010 apra (2010a) prudential standard aps 113, http://www.apra.gov.au/adi/prudentialstandards-and-guidance-notes-forhttp://www.apra.gov.au/policy/upload/draft-aps-1132006.pdf, viewed january 2010 apra (2010b) quarterly bank performance, september 2009 (revised 26 march 2010), http://www.apra.gov.au/statistics/adi-quarterly-performance-statistics.cfm, viewed may 2010 atca (2010) basel iii: making banks stronger or not? http://www.mi2g.com/ cgi/mi2g/frameset.php?pageid=http%3a//www.mi2g.com/cgi/mi2g/press/250110.php, viewed september 2010 bis (1988) basel i (1988) basel committee: international convergence of capital measurement and capital standards (updated to april 1998), http://www.bis.org/publ/bcbsc111.htm, viewed january 2010 bis (2006) basel ii: revised international capital framework, http://www.bis.org/publ/bcbsca.htm, viewed february 2010 bis (2010) press release group of governors and heads of supervision announces higher global minimum capital standards, http://www.bis.org/press/p100912.htm, viewed september 2010 business banking board (2002) pricing strategies, corporate executive board, july coates, d. (2008) the irish sub-prime residential mortgage sector: international lessons for an emerging market, journal of housing and the built environment, 23, 131–144 council on financial competition (1997) beyond commodity status, corporate executive board council on financial competition (2003) mortgage pricing practices, corporate executive board, july council on financial competition (2005) strategic international trends, corporate executive board, february council on financial competition (2006) innovations in the mortgage market, corporate executive board, july ellis, l. (2009) the global financial crisis: causes, consequences and countermeasures, http://www.rba.gov.au/speeches/2009/sp-so-150409.htm, viewed may 2010 gordy, m. b. and howells, b. (2004) procyclicality in basel ii: can we treat the disease without killing the patient?, board of governors of the federal reserve system,http://www.bis.org/bcbs/events/rtf04gordy_howells.pdf, viewed september 2010 imad, a. m. (2010) basel ii as a casualty of the global financial crisis, journal of banking regulation 11, 95-114 karamujic, m. h. (2009) the determination of home loan interest rates and an empirical assessment of their cyclicality and seasonality in australia, saarbrucken germany: vdm kosonen, k. (1997) the pricing of subsidized housing loans in finland, journal of housing and the built environment, 12 (4), 381-399 moody‟s (2010) moody's rating process – introduction, http://v3.moodys.com/ pages/default_au.aspx, viewed may 2010 rba (2010) interest rates and yields money market, april 2010, http://www.rba.gov.au/statistics/tables, viewed may 2010 http://www.apra.gov.au/adi/prudential-standards-and-guidance-notes-for-adis.cfm http://www.apra.gov.au/adi/prudential-standards-and-guidance-notes-for-adis.cfm http://www.apra.gov.au/adi/prudential-standards-and-guidance-notes-for-adis.cfm http://www.apra.gov.au/adi/prudential-standards-and-guidance-notes-for-adis.cfm http://www.bis.org/publ/bcbsca.htm http://www.rba.gov.au/speeches/2009/sp-so-150409.htm,%20viewed%20may%202010 http://www.bis.org/bcbs/events/rtf04gordy_howells.pdf loosemore, m (2012) book review, australasian journal of construction economics and building, 12 (1) 92 92 book review risk management for design and construction ovidiu cretu, robert b. stewart and terry berends, john wiley and sons inc. 2011, 288 pages, isbn: 978-0-470-63538-4 aud 155.00, nzd 175.00, gbp 85.00, usd 125.00, euro 100.00 this book is written by three highly experienced professionals who appear to work primarily in the transportation sector. it describes a highly quantitative approach to risk management and will be of interest to anyone who is responsible for delivering design and construction projects or indeed, projects of any kind. while written in a clear and easy-to-follow style with plenty of real-life examples and anecdotes to enliven the text, the book will suit those with some prior knowledge of quantitative techniques. the content becomes quite technical in parts and would likely overwhelm the layperson tackling this subject for the first time. the book’s focus in on risk-based estimating and it starts with a brief introduction to risk management and with some basic definitions used in the estimating arena. while promoting quantitative probabilistic methods the book does not seek to argue that they are panacea for every situation and to its credit regularly points out the limitations of the approach. in the early chapters, readers are also taken step-by-step through traditional deterministic and riskbased estimating processes and the documentation and sources of data needed to ensure it is reliable. ideas of cost and schedule risk are integrated and many figures, illustrations and case study examples are used to illustrate points being made. some of these rather idiosyncratic figures are quite complex and hard to follow, nevertheless they do help to lighten what would otherwise be a rather heavy text. ideas of risk correlations and inter dependencies are also introduced as critical elements of reliable risk models, as are discussions about the wide range of distributions which can be used to represent risk-based data and form the basis of monte carlo simulations and sensitivity analysis. later chapters go into the practicalities of collecting risk data to populate the models described. different methods of data collection are discussed here, as are the potential cognitive biases which can distort it. this recognition of the psychological limits of quantitative analysis is a strength of the book which continues to make extensive use of examples, case studies, scenarios and figures to illustrate points being made. issues of risk appetite, risk tolerance and risk attitude are also considered in some detail in how they can influence the risk-based estimating process. the penultimate chapter of the book shows how the principles explained in the previous chapters can be applied in practice using a proprietary risk-based estimating software called rbes. this chapter goes into great depth, taking the reader step-by-step through the whole process of building a model, simulating it and then interpreting the results using real-life examples from the authors’ significant experience of using this software. the final chapter is somewhat out of place in that it tackled the risk workshop process used to identify and collect risk-based data. once cannot help feeling that it would be better integrated in chapter four on risk elicitation techniques which covers some of the same ground. in conclusion, this is an excellent book for those with a keen interest in quantitative riskbased estimating. it is well balanced, although quite complex in parts, and is written in a clear and lucid style by three authors who clearly have a deep understanding of their subject matter. martin loosemore the university of new south wales sydney, australia editorial the architecture, engineering and construction (aec) industries have long sought techniques to decrease project cost, increase productivity and quality, enhance safety, and reduce project delivery time. building information modeling (bim) offers the potential to achieve these goals. bim simulates the construction project in a virtual environment. with bim technology, an accurate virtual model of a facility is digitally constructed. when completed, the computer-generated model contains precise geometry and relevant data needed to support the programming, fabrication, procurement, construction, and post-construction activities. it can be used by project stakeholders for planning and decision making throughout the project life cycle. bim represents a new paradigm within aec, one that encourages integration of the roles of all stakeholders on a project. it has the potential to promote greater efficiency and harmony among players who, in the past, saw themselves as adversaries. this special issue of australasian journal of construction economics and building (ajceb) presents five scholarly research papers on bim technology and process. these papers provide not only basic knowledge on bim but also cover new cutting edge research on bim applications and implementation being conducted in different parts of the world. the guest editors have written the first paper followed by four other papers, which were originally presented at the cib w102 knowledge and information management in building conference in france last year 1 . the presented conference papers were revised by the authors for this special issue and went through the established peer-review process of ajceb. in the first paper, “building information modeling (bim): now and beyond”, azhar, khalfan and maqsood have discussed core concepts of bim, its applications in the project life cycle and benefits for project stakeholders with the help of several case studies. their paper also elaborates risks and barriers to bim implementation and future challenges for aec companies. the next paper, “a bim-based approach to reusing construction firm’s management information”, written by ma zhiliang, introduces a new approach based on bim technology to reusing construction firm’s management information. in this paper, the current approaches are reviewed at first, and then the framework of the new approach is described. next, the key issues of the bim-based approach are clarified. finally, a use case of the new approach is demonstrated. the author found that the bim-based approach can be used in construction firms to better reuse the accumulated management information. the following paper “a bim-info delivery protocol” by hooper and ekholm presents a framework to align consultant bim-info delivery expectations. the bim-info delivery protocol (idp) is a compelling tool for use in the evolving world of virtual design and construction teams and can be used as a basis for a bim management plan. if handled optimally biminfo can significantly enhance the quality of the product and safeguard the success of the project. redmond and west’s paper, “the use of cloud enable building information models – an expert analysis”, explores cloud computing as a centralized heterogeneous platform for enabling different bim applications to be connected to each other through remote data servers. they found the cloud computing as a positive form of physical it infrastructure that would increase efficiency and productivity among project teams. using delphi questionnaires, they also seek the answers of the following queries; (i) what are the most appropriate applications for advancing interoperability at the early design stage, (ii) what are 1 joint cib w78-w102 2011: international conference –sophia antipolis, france, 26-28 october 2011 khalfan, m m a, azhar, s and maqsood, t (2012) editorial, australasian journal of construction economics and building, 12 (4) 13-14 14 the most severe barriers of bim implementation from a business and legal viewpoint, (iii) what is the need for standards to address information exchange between design team, and (iv) what are the uses of the most common interfaces for exchanging information? please read their paper to find the answers of these queries. in the final paper, “aligning bim with fm: streamlining the process for future projects, kasprzak and dubler, throws light on the applications of bim in facility management through a case study of the pennsylvania state university (psu), usa. their paper outlines the current initiative by the office of physical plant (opp) and the asset manager at psu, to develop an information exchange framework between bim and fm applications to be used internally. as a result of this research, psu has been able to define owner operational requirements for future projects and develop a flexible integration framework to support additional bim tasks and information exchanges. we do hope that you would find these papers informative and useful in your research, teaching and practice endeavours. if you have any follow-up questions or would like to write a discussion note, please feel free to contact the journal’s editorial staff. we also encourage you to considering submitting your scholarly articles to australasian journal of construction economics and building. dr. malik m. a. khalfan, rmit university, melbourne, australia dr. salman azhar, auburn university, auburn, alabama, usa dr. tayyab maqsood, rmit university, melbourne, australia guest editors special issue of australasian journal of construction economics and building on bim analysing the relationship between new housing supply and residential construction costs with the regional heterogeneities junxiao liu, (deakin university, australia) kerry london, (rmit university, australia) abstract new housing supply in australia has been experiencing a low rate of increase in conjunction with a dramatic increase in residential construction costs since the 1990s. this study aims to estimate the relationship between new housing supply and residential construction costs with the regional heterogeneities. based on a panel error correction model, it can be identified that there is a causal link as well as a significant correlation between new housing supply and construction costs in the australian sub-national housing construction markets. the model developed in this research assists policy makers to better understand the nature of the supply side of the housing sector and then enact appropriate policies to improve the new housing supply in australia. keywords: new housing supply, residential construction costs, regional heterogeneities introduction the capacity of the australian housing sector to supply has reached a crisis point since the 1990s, during which australia’s urban population increased dramatically (abs, 2010a). figure 1 indicates that the annual population growth in australia exhibited a significant upward trend between 1996 and 2009 while the number of new housing commencements was highly stable. according to the projection of the australian national housing supply council (nhsc, 2010) in 2010, approximately 3.2 million additional dwellings will be required across australia in the next 20 years to accommodate a dramatic population growth. urban economic theory suggests that there should be a long-run convergence between total housing stock and urban population (dipasquale, 1999). however, it can be inferred from figure 1 that a divergence between housing supply and urban population has occurred in australia. the annual report of the housing industry association (hia, 2010) supported this perspective and stated that a housing shortage of approximately 110,000 emerged in 2009 in australia and this problem will be exacerbated in the future if the poor performance of the australian new housing supply is not able to be improved. an interesting situation along with the low increasing rate of the new housing supply in australia is that the input producer price indexes (ppi) of housing construction increased by more than 40% across the australian states (abs, 2010b). the input ppi is a measure of the changes in the prices of goods and services purchased by domestic producers for intermediate inputs of products (international monetary fund, 2004). thus, the input ppi related to housing construction is viewed as a measure for the changes in the input cost level of housing production. conventional economics claims that an increase in the input construction cost reduces new housing output level (somerville, 1999). however, few empirical studies have investigated whether or not the rises in residential construction costs causally and negatively affect the supply of new housing in australia. this paper starts by presenting previous studies on the relationship between new housing supply and residential construction costs. then, the methodology and the data will be australasian journal of construction economics and building liu, j and london, k (2011) ‘analysing the relationship between new housing supply and residential construction costs with the regional heterogeneities’, australasian journal of construction economics and building, 11 (3) 58-67 59 described. finally, the results yielded by the selected econometric model will be utilised for analysis and discussion. 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 500.0 p o p u la ti o n g ro w th & n e w h o u si n g c o m m e n c e m e n ts ( u n it s: '0 0 0 ) population new housing commencements figure 1 population growth and new housing commencements in australia (source: abs, 2010a) literature review the studies on new housing supply are less common than that of housing demand. however, the early research with regard to the supply of new housing can be dated back to the 1960s and the focus is estimating the price elasticity by the reduced-form method. the reduced-form technique is a simple regression approach where house price is a function of the factors in relation to supply and demand. the early reduced-form study, commenced by muth (1960), who examines the relationship between new housing outputs and house prices in the us, using national data. the results indicate that there is no correlation between new housing outputs and house prices. follain (1979) tests the price elasticity of long-run new housing construction applying muth’s (1960) model to national data as well. the results are similar to muth’s (1960) findings, suggesting that new housing starts are totally price inelastic. nevertheless, it is not possible to conclude, depending upon these two studies (follain, 1979; muth, 1960) that the supply of new housing is price inelastic as muth (1960) and follain (1979) use national data that has a potential problem in aggregation bias (stover, 1986). to solve this problem, a function with the cross-sectional data across 61 us metropolitan areas was estimated by stover’s (1986) study, in which new housing supply is significantly related to house prices. since the 1980s, there have been a series of empirical studies attempting to model the new housing supply directly. the approaches employed in such research emphasises a more structural method, in which the construction or aggregate supply is deemed to be a function of price and cost factors (dipasquale, 1999). the theory underpinning these studies is derived from the investment literature and urban spatial theory. within the framework of the investment literature, the demand for investment in housing is assumed to be the demand for new construction (montgomery, 1992). accordingly, an asset market approach, which views housing investment as a function of economic factors [e.g. australasian journal of construction economics and building liu, j and london, k (2011) ‘analysing the relationship between new housing supply and residential construction costs with the regional heterogeneities’, australasian journal of construction economics and building, 11 (3) 58-67 60 house prices, the price of output alternative (non-residential deflator) and construction costs], is developed by poterba (1984) to test the impact of the user costs on the steady state of the housing market. the results indicate that house prices is an essential determinant of new housing construction and the increases in prices of non-residential construction lead to decreases in residential construction. however, poterba (1984) found that there is no significant relationship between construction costs and new housing supply. the model proposed by poterba (1984) pursues the long-run equilibrium relationships among new housing supply, house prices and cost factors. however, the interrelationship between the variables within a short-run context is ignored. topel and rosen (1988) identified this point and developed a model where new housing supply is a function of house prices and a vector of cost factors. the results show that the long-run supply elasticity of price is 3.0 but the short-run elasticity is only 1.0. in short, the supply of new housing in the us is price elastic. topel and rosen’s (1988) model yields a result similar to poterba’s (1984) findings, which suggest that the impact of construction cost on new housing supply is not significant. although the investment-based models (poterba, 1984; topel and rosen, 1988) have contributed to the literature, advocates of the urban-spatial theory still criticise these studies because all of them ignore an important issue – the input of land. in reality, poterba (1984) acknowledged the importance of land input in housing supply research but omitted it in his model due to a lack of data. the urban spatial theory is a theoretical system which assumes that total housing stock equals urban population and land issues maintain an important role in new housing production (dipasquale, 1999). one valuable piece of housing supply work on the basis of urban spatial theory is the research by dipasquale and wheaton (1994). this study produces an equation where new housing supply is a function of house prices, land prices, construction costs and lagged housing stock. by estimating this function, the price elasticity of housing stock and the price elasticity of new housing construction range from 1.2 to 1.4 and 1.0 to 1.2 respectively. however, dipasquale and wheaton (1994) can not identify a significant linkage between construction costs and new housing construction. as described previously, the empirical research on new housing supply shared a problem in estimating the interrelationship between new housing supply and construction costs. therefore, somerville (1999) develops an hedonic construction cost series with an entirely new set of micro-data on housing construction to examine the link between new housing outputs and residential construction costs across the metropolitan areas of the us. the empirical results indicate that the housing starts in the us are cost elastic and construction cost is endogenous in the new housing supply function. the possible reason for the poor performance of the housing supply studies of housing starts and construction costs is a bias in the commercial cost indexes used by the previous research (somerville, 1999). this literature review demonstrates that some empirical studies (dipasquale & wheaton, 1994; poterba, 1984; topel & rosen, 1988) have attempted to uncover the linkage between new housing supply and residential construction costs since the 1980s. however, the researchers fail to identify a significant relationship between these two variables. in 1999, somerville (1999) successfully discovered this correlation and claimed that the possible reason for the poor performance of the previous studies is the bias in the data. in addition, it can be identified from the existing housing supply literature that the ‘regional heterogeneity’ has not been empirically considered in the past research, leading to an critical assumption that omitting the ‘regional heterogeneities’ could be another reason for the failure of the previous models (dipasquale & wheaton, 1994; poterba, 1984; and topel & rosen, 1988). this paper will contribute to the literature by exploring the relationship between new housing supply and residential construction costs with the regional heterogeneities. australasian journal of construction economics and building liu, j and london, k (2011) ‘analysing the relationship between new housing supply and residential construction costs with the regional heterogeneities’, australasian journal of construction economics and building, 11 (3) 58-67 61 significance of the regional heterogeneity the literature review suggests that construction cost is a key determinant of new housing supply. however, the sub-national or regional housing markets are segmented and can be influenced by a series of variables other than costs changes, such as policies, culture, race, education and even gender composition of local populations (tu, 2003). these factors result in regional variations, which are also known as the ‘regional heterogeneities’. the majority of the factors that trigger the regional heterogeneities (e.g. culture, race and education) are difficult to observe in empirical research, however they can stay constant over time to effectively affect the demand and the supply sides of the housing sector (reed, 2001). thus, modeling the housing markets on a regional level without regional heterogeneities is not realistic. the study conducted by tu (2000) discovered that the australian regional housing markets are segmented and they are mainly determined by local factors varied by regions. in simple terms, the ‘heterogeneities’ across the regions maintain an active role in the sub-national housing markets in australia. as a result, the regional heterogeneities are significant to the study regarding the australian sub-national housing sector. methodology theoretically, the entity fixed-effect models of the panel econometric techniques not only capture the time-series effects, but also allow for ‘the effects of those omitted variables that are specific to individual cross-sectional units but stay constant over time’ (hsiao, 2003, p. 30). in other words, the panel econometric models can quantify the effects specific to the heterogeneities within a cross-sectional unit (e.g. regional markets) across periods (greene, 2000). to investigate the causal link and correlation between new housing supply and residential construction costs with regional heterogeneities, a panel error correction model (ecm) will be employed in this study. the ecm is a regression model with a cointegration and error correction term. it is useful for identifying the granger causality and any correlation between variables (dinda & coondoo, 2006; luo et al., 2007). two tests must be conducted before constructing the panel ecm, one is the panel unit root test and the other is the panel cointegration test. panel unit root tests: ips test the unit roots tests are an important step for econometric modeling and they are utilised to examine the stationarity of the data. it is argued that the regression will be spurious if the data imported are non-stationary (granger & newbold, 1974). the method used in this paper to test the unit roots is the ips test. the ips test is proposed by im et al. (im, pesaran and shin) (1997; 2003) in 1997. the main equation of the ips test is expressed in eq. (1). ),,2,1;,,2,1(, ,1,, ttni tiitiiti yy     (1) the null and alternative hypotheses of the ips test are defined as: ),,2,1(0: 0 nih i  ),,2,1(0),,,2,1(0: 111 nnninih ii   (2) australasian journal of construction economics and building liu, j and london, k (2011) ‘analysing the relationship between new housing supply and residential construction costs with the regional heterogeneities’, australasian journal of construction economics and building, 11 (3) 58-67 62 the ti,  are serially auto-correlated with different serial correlation properties across units. a group-mean lagrange multiplier (lm) statistic is used by im et al. (1997) to test the null hypothesis in eq. (2). this lm-statistic is computed by the regression shown as follows: .,...2,1,,,,1,, 1 ttyyy tiiltilitiiti p l i       (3) im et al. (1997) defines     n i iiittn plmnlm 1 1 , ),(  (4) then the values of ]0)0,([ , iiti plme  and ]0)0,([ , iiti plmvar  are obtained by im et al. (1997). under these assumptions, im et al. (1997) concludes that: )1,0(n lm  (5) im et al. (1997) also employs a group-mean t-bar statistic to test the unit roots of the panel data. applying a monte carlo study, im et al. (1997) demonstrates the finite sample property of the ips test and identifies that the ips test under the small sample has a better performance than other panel unit root tests. panel cointegraton tests the panel cointegration test developed by pedroni (1999) will be selected in this study. pedroni’s (1999) test is an eg-based (engle-granger) cointegration test, in which the following models of the cointegrated regressions are considered. ),...,1,,...,1(, , ' ,, ttnixty tiitiiiti   (6) where ),...,,( 21 miiii   and ),...,,( ,,2,1, tmitititi xxxx  . the system expressed as eq. (6) allows for heterogeneity in the panel. as a result, heterogeneous coefficients, fixed effects and individual specific deterministic trends are all permitted. moreover, ti y , and ti x , are integrated process of order one for all i . pedroni (1999) builds up a 0 h , defining ),( ' ,,, tititi xyz  , ),( ,, ' , x ti y titi   , and tititi zz ,1,,   , where the process ' ,ti  satisfies )( 1 , 1 it bi tr t ti     for all i as t→∞. (7) here )( ii b  is a vector brownian motion with asymptotic covariance i  in which 22 is non-singular. the )( ii b  is utilised to be defined on the same probability space for all i and 0),( ' ,,  sjti e  for all ji  and then for all ts, . accordingly, seven panel cointegration statistics are derived by pedroni (1999), of which four tests belong to the first categories that are defined as within-dimension-based statistics. in the first category, the four tests depend on a variance ration statistic, a non-parametric australasian journal of construction economics and building liu, j and london, k (2011) ‘analysing the relationship between new housing supply and residential construction costs with the regional heterogeneities’, australasian journal of construction economics and building, 11 (3) 58-67 63 philips and perron type statistic , a non-parametric philips and perron type statistict  and a parametric adf-based test respectively. regarding the second category, which is defined as the between-dimension-based statistics, two of the three tests are non-parametric corrections while the third is a test of the adf. the tests in the second category are based on a group mean approach (pedroni, 1999). panel error correction model once the pairwise cointegration between two variables has been identified, the next step in the engle-granger methodology is to model the short-run variations of the variables, which can be done by estimating the ecm (dinda & coondoo, 2006). the ecm was first introduced by sargan (1964) in the 1960s and systematically developed by davidson et al. (1978) in the 1970s. however, the ecm was widely promoted by engle and granger (1987) in the 1980s. according the ecm methodology, the panel ecm is written: )...,3,2,1;...,3,2,1(, 1,,, ttniecmxy ii titiiti    (8) xyecm tititi 1,101,1,    (9) where ti y ,  and ti x ,  represent the data panel ti y , and ti x , at the first difference; i  and i  denote the regression parameters; the symbol i  stands for the rapidity of adjusting to equilibrium and they are expected to have negative values; and the 1, ti ecm represents the error correction term, in which the 0  is the constant item and the 1 stands for the longterm elasticity. the error correction term can be derived from the residual generated by a simple regression of two variables. the panel ecm in this study will be estimated by a seemingly unrelated regression (sur), which is able to ‘address problems associated with the presence of cross-sectional dependency among the series in the panel’ (holmes, 2007, p. 3). data collection for the purpose of estimating a panel ecm, the new housing commencements (nhc) and the input ppi (ippi) of housing construction of the australian six states (excluding australian capital territory and northern territory) will be selected. the data on the new housing commencements are published in building activity australia in the abs, measuring the number of the new housing commenced for construction (abs, 2010b). the input ppi of housing construction is one type of the producer price indexes used to measure the prices of goods or services purchased by domestic producers for intermediate inputs of housing construction (abs, 2010c). the reason for excluding the two territories in the model is a lack of housing construction input ppi of the nothern territory and the australian capital territory. the report of the abs (2010b) on the australian social trends claimed that the data for national total on the input ppi of house construction are a weighted average of six states. as a result, modelling the new housing supply and construction costs for australia without the data on two territories is acceptable. all the data imported into the panel ecm in next analytical section are transformed to natural logarithms. analysis and discussion likewise the time-series ecm, the prerequisite of constructing the panel ecm is that the data used must be stationary. table 1 reports the results of the ips unit root tests and it indicates that the data are integrated of the order one, i.e. i (1). australasian journal of construction economics and building liu, j and london, k (2011) ‘analysing the relationship between new housing supply and residential construction costs with the regional heterogeneities’, australasian journal of construction economics and building, 11 (3) 58-67 64 level first difference results model specification (lags) stat. p-value model specification (lags) stat. p-value ln(nhc) individual intercept & trend (1) -0.97 0.17 individual intercept (1) -3.00 0.00 i (1)*** ln(ippi) individual intercept & trend (1) -0.74 0.23 individual intercept (1) -5.81 0.00 i (1)*** table 1 summary of the ips unit root test results notes: ** and *** denote the 95% and 99% significance level the second step for formulating the ecm is to identify the cointegration relationship. as mentioned in methodology, the pedroni test will be conducted. table 2 summarises the pedroni test results associated with the selected variables. the results suggest that there is cointegration between the new housing commencements and the input ppi. model specification (lags) panel adf-stat. p-values weighted panel adf-stat. p-values (weighed) results ln(nhc) (d.v.) ln(ippi) (i.v.) individual intercept (1) -1.74 0.04 -1.80 0.04 y individual intercept & trend (1) -1.58 0.05 -1.78 0.04 y table 2 summary of the pedroni cointegration test results notes: d. v. denotes the dependent variable and i. v. denotes the independent variable as cointegration is found, the panel ecm can be constructed to uncover the nature of the target relationship. the model displayed as eq. (10) is the panel ecm composed of the new housing commencements and the input ppi. table 3 shows the t-statistics and the p-values of the independent variables of the panel ecm, all of which indicate that the coefficients of the independent variables (ippi) are significant. 00396*6277.0)(*0420.10725.0)( 1,,,  tnswtnswtnsw ecmippidnhcd 0396.0*5320.0)(*9925.10372.0)( 1,,,  tvictvictvic ecmippidnhcd 0396.0*5053.0)(*6834.20303.0)( 1,,,  tqldtqldtqld ecmippidnhcd 0396.0*5732.0)(*7068.10630.0)( 1,,,  tsatsatsa ecmippidnhcd 0396.0*5069.0)(*2247.10021.0)( 1,,,  tw atw atw a ecmippidnhcd 0396.0*6716.0)(*0529.20600.0)( 1,,,  ttasttasttas ecmippidnhcd (10) based on the cointegration tests and the panel ecm (eq. 10), it can be concluded that there is a causal link between the new housing commencements and the input ppi of housing construction across the australian six states. as claimed by johansen (1988), the granger causality exists in at least one direction between two variables if they are co-integrated. in the pedroni cointegration tests and the panel ecm, the nhc is the dependent variable and the ippi is the independent variable. hence, the input ppi granger-causes the new housing construction on a regional level in australia. furthermore, the coefficients of the input ppi in the panel ecm are all significant and negative, which indicate that the increasing trends of the new housing commencements in six states were significantly depressed by the dramatic australasian journal of construction economics and building liu, j and london, k (2011) ‘analysing the relationship between new housing supply and residential construction costs with the regional heterogeneities’, australasian journal of construction economics and building, 11 (3) 58-67 65 increases in the housing construction input ppi. this finding complies with the conventional economic theory discussed in introduction. t-statistics p-values tnsw ippi , -4.59 0.00 tvic ippi , -6.57 0.00 tqld ippi , -4.15 0.00 tsa ippi , -2.64 0.01 tw a ippi , -2.85 0.01 ttas ippi , -4.28 0.00 table 3 t-statistics and p-values of the coefficients of the independent variables according to the coefficients in eq. (10), the new housing commencements are sensitive to the changes in the input ppi of the australian six states. specifically, the supplies of new housing in queensland and tasmania are more sensitive to the construction cost fluctuations than that of other four states. in new south wales, victoria, south australia and western australia, the supply elasticities of the construction costs are similar, ranging from 1.22 to 1.99. moreover, the first coefficients of the six equations in eq. (10) indicate that the regional heterogeneities across the sub-national housing markets in australia significantly affect the relationship between the australian new housing supply and residential construction costs. these results support the assumptions on the importance of the regional heterogeneity addressed previously. conclusions this study has empirically estimated the relationship between the supply of new housing and construction costs in australia with regional heterogeneities. depending upon the panel ecm and the tests for the panel unit roots and the panel cointegration, a causal link affected by the regional heterogeneities has been identified from the input ppi to the new housing commencements in australia. the coefficients of the variables in relation to housing construction costs in the panel ecm are significant and negative, indicating that the increasing trends of the australian new housing supply had been significantly depressed by the residential construction costs. it can be further discovered from the empirical evidence that the new housing outputs in queensland and tasmania are more sensitive to construction cost changes than new south wales, victoria, south australia and western australia. the essential role of regional heterogeneities and the significant correlation validate the assumption that omitting regional heterogeneities could be the reason for the failure of the previous research in establishing a linkage between new housing supply and construction costs. the model developed in this study is suited for investigating the residential construction sector within a comprehensive context, and it provides policy makers with valuable information to better estimate market development. the overall findings in this paper imply that construction costs and local issues (e.g. political and demographic factors) are undoubtedly key determinants of the poor performance of the australian new housing supply. accordingly, how to control the cost inflation in the australasian journal of construction economics and building liu, j and london, k (2011) ‘analysing the relationship between new housing supply and residential construction costs with the regional heterogeneities’, australasian journal of construction economics and building, 11 (3) 58-67 66 residential construction sector will be one of the challenges for the state governments, to deal with the imbalance between dramatic population growth and low housing supply across australia. references abs (2010a) australian social trends, available at: http://www.abs.gov.au/ausstats /abs@.nsf/detailspage/4102.0jun%202010?opendocument (accessed 28 august 2010) abs (2010b) building activity, australia, available at: http://www.ausstats.abs.gov.au/aus stats//abs@archive.nsf/0/0ef2cdfe267b47adca25775f0016e358/$file/87520034.xls (accessed 28 august 2010) davidson, j.e.h., hendry, d.f., srba, f. and yeo, s. 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(1960) the demand for non-farm housing, in harberger, a. c. eds., the demand for durable goods, the university of chicago press, chicago, us nhsc (2010) national housing supply council: 2nd state of supply report, available at: http://www.fahcsia.gov.au/sa/housing/pubs/housing/national_housing_supply/documents/st ateofsupplyreport_2010.pdf (accessed 25 may 2011) pedroni, p. (1999) ‘critical values for cointegration tests in heterogeneous panels with multiple regression’, oxford bulletin of economics and statistics, 61 (4), 653-670 poterba, j.m. (1984) ‘tax subsides to owner occupied housing: an asset market approach’, quarterly journal of economics, 99 (4), 729-752 reed, r. (2001) ‘the significance of social influences and established housing values’, prres 2001: refereed proceeding of the 7th pacific rim real estate society conference, adelaide, australia sargan, j.d. (1964) ‘wages and prices in the united kingdom: a study in econometric methodology’, in: wallis, k. f. and hendry, d. f. eds., quantitative economics and econometric analysis, basil blackwell, oxford, uk somerville, c.t. (1999) ‘residential construction costs and the supply of new housing: endogeneity and bias in construction cost indexes’, journal of real estate finance and economics, 18 (1), 43-62 stover, m.e. (1986) ‘the price elasticity of the supply of single-family detached urban housing’, journal of urban economics, 20 (3), 331-340 topel, r. and rosen, s. (1988) ‘housing investment in the united states’, journal of political economy, 96 (4), 718-740 tu, y. (2000) ‘segmentation of australian housing markets: 1989-98’, journal of property research, 17 (4), 311-327 tu, y. (2003) segmentation, adjustment and disequilibrium, in: o’ sullivan, t. and gibb, k. eds., housing economics & public policy, blackwell science, uk stevens, m (2013) book review, australasian journal of construction economics and building, 13 (1) 106 106 book review managing giga projects: advice from those who’ve been there, done that galloway, p. d .,kris, p. e., nielsen, r., and dignum, j. l., asce press, reston, virginia, 2013, isbn 978-0-7844-1238-1 (hard cover, 480 pp) usd 120, e-book (forthcoming) isbn 978-07844-7693-2 usd120.00 (pdf) . the objective of this book is to discuss construction management aspects of expectations, complexity, risk and effective reactions to bad luck in “giga” projects ($10 billion+). the contributing authors represent financiers, owners, program managers, consultants, designers, contractors, and legal counsel who have extensive experience with these projects. while most construction managers may never work with projects of this magnitude, the issues presented and the discussions that follow are applicable to any size project. it addresses how to minimize the negative consequences of uncontrollable events such as credit crises, governmental actions or latent ground conditions. the book is comprised of twenty project case studies, from globally diverse places such as the united kingdom, brazil, china, australia, and the united states. in the first part, lessons learned and best management practices are discussed. the second part of the book discusses specific projects gathered from these places. summary lists of strategies to adopt listed across chapters follow an intuitive flow. the first three chapters (of 19) discuss keystone issues of governance, risk management and finance. the last chapter discusses the ultimate “giga” project: nuclear. critical management topics discussed in all the case studies, any of which could be the single reason for project failure, include: 1. the ricochet effect 2. controlling non-participatory stakeholders’ expectations 3. controlling cultural differences 4. controlling cost creep 5. controlling schedule creep 6. controlling information overload many other strategies are included, such as the crucial need to plan for most contingencies and ensuring that your staff has wide enough experience to trouble shoot most problems. this book would be one to consider for graduate university courses in construction and civil engineering. students mastering its lessons will be better prepared for a life’s work in construction. starting this learning early such as in undergraduate courses makes sense since it takes many years to gain the experience to manage projects of any size. for any professional who will be managing a giga project, this book is one to study to refresh or expanding thinking. matt stevens the university of melbourne, australia traditional procurement is too slow 51 traditional procurement is too slow ann tien kong (school of urban development, queensland university of technology, brisbane, australia) and jason gray (school of urban development, queensland university of technology, brisbane, australia) abstract a this paper reports on an exploratory interview survey of construction project participants aimed at identifying the reasons for the decrease in use of the traditional, lump-sum, procurement system in malaysia. the results show that most people believe it is too slow. this appears to be in part due to the contiguous nature of the various phase and stages of the process and especially the separation of the design and construction phases. the delays caused by disputes between the various parties are also seen as a contributory factor the most prominent cause being the frequency of variations, with design and scope changes being a particular source of discontent. it is concluded that an up scaling of the whole of the time related reward/penalty system may be the most appropriate measure for the practice in future. keywords: procurement, traditional system, time, cost uncertainty, buildability, fragmentation, disputes, variations. introduction a the traditional procurement system is predominant in the malaysian construction industry and, until 1992 at least, able to satisfy its requirements (masterman 1992:23-6). as is well known, it is characterised by the contractor not being responsible for the design or the documentation work (e.g., goldfayl 1999:10-1; rwelamila and meyer 1999:40) and with a clear division between the design and construction process responsibilities (rowlinson 1999:39; martin 2000). also, each phase in the traditional system is separate (tenah 2001:31; walker and hampson 2003:14), with the design and construction processes being quite different (wearne 1997:781). each phase also contains different stages. the design development phase, for example, comprises project briefing, feasibility studies, outline proposals, scheme design and detail design (smith 1998:37-8). the reasons for the system‟s continuance are obvious to many observers:  it exploits the economic potential of the free market by enabling contractors to be selected either by open or select competition among an unlimited number of prequalified competitors (rowlinson 1999:46).  the separation of design and construction appointment and service provision effectively restricts the amount of opportunistic business behaviour of those involved until the design is completed.  considerable flexibility is allowed for unforeseen events occurring during the construction phase, e.g., ground conditions, changes in scope and design, and errors in documentation (e.g., turner 1990:76-7; goldfayl 1999:182; walker and hampson 2003:14).  it is a „value for money‟ delivery system which employs participants with different talents and combines these talents into a business relationship to produce the desired results with greater certainty (rowlinson 1999:50). to work well, sufficient time is needed for the preparation of full documentation by all consultants and for the quantity surveyors to complete a final estimate prior to calling tenders (neighbour 2000:16). it is also common for a period of several months to elapse from the first initiation of a project and appointment of architects to contractor selection and commencement on site (hovet 1994). the hong kong jockey club project, for example, did not use the traditional procurement system for this 52 very reason as the management of the jockey club lacked confidence that the work would be completed within the required time frame of 4 years (tam 1997:746). in particular, the traditional procurement requires a sufficiently lengthy tendering period, to allow for the complexity of the work and for the tenderers to read the documentation, visit the site, and prepare for the tender (neighbour 2000:16). the traditional system is therefore often recommended for fairly simple small to medium sized projects where time is not a critical factor (masterman 1992:40; taylor et al 1999:166). the traditional system has, however, been declining noticeably in popularity in malaysia in recent years (tan 2001). the same has also been noted in many countries (mo and ng 1997:454) a particular criticism being that it is unable to cope with the complexity and dynamic nature of the current construction industry (rwelamila and meyer 1999:40). in this paper, we report on an exploratory survey conducted in malaysia to ascertain the reasons for this decline. in particular, we are concerned with four major criticisms of the traditional system identified in the literature: 1. time consuming aspects of the development processes 2. the effect of cost uncertainty 3. the effect on buildability 4. fragmentation of organisational interfaces time consuming aspects of the development processes a a 1997 survey showed only 54% of the clients in malaysia to be satisfied with the completion time for traditionally procured projects (hashim 1997:280). this may be partly attributed to the complexity in designing modern buildings (newcombe 1996:75). the traditional system, however, has also been continuously identified as the slowest method of procuring construction projects available to a client (masterman 1992:37; chang and ive 2002:696). it is said to be the most convoluted and inefficient in malaysia (tan cited in hashim 1997:274) and elsewhere (rowlinson 1999:50). one reason given for this is that the traditional system is a sequential process (masterman 1992:24). the construction phase, for example, should not begin until the design is completed. however, the preparation and approval of drawings, and the mistakes and discrepancies found in the design documents are frequent causes of delay in the design phase (chan and kumaraswamy 1997:58). as a result, whole development process is lengthened (turner 1990:52). similarly, when the design team permits the client to postpone the briefing decisions until the later stages, this results in key time delays – again causing the whole project to be delayed (barnes cited in chan and kumaraswamy 1996:576). of course, the effects of delays are well documented: severe criticism arises when projects run far longer than planned and legal disputes always arise over how much responsibility each party is willing to take for delays (chan and kumaraswamy 1996:569-76; tenah 2001:30); the developer may be forced to sell or lease the building to cover the interest incurred (hashim 1997:273); although extensions of time may help the contractor, the initial completion date of the project is still affected with concomitant affects on the client (the aqua group 1996:114); impacts on inflation, where the final cost of large projects is much more than the first estimation (taylor et al 1999:166); etc. in an attempt to overcome thee problems, the time made available for the design phase is often reduced to below what is regarded by many practitioners as a reasonable minimum (e.g., emmitt 1997:187). as a result, the design documents are said to be “inevitably incomplete” (yates 2002:222; walker and hampson 2003:14). errors also regularly occur in the form of differences in dimensions between plans and sections, incorrect dimensioning of walls and openings between the drawings and on-site (ogunlana et al 1996:39). in many cases, project designs and bills of quantities are not prepared before the contractor is selected due to the lack of design information available (masterman 1992:31; rwelamila and meyer 1999:42). far from saving time overall, therefore, this inevitably results in delays in the construction phase due to unclear drawings and specifications, which prevents contractors planning for the resources required for the work (chan and kumaraswamy 1997:59). 53 another implication of a reduced design period is an increase in variations later. variations are not only a source of annoyance in terms of time and cost (bromilow cited in chan and kumaraswamy 1997:59) but are “a time-consuming and expensive undertaking” (hovet 1994). they also always lead to poor on-time performance (chan and kumaraswamy 1996:577). effects of cost uncertainty a an associated issue concerns cost uncertainty. although the description of „lump sum price‟ under the traditional system seems to imply that the cost of the project will be the amount of the accepted tender, this is rarely the case in practice (cooke 2001:150). as rowlinson (1999:50) and turner (1990:79) point out, there is cost certainty only at the beginning stage of the construction process no one actually knows the final construction project price until the project has been completed (hovet 1994). in short, although a traditional lump sum tender may give the lowest tender price, it may not result in the lowest overall construction cost. because of the long period of time taken to design, document and tender, there are inevitably significant changes in the market forces, tender prices, interest and inflation rates (lavender 1990:224; turner 1990:76-7). price fluctuations in construction materials have also been found to be particularly significant in economically unstable countries (akinci and fischer 1998:67; the aqua group 1999:73; kayode cited in akpan and igwe 2001:367). for most projects, however, variations that occur during the construction phase have the most significant and inevitable effect on final cost (kumaraswamy and walker 1999:242; rowlinson 1999:49; rwelamila and meyer 1999:40; akpan and igwe 2001:367-72). the variations result in many extra claims (morledge 2002:185) and are often “very expensive” (lavender 1990:223). “scope growth” during the construction phase has been identified as a particular problem, with the majority of cost increase being derived from this source (akinci and fischer 1998:70) from the clients‟ point of view, contractors are seeking opportunities to create profit and additional revenue (yates 2002:223-4) and variations provide such an opportunity. also, variations cause confrontational disputes over what might be a fair price for a project (walker and hampson 2003:14). in fact, it is this very issue of increased claims by low bidders that is said to be one of the reasons for the increased usage of the design and construct system (molenaar et al 1999:56) effect on buildability a what looks good on paper or the computer screen can be difficult to build and designs are sometimes impractical (tenah 2001:33). as mentioned earlier, this can result in variations initiated by either clients or contractors. buildability, as “the extent to which the design of a building facilitates ease of construction, subject to the overall requirements for the completed building” is considered to be underprovided for most construction projects (ciria cited in low 2001:106). it is said that clients are dissatisfied with building designs which do not provide value for money, in terms of constructability (low and abeyegoonasekera 2001:301); their new facilities can be difficult to operate and expensive to maintain (markus 1997:22); productivity levels become difficult to raise and there is “incapacity to handle current realities” (kumaraswamy and dulaimi 2001:326); and that the neglect of buildability is just not sustainable in the long term (barker 1998:14). this also points to the conclusion that the lowest initial cost is not necessarily the most cost effective option or provides the greatest return. it is incumbent on designers, therefore, to incorporate buildability into their designs. to do this, it is obvious that contractors need to be involved in the design phase in order to maximise buildability, as they know the significant variables affecting their ability to complete projects within a given budget and schedule and to an acceptable level of quality (walker and hampson 2003:14; ling et al 2004:75). with the traditional system, however, the contractor‟s input into the design process is “minimal” and “often nil” (rowlinson 1999:38-9). with this separation of contractors from the design development stage, therefore, the opportunity to incorporate buildability into the design is largely lost (masterman 1992:30; walker and hampson 2003:14) and clients cannot receive the best possible design solution (love et al 1997:424). additionally, architects, who are seen to be traditionally the leader of the construction process, seem unwilling to give contractors the 54 leadership of this process (dulaimi et al 2004:707). in reality, however, each project participant in the traditional system is a separate entity and there is no overall management and coordination in this system (tenah 2001:31-3). it is also said that it is difficult for the architect to exercise objectivity in his/her decisions (turner 1990:30). moreover, the abilities of architects to manage projects have been questioned over the past two decades (masterman 1992:33) and a better solution may be to involve the contractor more in the process. furthermore, one of the major problems in the traditional system is thought to be that it pushes the budget setting responsibility onto the clients and the design consultants (masterman 1992:31; hovet 1994). again, this points to the possible benefits from involving the contractor more closely in the process. fragmentation of organisational interfaces a it has been observed that the traditional system does not create a unified team in which experience, feedback, and new ideas are shared (tenah 2001:33), with team members often not putting the clients‟ requirements as their first priority (smith 1998:16) resulting in completed projects that are not fully responsive to the client‟s needs (markus 1997:22). the separation of design and construction is an obvious cause of this. in an organisational context, this separation extends into the various sub processes involved also. for a large construction project, these sub processes can be extensive with a concomitant effect on relationships (harmon 2003:121). this situation, termed the fragmentation of organisation interfaces, has been held to be a major weakness in the traditional system (love et al 1997:423). as has been observed by many commentators, a particular problem associated with the fragmentation of organisation interfaces within the traditional system is the tendency towards adversarial relationships (e.g., mcdermott 1999:12). this is said to arise predominantly because of the separation of the design and construction teams (e.g., turner 1990:52) a situation viewed as one of “fragmentation, friction and mistrust” (newcombe 1997:525), with the gap between design and construction contributing to “major behavioural, cultural and organisational differences between project individuals and groups” (love et al 1997:423). it is argued, for example, that the architect and other key members of the design team fail to provide essential management to coordinate the overall process of planning, design and construction (turner 1990:32). similarly, the rush to complete the design often creates problems in coordination between the project team members (ogunlana et al 1996:39). as a result it has been suggested that communication problems can be reduced through the design and construct procurement system, for example, because of the reduced number of communication links with this approach (kashiwagi 1999:420). also, as kadefors (2002:452) points out, the client fears that the contractor will scrutinise the contractual documents for errors and ambiguities that may lead to claims, exploit their monopolist position by excessive pricing of extra work, or save money by lowering quality. this client dissatisfaction has also led some researchers to conclude that the traditional system fails to provide an appropriate relationship between the client and the contractor (ngowi 1997:556). the problems caused by fragmentation of organisational interfaces, however, go beyond the separation of design and construction. there are “conflicts, inconsistencies and mismatches” between all the project team members (hegazy et al 2001:322), possibly due to simple misunderstandings or prior assumptions or beliefs (gardiner and simmons 1998:36). these have often been attributed to communication difficulties caused by either language differences (ngowi 1997:559; loosemore and lee 2002:518) or differences in the communicating cultures involved (loosemore and lee 2002:518). chan and kumaraswamy (1997:59), for example, report that inadequate communication among all project team members results in problems in project coordination and schedules. likewise, murray et al. (2002:157) found many communication problems at the contractor-subcontractor-architect design interfaces, while poorly communicated design changes have also been noted as leading to costly variations (zaneldin et al 2001:330). in addition, culture has been identified as affecting the degree of uncertainty and anxiety of project participants – these being lower on projects where members of different organisations share the same culture (ngowi 1997:558-61) an alternative explanation of the source of conflict relates to the hierarchical power structure 55 implicit in the traditional system (newcombe 1996:79; liu and fellows 1999:144) leading to conflict between the project team members and clients (newcombe 1996:77; girmscheid and hartmann 2002:372). a further view is that adversarial relationships arise in the traditional system because of the liabilities and penalties on a party who has either done something wrong, or instructed another party to do something wrong (kumaraswamy and dulaimi 2001:325). the survey a method having identified the four major issues and their sub issues as described above, a questionnaire was developed to survey their extent and influence in the malaysian construction industry. following a small pilot study, 32 consent forms and notifications of telephone interviews were sent either electronically or mailed to a sample of architectural (5), quantity surveying (11), construction contracting (6), project management (5) and clients (5) across west and east malaysia to obtain their permission for interview. of the 32 consent forms and notifications of telephone interviews, 20 firms replied and accepted the interviews. appointments for telephone interviews were made at the most convenient time for the interviewees. the 20 interviewees comprised 2 architectural, 8 quantity surveying, 4 construction contracting, 3 project management and 3 client personnel in both west and east malaysia. all interviewees had practical experience of procurement practices in the construction industry. the wide variety of occupational groups comprising the sample was a deliberate strategy aimed at reducing the likelihood of bias due to the perspective of an individual occupation. therefore, when all interviewees provided similar answers to a question, it was taken to imply that the answers were unbiased being an exploratory study, it was not intended to highlight the differences between the views of the different occupations at this stage. results time consuming aspects of the development processes in response to the question “do you think projects using the traditional procurement system in the malaysian construction industry are generally completed on time?”, 2project managers and 4 quantity surveyors agreed that this was the case, while none of the architects, contractors and clients agreed. question strongly disagree disagree neutral agree strongly agree score the process stages i.e. design development stage, documentation stage, tendering stage and construction phase have a longer duration than other non-traditional procurement methods. 0 0 4 9 7 4.15 construction cannot commence if the design is incomplete. 0 2 4 8 6 3.90 severe criticisms and legal disputes result in slow growth in the economy when projects are delayed. 0 1 5 14 0 3.65 the decision processes of the traditional procurement system are slow and convoluted. 0 5 2 12 1 3.45 the selection processes for architects and contractors are time consuming. 0 8 3 7 1 3.05 the time consuming aspects of the development processes contribute to the need for extension of time (e.o.t). 2 10 4 0 4 2.70 table 1: time consuming aspects of the development processes 56 table 1 summarises the results concerning the speed of project delivery, rank ordered by weighted agreement of the respondents to six statements. this entailed weightings of strongly disagree=1, disagree=2, neutral=3, agree=4, strongly agree=5 and averaged over the twenty respondents. thus for question 1, the weighted score is [0(1)+0(2)+4(3)+9(4)+7(5)]/20=4.15. any score over the midpoint of 3 can therefore be regarded as an agreement of some magnitude. as the table shows, the respondents generally agreed with five of the statements and disagreed with the remaining one statement. of the five agreed statements, the highest is “the process stages i.e. design development stage, documentation stage, tendering stage and construction phase have a longer duration than other non-traditional procurement methods”, suggesting the whole of the traditional process to be cumbersome. this is followed by concern for the separation of the design and construction phases of the traditional process, with interviewees commenting that design for a construction project using the traditional system should finish before the construction phase commences in order to produce a complete bill of quantities. the effect on the economy and the speed of decision making follow, with the speed of the decision making being said to depend on the type of work, the budget and the clients involved. some interviewees said that if the clients decided that the projects had to be done urgently, then the decision processes would be made faster and more straightforward. the interviewees were rather less certain, on the other hand, that the development process itself and the selection procedures of the architects and contractors unduly affected time. the interviewees were also asked to rank the development stages according to the importance of each stage and how it contributed to the time consuming aspects of the processes in the traditional system. generally, the design development stage, with an average ranking of 1.9, was found to be the most time consuming stage, followed by the construction phase (2.2) and documentation stage (2.6). the tendering stage (3.3) was considered to be the least time consuming stage. finally, the open ended question “what other reason/reasons do you think contribute to the extension of time in the traditional system in the malaysian construction industry?” provided several responses:  majority of project details were not finalised upon tendering  economic factors influenced the supply and cost of construction materials  shortage of materials  financial and cash flow problems  poor weather conditions  lack of site management  client interference or strong involvement during design development stage  project complexity, size and type  source of materials  late payment of progress works  budget allocation or government funding  clients favouring certain conditions  variation in orders  poor site conditions effects of cost uncertainty table 2 provides the results of the questions relating to cost uncertainty within the traditional process. the two most agreed upon statements concern the cost uncertainty caused by the flexibility in the process to accommodate changes in the form of variations and scope changes, with some interviewees claiming that contractors were seeking opportunities to create profit and additional revenue by inducing variations. surprisingly, however, there is lack of agreement that the price agreed early on will inevitably be different by the time the project is completed. what is generally not accepted is the statement that tender documents are not ready at tender stage. 57 table 2: effects of cost uncertainty responses to the open ended question “which aspect contributes the most to the uncertainty of cost in the use of traditional procurement system in the malaysian construction industry?” are:  increase in the cost for construction materials  conditions of construction sites  uncertainty of design and lack of information given during tendering stage  extra claims by variations  uncertainty of the contribution from local authorities such as water and electricity boards  initial budget versus tender price due to time lapse of approximately 1 to 2 years  budget allocation or government funding  lack of complete design documents and changes to client requirements during the construction period  impractical designs  designs that are not finalised upon tendering and vary as the design develops finally, in response to the question “do economic issues affect the cost certainty of traditionally procured projects in the malaysian construction industry?”, all 3 clients agreed, 3 contractors and 6 quantity surveyors, 3 project managers and 1 architect. the reasons given are that:  a strong economy generates more new projects and thus reduces the competition among contractors, whose numbers tend not to increase as quickly. as a result, construction prices tend to increase.  inflation and shortage of construction materials affect the construction cost  contractors cannot afford to cover the construction cost based on the contract question strongly disagree disagree neutral agree strongly agree score variations often lead to unnecessary increases in the final cost of construction. 0 0 4 10 6 4.10 cost increase derives from scope growth during the construction period. 0 1 0 18 1 3.95 the tender price accepted is not the overall construction cost of the project. 1 3 6 6 4 3.45 there is cost certainty at the commencement stage of the construction processes. 0 3 7 9 1 3.40 very few projects are completed within the tendered price. 0 5 7 5 3 3.30 variations occur as a result of the incomplete designs that are never finalised for tendering. 0 8 6 4 0 2.78 full drawings and a complete bill are often not ready when a project goes to tender. 4 8 4 4 0 2.40 58 prices when the economy is experiencing a downturn  shortage of reinforcement bars due to great demand in the china market (olympic) and thus the cost of raw material increased  the economic issue has an impact on the exchange rates of imported materials, labour market and interest rates  design is mainly influenced by the size of the budget buildability table 3 gives the extent of agreement concerning buildability issues, showing the greatest agreement to be that there is no buildability input by the contractor during the design stage, followed by the belief that the lowest bid does not ensure quality and the lack of integration between the design and construction processes. there was an overall lack of agreement, however, that it is difficult for architects to make objective decisions because of their dual designer-project manager role. table 3: effects on buildability in response to the question “should contractors participate in the design stage?”, 1 architect agreed, with 3 quantity surveyors, 1 client and 1 project managers, but no contractors. however, in response to the question “are contractors the best advisers on how to meet design specifications in a cost effective and timely manner?” all contractors agreed, 2 clients, 2 project managers, 1 architect and 4 quantity surveyors. finally, the open-ended question “why do contractors submit unrealistically low bids?” produced the following responses:  competition to secure projects is very high. thus submitting unrealistic low bids ensure that the contractors win the project  to survive during economic downturn and roll over until a more lucrative/ productive time  intention to claim variations during construction period  time is too short to study the bid carefully thus the design concept is misunderstood  not really intending to win the job  some may be unfamiliar with the design and construction process, resulting in the underestimation of bids  poor construction knowledge fragmentation of organisational interfaces in response to the question “do you think that the separation of the design teams from the construction teams during project development period leads to adversarial attitudes amongst team members?”, 3contractors agreed, 2 clients, 1 architect, 4 quantity surveyors and 1 project manager. during the interviews, the contractors mentioned that adversarial relationships arise when they discover that some of the designs are not practical during the construction period, while question strongly disagree disagree neutral agree strongly agree score there is no buildability input by contractor during the design period. 0 0 3 12 5 4.10 the lowest bid does not ensure quality. 0 3 6 5 6 3.70 there is no integration between the design and construction processes. 0 5 2 11 2 3.50 the designers are not knowledgeable about the relevant design construction inputs. 0 2 9 9 0 3.35 it is difficult for an architect to exercise decision objectivity in playing the roles of both designer and project manager. 1 10 3 5 1 2.75 59 the architects have a similar point of view as the contractors in that adversarial attitudes arise when the contractors query designs that are not practical. designs are then amended according to contractors‟ preferences. consequently, variations occur and the project cost increases. some of the quantity surveyors stated that the design and construction processes are integrated and no adversarial attitude exists among team members. some further explained that in most cases the design teams and the construction teams manage to communicate well and ideas are shared among them in order to solve any inter-team problems. the responses to the statement “traditional procurement does not create a unified team in which experience, feedback and new ideas are shared” were mixed, with 11 agreeing, 7 disagreeing and 2 neutral. for some of the contractor interviewees, the traditional system does not create a unified team because contractors are only involved in the process at a later stage where most problems occur. this position is also maintained by the architects who stated there is no integration between the design and construction processes since the architects are in charge of the design process and the contractors are in charge of the construction process. however, the majority of the quantity surveyors contend that they resolve problems by discussing them with the team members. in response to the question “do different cultural backgrounds of project team members contribute to an adversarial relationship between project team members?”, all architects agreed, followed by 2 clients, 2 project managers, 2 quantity surveyors and 1 contractor. of the situations contributing most to the adversarial relationship between project team members and clients, “clients and project team members emphasize different goals respectively” was ranked highest, followed by “project team members often do not put clients‟ requirements as their first priority”, “simple misunderstanding and assumptions” and “clients‟ mistrust of contractors with regard to claims”. several of the interviewees mentioned that clients would have identified the contractors‟ prior background and experience during the tendering stage and therefore already in a position to enter into trusting relationship. factors most contributing to the decline of use of the traditional procurement system the interviewees were asked to rank in order of importance the above factors (1-4) that have or will contribute to the decline in the use of the traditional procurement system in the malaysian construction industry. most of the interviewees ranked time consuming aspects of the development processes as the main factor. according to the interviewees, any delay in project implementation which is already planned will slow down the social or economic development of malaysia and thus timing is a critical issue. it is interesting to note that all the clients ranked time consuming aspects of the development processes as the main factor. the clients responded that they need to finish and sell their development projects during a healthy economy. any delay in project implementation will increase holding and financing costs and therefore reduce profit. in the worst case, massive losses may be incurred causing abandoned or unfinished projects when there is a downturn in the economy. architects also reported that changing designs to accommodate changing clients‟ requirements was very time consuming, causing the designs to be unfinished at tender stage. cost uncertainty was ranked the second factor, with cost uncertainty occurring as a result of variations either by clients or contractors. fragmentation of organisational interfaces and poor buildability were ranked as the least important factors. the majority of the interviewees said that buildability in the traditional system still satisfied the malaysian construction industry. it was considered by many, however, that it would still be advantageous for contractors to participate in the design stage. discussion and conclusion a in surveying the reasons for the decreasing popularity of the traditional procurement system in malaysia, it was found that the main cause is attributable to the rather lengthy process involved. the clients surveyed were particularly vociferous in this respect, with all those interviewed naming this as the most important issue at stake. this seems to be in part due to the contiguous nature of the various phase and stages of the process and especially the separation of the design and construction phases, in which the design is intended to be competed before the appointment of the 60 contractor and commencement of construction work. also associated with the time aspects of the process is the delays caused by disputes between the various parties concerned for a variety of reasons, the most prominent of which appears to be the frequency of variations. variations also occur as a major source of cost uncertainty, with design and scope changes being a particular source of discontent. apart from the quantity surveyors, most interviewees found the ideal of a cohesive and unified project team to be seldom attained, but a less significance factor in the demise of the traditional system the most significant problem again being seen as the belated introduction of the contractor to the team. although coming from only a very small sample of industry participants, the results are, we suggest, at least indicative of what is inappropriate about the tradition system and hence what improvements are likely to be beneficial. firstly, it is clear participants need a speedier process. it is obvious that the traditional system must have evolved in less frantic times and, for whatever reason, has failed to evolve sufficiently to meet current requirements. the separation of design and construction is seen to be more of a barrier to increased speed of development than of straight cost or quality issues surrounding integrated teamwork or buildability. similarly, the adverse time effects of the traditional process in accommodating scope and design changes are seen to outweigh the advantages of the flexibility provided. viewed in this light, the thorny question of how and when to introduce the contractor into the process takes on a new shape. will early involvement of the contractor help speed up 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(accessed april 10, 2004, from asce civil engineering database). http://www.jrk.com.my/articles/designbld.htm perceptions of women and men professionals about women engineer in non-traditional occupations in thailand construction indust an investigation of women engineers in nontraditional occupations in the thai construction industry nuanthip kaewsri, (department of civil engineering, chulalongkorn university, thailand) tanit tongthong, (department of civil engineering, chulalongkorn university, thailand) abstract for over a decade, the public and the private sectors have carried out research aimed at attracting women engineers to the construction industry and retaining them. however, studies of women engineers working in other types of construction-related businesses apart from contractor companies such as consultancies, developers, etc., are scarce. this paper aims to examine the experiences of women engineers in non-traditional careers and the implications for their employment turnover. a literature search of women‟s careers in construction was undertaken in conjunction with semi-structured interviews with a sampling of 141 individuals. results from three viewpoints, viz those of professional men and women engineers in contractor companies, and of women engineers in non-contractor companies, were found to differ in many respects, including their viewpoints about career advancement, career path and the difficulties involved. it was also found that women engineers in contractor companies were much more affected by problems such as sexual harassment, work-life conflicts and equal opportunity than women engineers in non-contractor companies. turnover rates of women engineers and their reasons for leaving were examined. women engineers, particularly those in contractor companies, had to confront more barriers in non-traditional careers than their male counterparts. nonetheless, working in non-contractor companies provides a viable alternative for women engineers who want to have successful careers in the thai construction industry. keyword: civil engineer; women in construction; non-traditional career; thailand introduction there are several factors which determine whether a project will succeed or fail in the thai construction industry. staffing is a critical aspect with a varying spectrum of personnel ranging from executives, project managers, project engineers, operating engineers, employees at different levels and workers. the action of each individual who is involved in a project affects the overall outcome of the project (schneider, 1976). engineers, particularly civil engineers, play a vital role in construction projects. before a project can be commissioned, engineers have to study and assess the project‟s feasibility. after a project is approved, they plan, design and supervise every stage of construction. starting their work even before a project takes off, civil engineers coordinate with the project owners, project advisors, main contractors, subcontractors, and even material suppliers to ensure that the project goals are achieved. the construction industry has essentially two important components, namely productive and supportive work. a construction project cannot be successful with just one component. likewise, civil engineering also comprises productive and supportive work (lingard and lin, 2004). there are high levels of managerial and administrative responsibility (parmly, 2003). managers or australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 2 organizations owning the project should pay close attention to the performance of engineering groups because it is an integral part of a successful project (angus et al., 2000). the nature of construction fieldwork and organizational structure as well as the culture of the industry give rise to a large number of obstacles to engineers and, in particular, for women engineers, whose status has been obscure (dainty and lingard, 2006). in such a maledominant environment, women engineers are easily neglected by construction managers or organizations. it is widely acknowledged that construction is one of the industries where professional women are under-represented (dainty et al., 2000a, b; fielden et al., 2000, gale, 1994). a lack of information from the perspectives of both men and women engineers and inadequate separate studies of men engineers and women engineers lead to ill-informed judgments about the latter‟s managerial skills in many developing countries, thailand being no exception. female graduates in civil engineering and women in the thai construction industry as a developing country, thailand needs a large pool of civil engineers to help expand its infrastructure. unfortunately, only a small number of civil engineers graduate each year. the thailand research fund reported that women accounted for 12.3% of the thai civil engineer workforce in 2008, a 43.5% increase from 1999. data from thailand council of engineers (see table 1) showed that out of 50,670 civil engineers holding licences for professional engineering practices, the promotion rate of women civil engineers from associate engineers to chartered engineers was 0.3%, while the promotion rate of men civil engineers from associate engineers to chartered engineers was 3.2%, ten times that of their female counterpart.. it was also shown that the promotion rate of women civil engineers from associate engineers to fellow engineers was 4.4%, while the promotion rate among men civil engineers from associate engineers to fellow engineers was 15.4%. hence it is obvious that the chances of promotion were relatively slimmer for women engineers. classification of civil engineers male female number per cent number per cent associate engineers 39,094 81.4 2,528 95.3 fellow engineers 7,369 15.4 115 4.4 chartered engineers 1,555 3.2 9 0.3 total 48,018 100.0 2,652 100.0 table 1 classification of civil engineers with registered engineering licences engineering as a career for women in the construction industry most previous researches of women in construction industry have focused on women working in contractor company and how to boost the participation of women in the construction workplace, the objective being to help solve the labour crisis and skill shortage (agapiou, 2002) rather than to improve equality of opportunity (amaratunga et al., 2005). there have been few studies on the obstacles hindering women‟s entry into the construction industry, the problems of career development for women engineers in the construction industry, the challenges faced by women taking up non-traditional careers in the construction industry, and guidelines for solving such problems. the details are as follow: australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 3 obstacles to women’s entry into the construction industry research has been conducted on obstacles preventing women from entering this career path by (fielden et al., 2000; amaratunga et al., 2005). findings have indicated that women are reluctant to choose this career for several reasons, including the poor image of the industry, a lack of information and knowledge of this career, male-centric criteria, recruiting procedures and methods, sexually discriminatory attitudes, male-dominated culture, and a hostile working environment. besides, women do not have role models or mentors to coach and train them (khazanet, 1996; yates, 2001). furthermore, a study in singapore identified obstacles preventing women undergraduates from entering the construction industry upon graduation. these obstacles were both external and internal factors (ling and poh, 2004). it was not easy for women to gain access to the industry because of sexual discrimination against them, the harsh work environment of construction sites, lack of adequate knowledge about the industry and an insufficient number of successful women engineers to act as role models. there was also evidence of discrimination and sexual harassment. all these factors had a negative impact on the career options of south african women in the construction industry (madikizela and haupt, 2010). problems of career development for women in the construction industry in a study, gale (1994) investigated why there were a relatively small number of women professionals at management level. when career advancement of women engineers was compared to that of men engineers, it was found that women engineers tended to stagnate in their organizational hierarchies (dainty et al., 2000a, b). in 1999, bennett et al., found that professional women already working in the industry had higher expectations and had more commitment to stay in the construction sector than female undergraduates, but the latter had significantly higher financial expectations than their male counterparts. on the other hand, male undergraduates had significantly higher expectations of the number of people they expected to supervise. it was found that professional men were assigned to supervise significantly more people than professional women. in addition, fewer women than men over 36 years were found in the construction industry. furthermore, it was found that there was slow advancement for women in the thai construction industry and as a consequence, women engineers left the industry to work in other fields (ogunlana et al., 1993, hossain and kusakabe, 2005). other studies sought to find out why there were a small number of women in the construction sector, taking into consideration the number of qualified graduates and their turnover rates (arslan and kivrak, 2004; hossain, 2007). it was found that the national religion and culture influenced norms and practices of men and women. the graduation rate of women in bangladesh was higher than that of women in thailand because the bangladeshi government established quotas for women engineers to work in government offices. families with engineering graduates were considered well-off. some bangladeshi women studied engineering because their family members were engineers. even so, the top priority of women in bangladesh was to take care of their families, not to work outside their homes. this is consistent with a study by arslan and kivrak (2004) of the low employment rates of women engineers in turkey. moreover, construction sites in bangladesh were considered dangerous and unsuitable for women engineers. this was a situation similar to that in south africa as described by english et al. (2006). as a result, there were even fewer women engineers in the bangladeshi construction industry than in thailand despite higher rates of female engineers graduating in bangladesh. challenges faced by women embarking on non-traditional careers in the construction industry and guidelines for solving problems inequality in the workplace, sexual harassment and work-life conflict were the major problems confronting women with non-traditional careers. (gale, 1994; dainty et al., 1999; dainty et al.,2001; bagilhole, 2002; whitock, 2002; lingard and lin, 2004; dainty et al., 2004; byrne et australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 4 al., 2005; greed, 2006; dainty and lingard, 2006; elvitigala et al., 2006, madikizela and haupt, 2010). ceos of construction and consulting firms interviewed said that the major impediment to the promotion of women engineers was that women left the career track earlier than men (as cited from khasanet, 1996), pointing to the pressing need to promote equality in the workplace (agapiou, 2002; clarke and gribling, 2008; french and strachan, 2009), khazanet undertook research in 1996 into women engineers‟ work conditions and proposed guidelines for solving the problems which women engineers faced. this study was aimed at bringing about better recognition and promotion opportunities for women engineers and, subsequently, to attract and retain women engineers with valuable experience. research in the us suggested ways to recruit and retain women engineers (yates, 2001). a critical pool of women engineers could serve as a focal point to encourage construction companies become more aware of the importance of senior women engineers acting as mentors, advisers and role models in engineering careers for women (fielden et al., 2000; dainty et al., 2000a, b; yates, 2002; ogunlana et al., 1993; hossian and kusakabe, 2005, dainty and lingard, 2006). further studies by dainty et al. (2000 a, b) suggested that the work culture and structure of the construction industry should be changed to give women more opportunities for career advancement in this sector. menches and abraham proposed guidelines for all concerned parties to promote the placement of women in the construction industry to meet future demand (menches and abraham, 2007). these guidelines were supported by professional associations, labour unions, and universities. nevertheless, there has not been sufficient study of women engineers in non-contractor companies such as consulting companies, real estate developers and construction material suppliers to provide a clear comparison of women engineers working in different types of construction-related businesses. thus, the present study aims to fill the gaps in previous research by studying women engineers in non-traditional careers, complemented by the experiences of men and women engineers in the thai construction industry. methodology pilot study to obtain data for the pilot study, the researcher interviewed 21 men engineers who were superiors, colleagues and subordinates of women engineers, and 12 women engineers with over five years of experiences in contractor companies. all 21 men engineers acknowledged that women engineers did not enjoy the same benefits as they did. the 11 women engineers (92%) of all women engineers who worked in contractor companies felt that they did not advance in their careers as fast as men engineers because of restrictions that precluded them from fulfilling many roles played by men engineers. there were intrinsic and extrinsic factors to be considered. intrinsic factors included the restraints women engineers put on themselves from doing certain types of work, especially site work. they were not sure whether they could supervise construction projects. they were also unable to work in rural areas because of family commitments. the second factor is extrinsic. women engineers were not assigned to jobs, such as project supervision, due to the risky nature of the work. moreover, in thai culture, it is not common for a woman to be in a job position which is superior to that of a man. almost all women engineers admitted to experiencing restrictions in their workplaces, thus preventing them from working on construction sites and thus enjoying career advancement. in addition, 12 female engineers found that contractor companies dealt mainly with construction projects. accordingly, engineers who worked on construction sites received greater recognition from their employers. however, women engineers opined in the interviews that they faced fewer restrictions and enjoyed more opportunities in career advancement in other sub-sectors as such non-contractor businesses (consulting companies, real estate developers and construction material suppliers for example) which placed emphasis on a knowledge of civil engineering or australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 5 provided a consultancy service based on know-how. hence, not surprisingly during the pilot study, some women engineers participating in the interviews said that they were looking for positions in consulting companies. there is therefore a need for more research into women engineers working in contractor and non-contractor companies and the turnover rates of men engineers compared to those of women engineers. research design as there was no current list of women engineers in the thai construction industry, it was not possible to carry out a probabilistic random sampling of women engineers working in contractor firms and non-contractor firms in thailand. thus a non-probabilistic sampling approach, incorporating a snowball technique, was adopted to select qualified women engineer respondents. nueman (1994) explained that this technique was both a direct and indirect data collecting technique whereby the first respondent gave new leads for the researcher to further collect information until sufficient information was processed into data for analysis. for clarity and precision of data, men and women engineers in contractor companies and women engineers working in non-contractor companies in their early careers (that is those with less than ten years of experience) were asked to participate in the research. most companies participating in this research were located in bangkok, the capital of thailand. semi-structured interviews were employed as the data gathering tool. the research is divided into three parts. the first part considers two viewpoints about women engineers working in contractor companies and non-contractor companies in terms of career advancement, career path, career difficulties, and problems in non-traditional occupations. the second part considers three viewpoints of men engineers and women engineers who work in contractor companies and of women engineers in non-contractor companies in terms of the appropriateness of women in construction, and opinions about career advancement in the thai construction industry. lastly, the third part considers the viewpoints from men engineers and women engineers working in contractor companies in terms of years of working experience and reasons for leaving. this paper presents a selection of the findings from the full study. each interview session lasted 30 to 60 minutes. the data gathering process started in july 2008 and was completed in december 2009. the gathered data was analysed using the statistical package for the social sciences (spss) program. results the samples table 2 shows results of data gathered from 141 civil engineers in thai construction companies. the profile of informants comprising civil engineers working in private companies is shown in table 2. there were 47 male engineers and 47 women engineers working in contractor firms, 47 women engineers who worked in non-contractor firms i.e. 4 women engineers in construction management firms, 2 women engineers in design and inspection firms, 19 women engineers in design and consulting firms, 14 women engineers in real estate companies, 8 women engineers in supply material firms. the total number of civil engineers participating in this research was 141. in the contractor companies, there were more men who were 23-27 years old (57%) than those who were 28-32 years old (43%); similarly in contractor companies, there were more women australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 6 who were 23-27 years old (62%) than those who were 28-32 years old (38%). however, in the non-contractor companies, there were fewer women engineers who were 23-27 years old (43%) than those who were 28-32 (55%) and there was only one woman engineer (2%) who was more than 32 years old. most men engineers worked at sites (62%). most women worked at headquarter offices, both in contractor companies (55%) and non-contractor companies (94%). categories contractor non-contractor total (person) men % women % women % 1. type of business 1.1 contractors 1.2 construction management 1.3 consult design & sup. 1.4 consult design 1.5 developers 1.6 suppliers total 47 47 100 100 47 47 100 100 4 2 19 14 8 47 9 4 40 29 17 100 94 4 2 19 14 8 141 2. age 2.1 23-27 yr 2.2 28-32 yr 2.3 33-37 yr total 27 20 47 51 49 100 29 18 47 62 38 100 20 26 1 47 43 57 2 100 76 64 1 141 3. work location 3.1 head office 3.2 site office 3.3 on-site total 16 2 29 47 34 4 62 100 26 20 1 47 55 43 2 100 44 3 47 94 6 100 86 25 30 141 4. marital status 4.1 single 4.2 married total 33 14 47 70 30 100 40 7 47 85 15 100 36 11 47 77 23 100 109 32 141 5. family responsibility 5.1 no responsibility 5.2 elderly care 5.3 child care 5.4 both child and elderly care total 41 3 3 47 87 6 6 100 32 11 3 1 47 68 24 6 2 100 34 5 8 47 72 11 17 100 107 19 14 1 141 6. education level 6.1 bachelor 6.2 master 6.3 others..studying master total 28 15 4 47 60 31 9 100 34 9 4 47 72 19 9 100 22 20 5 47 47 43 10 100 84 44 13 141 7. salary (baht / month) 7.1 10,000-20,000 7.2 21,000-50,000 7.3 51,000-100,000 total 11 30 6 47 23 64 13 100 23 23 1 47 49 49 2 100 9 36 2 47 19 77 4 100 43 89 9 141 8. site work experience 8.1 0-1 yr. 8.2 2-4 yr. 8.3 5-10 yr. total 7 21 19 47 15 45 40 100 37 9 1 47 79 19 2 100 43 4 47 91 9 100 87 34 20 141 9. tenure 9.1 0-1 yr. 9.2 2-4 yr. 9.3 5-10 yr. total 13 29 5 47 28 62 10 100 28 16 3 47 60 34 6 100 27 17 3 47 57 36 6 100 68 62 21 141 table 2 informant profiles australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 7 as for marital status, most men were single (70%) and most women (85%) in contractor companies were single, while in noncontractor companies 77 per cent of the women were single. regarding family responsibilities, most men engineers (87%) and women engineers (68%) in contractor companies and women engineers (72%) in non-contractor companies did not have family responsibilities. with reference to education levels, there were more men in contractor companies who had bachelor‟s degrees (60%) than those with master‟s degrees (32%) and those who were studying for master‟s degrees (9%). likewise, in contractor companies, there were significantly more women who had bachelor‟s degrees (72%) than those with master‟s degrees (18%). however, in non-contractor companies, the percentage of women with bachelor‟s degrees (47%) was only slightly higher than that of women with master‟s degrees (43%); women who were studying for master‟s degrees (6%) were only slightly fewer than men who are pursuing their master‟s degrees (9%). in regard to salaries (baht per month), most men engineers (64%) and women engineers (77%) in non-contractor companies had salaries of 21,000-50,000 baht / month. however, among women engineers in contractor companies, about half of them had salaries in the range of 10,000-20,000 baht / month and another half drew salaries of 21,000-50,000 baht / month (table 1). regarding site work experience, most women in contractor (79%) and non-contractor companies (91%) had 0-1 year experience. most women (62%) who worked in non-contractor companies did not have site work experience and, there was only one woman engineer in contractor companies in the 5 -10 year experience category. regarding men engineers with site work experience, 40 per cent of them had worked 5 10 years; those who had 2 4 years‟ site work experience made up 45 per cent of the male engineering workforce. finally, tenure was analysed. most men (62%) had worked in the same positions for 2-4 years while 28 per cent of them had worked in the same positions for 0 to 1 year, and 10 per cent were in the 5-10 year category. as for women engineers, 60 per cent of them had worked in the same positions for 0 to 1 year in contractor companies. in non-contractor companies, the figure was 57 per cent. a comparison of the viewpoints of women engineers in contractor companies with those of their counterparts in non-contractor companies the data in this section were derived from interview sessions with 47 women engineers working in contractor companies and 47 women engineers working in non-contractor companies. questions for the interviews were based on selected topics such as difficulties encountered in civil engineering careers, problems in non-traditional careers, career progression of women engineers compared with men engineers and careers guidelines for employees. each topic is discussed below. career challenges in the thai construction industry difficulties of working in the construction industry with regard to studying civil engineering, job application and career success in the thai construction industry are illustrated in table 3. as shown in table 3, women engineers faced many challenges if they aspired to be employed in the thai construction industry. the difficulties were in the following areas: studying civil engineering field: when they were civil engineering undergraduates, the top three difficulties for women engineers in contractor companies and non-contractor companies were: studying in laboratories where they had to carry heavy materials such as cement blocks, australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 8 studying in the sun, self-perceived slower pace of learning and self-perceived lack of talent compared to their male counterparts. according to the two viewpoints, it can be concluded that women engineers working in both contractor companies and non-contractor companies had more or less similar difficulties at the time they were studying civil engineering. job application: the top three difficulties for women engineers working in contractor companies were: preference for men engineers by most companies, fewer positions for women engineers in contractor companies and preference for graduates from public universities by most companies. as for women engineers working in non-contractor companies, the three major difficulties were preference for graduates from public universities by most companies, making it harder for women graduating from private universities to get a job, difficulty of employment after graduation and preference for people with hands-on experience. it can be concluded that the top three difficulties faced by women engineers working in contractor companies were different from those of women engineers working in non-contractor companies. difficulties score rank 1. civil engineering undergraduate : contractor 1. impatient when conducting studies outdoors or in the sun 2. unable to do heavy work in laboratories, such carrying heavy instruments or materials 3. perceived as slower learners in laboratories and less talented compared to men engineers non-contractor 1. unable to perform certain physical tasks such carrying heavy instruments or materials 2. impatient when studying outdoors or in the sun 3. perceived as slower learners in laboratories and less talented compared to men engineers 24 14 12 16 11 9 1 2 3 1 2 3 2. job application: contractor 1. preference of men to women engineers by contractor companies 2. fewer positions open to women engineers 3. preference of graduates from public universities by contractor companies non-contractor 1. preference of graduates from public universities by contractor companies 2. difficulty of finding jobs immediately after graduation 3. preference of applicants with hands-on experience 31 23 18 26 18 17 1 2 3 1 2 3 3. success in working: contractor 1. little knowledge of site work made work difficult 2. greater difficulty in controlling subordinates compared to men 3. difficulty in receiving recognition from superiors or subordinates non-contractor 1. during site inspection contractors and workers gave less respect to women engineers 2. little knowledge of site work made work difficult 3. difficulty in receiving recognition from superiors or subordinates 27 19 18 23 16 15 1 2 3 1 2 3 table 3 career challenges faced by women in the thai construction industry australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 9 working for success: the most serious problem for women engineers in contractor companies was limited knowledge about site work, followed by difficulty of controlling subordinates compared to men engineers. the third challenge was the difficulty of getting recognition from superiors and subordinates. women engineers working in non-contractor companies stated that the number one problem they had was little recognition from contractors during site inspection, followed by limited knowledge about site work. the third problem was the difficulty of getting recognition from superiors or subordinates. hence, there was similarity in the first three difficulties confronted by women engineers working in contractor companies and non-contractor companies. experience of problems in non-traditional careers challenges faced by women with non-traditional careers in the construction industry, specifically sexual harassment, work-family conflicts and inequality at work are shown in table 4. obstacles contractor non-contractor number per cent number per cent sexual harassment presence absence total 11 36 47 23 77 100 6 41 47 13 87 100 work-family conflict presence absence total 12 35 47 26 74 100 3 44 47 6 94 100 equality of opportunities equal not equal total 3 44 47 6 94 100 36 11 47 77 23 100 table 4 obstacles in non-traditional careers in the construction industry table 4 summarises the problems women engineers faced in non-traditional careers the thai construction industry. more specifically, the problems were in the following areas: sexual harassment: twenty-three per cent of all women engineers working in contractor companies felt sexually harassed. examples of harassing behaviours were flirting, talking in a sexual way, touching bodies, touching hands, requesting women engineers to stay late to work, asking women engineers to become minor wives, offers of financial support with suspect motives. in one case, a women engineer was asked to take care of a consultant who was flirtatious. however, 77 per cent all women engineers working in contractor companies did not feel sexually harassed in their workplaces, saying that civil engineering was a prestigious profession and that they felt respected. when asked about sexual harassment, 13 per cent of the women engineers in non-contractor companies stated that there was sexual harassment in their workplaces. they gave examples like dirty talk, inappropriate description of bodies, trying to have dinner dates with women engineers, asking them about their love life, etc. while 87 per cent of women engineers working in non-contractor companies did not experience sexual harassment in their workplaces, adding that most people respected them as civil engineers. however, they mentioned that women in other positions such as secretaries were sexually harassed if they did not know how to conduct australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 10 themselves. apparently, the percentage of women engineers who experienced sexual harassment was higher for those working in contractor firms than in non-contractor companies. work-life conflict: twenty-six per cent of women engineers in contractor companies had to deal with work-family conflicts in their workplaces, such as working upcountry for lengthy periods while having to take care of family responsibilities at the same time, uncertain working hours which made it difficult for women to take care of their children and their parents, and working over the weekends. sometimes women engineers had to work late into the night to compete with their male counterparts for recognition and promotion. however, unlike women engineers, men engineers did not have similar family responsibilities. some problems were inevitable such as working in remote places. it should be noted that 74 per cent of all women engineers in contractor companies said that they did not have work-family conflicts as they did not have family responsibilities. on the other hand, 6 per cent of the women engineers in non-contractor companies stated that they had work-family conflicts such as having to care for very young children who required much of their time and attention, busy husbands who had no time to help with family chores, and taking care of sickly or elderly parents. ninety-four percent of all women engineers in noncontractor companies said that they did not have work-family conflicts because they did not have unmanageable family responsibilities. they also did not have high workloads all the time and most companies gave them two days off per week so that they could attend to family matters. therefore, it can be seen that women engineers working in contractor companies had slightly more work/family conflicts than their female peers in non-contractor companies. equality of opportunities: only six per cent of women engineers from contractor companies thought that there was equality of opportunities, adding that they had good and efficient superiors who treated everybody equally, and their companies gave both sexes equal opportunities to work both on site and in the office. however, the majority (94%) of women engineers working in contractor companies opined that there was no sexual equality in their workplaces. they gave the following reasons in descending order. most of the time, contractor companies preferred to hire men engineers. even if they did get hired, women engineers were hardly ever assigned to work on construction sites. the more important jobs were usually given to men engineers. organizations and male superiors seemed have a mindset about men engineers being more efficient than their female counterparts. they held the view that women engineers were incapable of supervising subordinates because they did not have enough leadership qualities and were unable to get acceptance from subordinates, superiors and colleagues. in addition, the opinions of women engineers were seldom taken into consideration. on the other hand, there was a very different picture in the non-contractor companies. seventyseven per cent of the women engineers enjoyed equality in their workplaces. they said they could compete with men equally for all the positions. in their view, women were more suitable for this profession because they had good communication and coordination skills, which could reduce communication mistakes. with good and fair-minded superiors, they also had equal opportunities to get promoted and enjoy salary increments. nevertheless, 23 per cent of all women engineers working in non-contractor companies opined that there was no sexual equality in their workplaces. they stated that superiors thought that women did not have enough leadership ability. they also thought that women were highly discriminated against in their workplaces, and there were a lot of jobs that were considered unsuitable for women. according to this group of women engineers, they were hardly ever given important jobs; neither did they receive recognition from superiors, colleagues, customers or project owners. australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 11 therefore, women engineers working in contractor companies had different perceptions about equality in workplaces from those of women engineers in non-working contractor companies. there seemed to be more inequality for women engineers working in contractor companies. on the other hand, the majority of women engineers working in non-contractor companies opined that there was equality in their workplaces. career progression prospects for career progression of women engineers compared with those of men engineers are shown in table 5. career progression contractor non-contractor number per cent number per cent had equal career advancement compared to men engineers 8 17 22 47 had less career advancement compared to men engineers 39 83 25 53 total 47 100 47 100 table 5 women engineers’ views of career advancement table 5 shows the percentage of women engineers from contractor companies who felt that they had fewer career advancement opportunities compared to men engineers was significantly higher (83%) than women engineers who thought that they had equal career advancement to men engineers (17%). interestingly, women engineers in the non-contractor companies did not differ very much in their views regarding career advancement, with 47 per cent thinking that they had equal career advancement to men, while 53 per cent thought otherwise. the reasons put forth by women engineers who felt that they had equal career advancement as men engineers were:  their companies gave similar assignments to both men and women engineers and offered the same starting salaries and performance-based increments. sometimes they even had higher salary raises than men engineers. on the other hand, women engineers who felt that they did not have equal career advancement compared to men engineers gave the following reasons:  women engineers imposed limitations on themselves. they did not feel confident enough to handle certain tasks as they were not sure whether they could work with subcontractors and supervise subordinates; they disliked the physical conditions of site work as they thought that construction sites were dirty and dangerous for women.  most of the time, men engineers were assigned to do more important jobs than women engineers especially at construction sites where men predominate. women engineers were not assigned to supervise projects and male workers. unlike their male counterparts, women engineers did not have a clear understanding about construction methods due to their lack of site work experience. subsequently, they could not carry out as many tasks as men could. nevertheless, women engineers who worked in contractor and non-contractor companies admitted that site work experience was important for their career advancement and australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 12 performance. women engineers who did not have direct site-based work experience sought new knowledge from site visits, self-study and the internet. some companies even provided mentors for them so they could improve their performance and productivity. career path career path guidelines provided by construction companies for women engineers are shown in table 6. career path contractor non-contractor number per cent number per cent yes 4 9 18 38 no 43 91 29 62 total 47 100 47 100 table 6 women engineers who had career path guidelines as shown in table 6, only 9 per cent of contractor companies developed career path guidelines for women engineers. however, the percentage was higher (38%) in non-contractor companies. it can be concluded that non-contractor companies developed more career path guidelines for women engineers than contractor companies. normally, most companies developed career path guidelines for employees who held key positions in the companies in order to retain and motivate them. hence from the data collected, it was implied that, unlike contractor companies, non-construction companies placed more emphasis on the potential roles of women engineers in thailand. comparison of the views of men and women engineers in contractor companies with those of women engineers in non-contractor companies this section discusses appropriateness of women working as civil engineers. opinions regarding this issue were gathered from 47 women engineers and 47 men engineers working in contractor companies, and 47 women engineers working in non-contractor companies about career success in the thai construction industry. the data are discussed in detail as below. careers in construction information regarding the appropriateness of women engineers working as civil engineers is shown in table 7. women should be civil engineers contractor non-contractor men women women no. per cent no. per cent no. per cent should be 7 15 16 34 34 72 should not be 40 85 31 66 13 28 total 47 100 47 100 47 100 table 7 appropriateness of women working as civil engineers from table 7, it can be seen that only 15 per cent of all men engineers working in contractor companies thought that women should be civil engineers. however, the majority of them australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 13 thought that civil engineering work was only suitable for women engineers working in noncontractor companies, doing various supportive and productive work, which were equally important and indispensable in construction projects. nevertheless, 85 per cent of the men thought that women should not be civil engineers in contractor firms, stating that construction projects in contractor companies required engineers to be physically strong. they stated that civil engineering jobs including estimation, procurement-recruitment, coordination, inspection, planning and monitoring, design and documentation work were more appropriate for women engineers. therefore, it was felt that if women engineers could coordinate their work with their male counterparts in contractor companies, mistakes could be mitigated. as far as women engineers in contractor firms were concerned, 66 per cent of them thought that women should not be civil engineers. they felt that they were underachieving because they were not given the opportunity to advance. their scope of work was limited as site work was regarded as inappropriate for women, who were generally considered the weaker sex. hence, women engineers were of the view that they had limited career advancement. furthermore, women engineers thought that there was sexual inequality in contractor companies. according to a woman engineer who was interviewed: “i don‟t encourage women to do this job. if you do not have dark skin, or if you are not fat and gay-like or tomboyish, you will have big problems when working in a contractor company. out of the three companies i have worked for, i have never seen any women civil engineers in high positions except for those who have their own businesses. being merely an employee leaves you with little chance of career advancement.” on the other hand, 72 per cent of women engineers working in non-contractor companies said that women should become civil engineers. they stated that civil engineering was a field with work including designing, inspection, planning and supervising. in their opinion, women would do well in this profession because they had good communication and coordination skills, which would reduce communication mistakes. feminine strengths, namely tact, honesty, tidiness and english proficiency, could mitigate men engineers‟ mistakes and complement their work. due to a wide range of jobs in civil engineering, the women engineers interviewed felt that they should, nevertheless, seek to have more experience and knowledge from site work and other sources so they could be proud of their careers, as traditionally this profession belonged to men. however, 28 per cent of women engineers working in non-contractor companies thought that women should not become civil engineers, saying that most construction companies put more trust in men civil engineers, so women engineers did not receive recognition and advancement in their careers as men did. thus there were different viewpoints about women in civil engineering. both men engineers (85%) and women engineers (66%) working in contractor companies thought that women should not be civil engineers. women engineers working in non-contractor companies, however, thought otherwise. in fact, 72 per cent of them thought that women should be civil engineers. career progression in the thai construction industry table 8 explains and compares opinions about working in non-traditional careers like the construction industry of men and women engineers in contractor companies and women engineers working in non-contractor companies. eight topics were asked using a 5-point rating scale. the details are in table 8. the feedback for each statement in the table 8 is explained as follows: australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 14 1. to be successful career in civil engineering, one must have site work experience. when the mean (µ) was taken into consideration, it was found that men engineers working in contractor companies had the highest mean (µ=4.34), followed by women engineers working in contractor companies (µ=4.28), and women engineers working in non-contractor companies (µ=3.15). this shows that both men and women engineers working in contractor companies ranked, at the highest level, the statement that to be successful in civil engineering careers they must have site work experience, whilst women engineers working in non-contractor companies gave an average rating to this opinion. descriptions contractor non-contractor men women women mean s.d. mean s.d. mean s.d. 1. to be successful in civil engineering, one must have site work experience 4.34 0.479 4.28 0.452 3.15 0.751 2. having no site work experience in the long run can make one lose confidence in work 3.43 0.500 3.15 0.416 2.45 0.544 3. people with site work experiences have more chances of promotions and salary raises 4.23 0.428 4.38 0.491 3.64 0.486 4. companies gain equal benefits from women and men engineers 4.94 0.247 4.34 0.522 4.57 0.500 5. getting promoted (from associate engineers to professional and professional to charter engineers) leads to career advancement 4.36 0.486 4.13 0.337 3.74 1.010 6. civil engineering is unsuitable for women because career advancement is limited to men 2.83 0.842 2.89 0.729 2.47 0.687 7. civil engineering is unsuitable for women because of limitations like dislike of working outdoors, fear of climbing, etc. 3.79 0.414 3.18 0.613 3.00 0.659 8. overall satisfaction with work in construction industry 3.68 0.663 3.28 0.649 3.91 0.408 table 8 working for progression in the thai construction industry * the level of mean interpreted as include; 1.0-1.79 = lowest, 1.80-2.59 = low, 2.60-3.39 = average, 3.40-4.19 = high, 4.20-5.00 = highest 2. having no site work experience in the long run can make one lose confidence in work. when the mean (µ) was taken into account, it was found that men engineers working in contractor companies had the highest mean (µ=3.43), followed by women engineers working in contractor companies (µ=3.15), and women engineers working in non-contractor companies (µ=2.45). this shows that both men and women engineers working in contractor companies agreed, on an average level, that having no site work experience in the long run could make them lose confidence in their jobs, while women engineers working in non-contractor companies rated their agreement with at a low level. 3. people with site work experience have more chances of promotion and salary raises compared to those without site work experience. when the mean (µ) was taken into account, it australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 15 was found that women engineers working in contractor companies had the highest mean (µ=4.34), followed by men engineers working in contractor companies (µ=4.28), and women engineers working in non-contractor companies (µ=3.64). this shows that both men and women engineers working in contractor companies agreed with the statement and rated it at the highest level i.e. they were very much in agreement that people with site work experience had better chances of promotions and salary raises compared to those without site work experience; women engineers working in non-contractor companies also agreed with this statement and rated it at a high level. 4. companies gain equal benefits from women and men engineers. when the mean (µ) was taken into consideration, it was found that men engineers working in contractor companies had the highest mean (µ=4.94), followed by women engineers working in non-contractor companies (µ=4.57), and women engineers working in contractor companies (µ=4.34). this shows that both men and women engineers working in contractor and non-contractor companies agreed, at the highest level, that companies gain equal benefits from women and men engineers. 5. getting promoted to higher levels (from associate to professional and from professional to chartered) leads to career advancement. when the mean (µ) was taken into account, it was found that men engineers working in contractor companies had the highest mean (µ=4.36), followed by women engineers working in contractor companies (µ=4.13), and women engineers working in non-contractor companies (µ=3.74). this shows that men engineers and women engineers working in contractor companies and women engineers working in non-contractor companies had different ideas about the statement “getting promoted to higher levels (from associate to professional and from professional to chartered) leads to career advancement.” men engineers working in contractor companies ranked their agreement with that statement at the highest level while women engineers working in contractor companies and women engineers working in non-contractor companies agreed with the statement at a high level. 6. civil engineering is unsuitable for women because career advancement is limited to men. when the mean (µ) was considered, it was found that women engineers working in contractor companies had the highest mean (µ=2.83), followed by men engineers working in contractor companies (µ=2.89), and women engineers working in non-contractor companies (µ=2.47). this shows that men engineers and women engineers working in contractor companies agreed, at an average level, that civil engineering was unsuitable for women because career advancement was confined to men; women engineers working in non-contractor companies agreed with the statement at a low level. 7. civil engineering is unsuitable for women because women have limitations such as climbing to high places, etc. when mean (µ) was taken into consideration, it was found that women engineers working in contractor companies had the highest mean (µ=3.81), followed by men engineers working in contractor companies (µ=3.79), and women engineers working in noncontractor companies (µ=3.00). this shows that both men and women engineers working in contractor companies rated their agreement with the statement at a high level whilst women engineers working in non-contractor companies gave an average rating for their agreement. 8. overall satisfaction with work in the construction industry. when the mean (µ) was taken into account, it was found that women engineers working in non-contractor companies had the highest mean (µ=3.91), followed by men engineers working in contractor companies (µ=3.68), and women engineers working in contractor companies (µ=3.28). this shows that women australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 16 engineers working in non-contractor companies and men engineers working in contractor companies enjoyed a high level of overall work satisfaction, whilst women engineers working in contractor companies thought that their overall work satisfaction was at an average level. comparison of turnover rates of women and men engineers working in contractor companies the data on the turnover rates and reasons for their turnover were collected from a survey of women engineers and men engineers working in contractor companies. turnover rates of 47 women and 47 men below 32 years of age, or in their first ten years of working, were compared. these values were based on the average duration that an engineer remained in service with one company, and were calculated using the following formula 1. the results obtained by using formula 1 giving the average years of working for one company of men and women engineers are analyzed and presented in figure 1. figure 1 comparison of average working years of men and women engineers in one company it can be seen from figure 1 that more than 80% of women engineers had worked in one company for less than two years; 26% of women engineers had worked in one company less than one year. the graph also reveals that 60% of women engineers had worked in a company for 1.0-1.9 years. as for men engineers, the graph shows that over 80% of them had worked in one company for 1.0-3.9 years; 26% of them had worked in one company for 1.0-1.9 years; 34% of them had worked in one company for 2.0-2.9 years; and 21% of them had worked in one company for 3.0-3.9 years. the figure also shows that there was only one woman engineer who had worked in one company for 5.0-5.9 years (the longest in this survey), whilst there were two men engineers, or 4% of all men engineers, who had worked in one company for the longest period of time, i.e. 8.0-8.9 years. the comparisons in figure 1 show that the average working years of women engineers were fewer than those of men in all the categories of same company employment. therefore, these figures show that women engineers changed their workplaces australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 17 more often than men engineers. the reasons for the turnover of women and men engineers are shown in figure 2. figure 2 major reasons for women and men civil engineers leaving contractor companies as figure 2 illustrates, the topmost reason for women engineers leaving their jobs was poor career advancement prospects, leading to a feeling of under-achievement. this reason was cited 47 times. the second leading cause of women engineers leaving was the slow work progress linked to the difficulty in acquiring the necessary knowledge, experiences and skills. this reason was given 28 times, the third most important cause of turnover in the careers of women engineers was the desire for experience in supervising a workforce and to go upcountry. this reason was given 12 times. where men engineers are concerned, the most important reason for leaving their jobs was the desire for better remuneration. this reason was given 25 times. the second most important reason for turnover among men was the desire to pursue higher education. a total of 12 responses were recorded. the third most important cause was slow progress in the acquisition of knowledge, experiences and skills, this accounting for 11 responses. therefore, it is clear that the foremost reasons for women engineers and men engineers leaving their jobs are different. men engineers aspired to have better employment whereas women engineers were unhappy with what they perceived as under-achievement in their careers where advancement opportunities were limited and slow to come by. when reasons for the employment turnover of women and men engineers were investigated, it was noted that women quitted their jobs because of sexual harassment, sarcasm and verbal abuse while men engineers did not face these problems (see figure 2). in contractor companies, women engineers had to work mainly with men superiors, colleagues and subordinates. in addition, construction site work was hazardous, and being a predominantly male domain, women were more prone to sexual harassment. australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 18 conclusions although the number of women civil engineers has been growing, they are still underrepresented in the thai construction industry (the council of engineering in thailand, 2009). this three-part study presents an analysis of data on the multi-faceted hurdles faced by women engineers in contractor firms. in the first part, work experience of women engineers in the construction industry was viewed from the perspectives of two groups of women engineers, namely those working in contractor companies as well as those from non-contractor companies. work challenges, problems in non-traditional careers, women‟s career advancement compared to men‟s, and career path guidelines provided to women engineers were the issues taken into consideration by the two groups of women engineers. women engineers working in noncontractor companies seemed to have more opportunities of advancing in their careers and faced fewer problems of working in non-traditional careers than women engineers working in contractor companies. thus, women engineers working in contractor companies had more limited career opportunities than women engineers working in non-contractor companies. the second part of this study is concerned with whether women should be civil engineers, and their career progression in the construction industry. the perceptions of three groups of engineers including women and men engineers working in contractor companies, and women working in non-contractor companies were compared. women and men engineers working in contractor companies shared the view that women should not be civil engineers because they had fewer career opportunities than their male counterparts in contractor companies, whilst women working in non-contractor companies thought otherwise. further, the perceptions of both women and men engineers were similar with regard to opportunities for career progression for women in the construction industry. in the third part, the perspectives of both women and men working in contractor companies were taken into account. the employment turnover rates for women engineers in contractor companies were higher than those of their male counterparts in contractor companies. unlike men engineers who usually left because of their desire for higher salaries, women engineers in contractor companies left mainly because of dissatisfaction with career prospect. hence, working in non-contractor companies seems to be a desirable option for women engineers. unless contractor companies undertake major policy changes regarding women engineers, the latter might shy away from embarking on civil engineering careers in contractor companies. it is hoped that the findings of the current study will bring about such changes so as to encourage women engineers to achieve more in their careers as civil engineers, and to work as professionals on par with men. if the cultural and industry biases in construction organizations can be resolved to meet the needs of the thai construction industry (dainty et al., 2000a, b; khazanet, 1996), more women will remain in the industry, and that will help to avert labour shortages in this sector in the future. besides, the information from this study can be used by construction and construction-related companies to motivate attract and retain women engineers in the thai construction industry. limitations of the study in this study, when collecting information on the average working years of both women and men engineers, the researcher did not take into consideration the type of business they were engaged in; hence the calculation was based on data from men and women engineers who were employed in construction companies at the time of the study. however, since the working years of both men and women engineers were calculated in the same way, they were valid for comparison purposes. another limitation was that during the pilot study, women engineers in australasian journal of construction economics and building kaewsri, n and tongthong, t (2011) ‘an investigation of women engineers in non-traditional occupations in the thai construction industry’, australasian journal of construction economics and building, 11 (2) 1-21 19 contractor companies had working restrictions while men engineers in contractor companies and women engineers working in non-contractor companies did not. had data been collected from men engineers working in non-contractor companies, it might have contributed to a more comprehensive view of women engineers‟ problems in construction companies. acknowledgement the authors would like to thank the kasem bundit university for generously funding this research. references agapiou, a. 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(2001) „retention of non-traditional engineering and construction professionals‟, journal of management in engineering, 17 (1), 41-48 viewpoint on the state of the building industry after the gfc and the euro crisis gerard de valence and göran runeson (university of technology, sydney, australia) abstract there has been an intense debate in the media and among academics on how the great financial crisis has affected the global economy, and how the effects have differed in different regions of the world. this survey was designed to establish to what extent the building industry has been affected by the gfc and the euro crisis. over the last months we have asked senior academics and executives in construction businesses what has happened up to now in their region, what will most likely happen in the near future and in the long term. the answer is that in developed economies the effect has been a substantial downturn as finances have dried up while in developing economies in most regions, demand has been sustained due to population growth with ever increasing needs for residential building and infrastructure. while there is some apprehension about the potential effects of the euro crisis deepening, no-one seems really worried. in the long term there is an agreement, in developed and developing countries alike, that current business models do not work and that the industry has to reinvent itself to be sustainable. keywords: gfc, construction, construction finance introduction this year the ajceb has asked a global sample of senior construction academics and corporate executives for their views on the recent past and near future of the industry in their respective countries. the intent is to get a feeling for the state of the industry around the world during the current financial crisis. the failure of lehmann brothers in september 2007 and the subsequent massive bailouts of banks with toxic asset backed securities and collateralised debt obligations on their balance sheets turned out to be just the first stage in an ongoing financial crisis that in 2011 spread to government debt, particularly in european countries with low growth rates and high debt levels. many financial crises in the past have been caused by housing and/or property booms and busts, and the current one is no exception. in america, spain and ireland the housing market is in a prolonged slump after heavy price falls, and the nov. 26 issue of the economist argued that its house price indicators suggest that the bursting of the global housing bubble is only halfway through. their concern is countries with high household debt and overvalued house prices, such as australia, new zealand, britain, canada, spain, the netherlands and sweden. one of the consequences of the financial crisis has been a withdrawal by banks from lending for building and construction projects in many countries. this is due to three overlapping factors: the requirements for new capital ratios under the basel iii agreement; the safety of government bonds in uncertain times; and weakness on the demand side, partly as a result of tight credit conditions. to put the ajceb survey in context the section below is the summary from the mckinsey global survey, economic conditions snapshot, sept. 2011, which covers general economic conditions across all industries: australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 103 as far as executives’ expectations are concerned, the sept. 2011 survey suggests that only 18 percent of executives in the eurozone expect near-term improvement in their national economies (compared with 29 percent of all respondents, down from 48 percent in june) the reason for this, is that they think that: a double-dip recession will hit advanced economies over the next six months, and nearly three-quarters say there is at least some chance of the eurozone splintering within the next two years. on the company level executives’ expectations on performance over the next six months: have fallen, after remaining fairly stable through the spring. the shares of executives who expect customer demand or the size of their companies’ workforce to rise have both fallen below a third, and the share expecting an increase in profits in 2011 has fallen to 45 per cent, from 63 per cent in june. the full mckinsey global survey, which provides fascinating reading is available from: https://www.mckinseyquarterly.com/economic_conditions_snapshot_september_2011_mc kinsey_global_survey_results_2866 in the mckinsey survey the barriers against economic growth in developed countries are seen as low consumer demand followed by economic volatility and lack of credit while in developing countries, inflation is the major concern. this provides the context in which the ajceb survey should be seen. against this background, the ajceb survey asked three questions from representatives of the major regions in the world: in your opinion, how has the last few years of economic crisis affected the building and construction industry in your region? what do you consider likely to happen to the industry, regionally and globally, in the near future? what about the long term? in what follows the responses to the questions are given in this order, although all answers to each question are not always included. while the intent is to present the responses in the words and with the focus of the respondents, in some cases the responses have been edited and sometimes rephrased to reduce repetition and make the report more focused. the replies cover europe, india, china, hong kong, singapore, korea, the middle east, africa, australia and south america 1 . we do not claim that this is a representative sample or that this is a statistically valid survey. however, we believe this sort of survey has an important role to fill. one of the respondents wrote in response to the request: “i presume that since you have asked me, you are more interested in opinions than facts . . .” this is true, we were and we are. facts are easy to find but are of little value without the considered interpretation by skilled and experienced experts. that we have got here. we hope you will find, like we did, that these responses are generally thoughtful and in many cases thought provoking, and reflect rather well the intriguingly varied state of the global construction industry. we would like to thank all those who responded to the questions. 1 unfortunately no-one responded from north america. https://www.mckinseyquarterly.com/economic_conditions_snapshot_september_2011_mckinsey_global_survey_results_2866 https://www.mckinseyquarterly.com/economic_conditions_snapshot_september_2011_mckinsey_global_survey_results_2866 australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 104 europe covers some of the strongest economies in the world, some that are of real concern to the global economy and a number of countries in between. given that the focus of the financial markets at the end of 2011 is government debt and growth prospects in europe this survey will start there. the first response is from germany, currently one of the saviours of the eurozone: for the construction industry, national and regional business cycles are of far greater importance than global interruptions. only 0.4 per cent of construction investment is carried out by international players. germany’s construction boom after reunification from 1990-1995 was followed by a deep recession from 1995 -2006, then modest growth till the 2008 crisis. the influence was small, although the financial crisis made it a bit more difficult to get financing. german banks always expected 30% equity when financing building, and, the value of buildings increased moderately overall. germany was destroyed after wwii. accordingly a big construction boom followed that lasted until 1975 when the country was full of new buildings. nowadays they are on average maybe 40 years old. renovation is the future in germany for many years to come. however, as reconstruction after wwii happened during a short period, there will be another period ahead (maybe in 20 years) when new construction will pick up considerably. globally there will be few changes for the german construction industry as construction remains largely local. in the long run i’d stick with conventional wisdom: overall, construction as a proportion of gdp will stay the same. more interesting are local trends and contractors must look out for those. in northern europe we had a response from scandinavia, outside the eurozone and as far as norway is concerned, also outside the eu: the picture is mixed. when danish property prices began declining a few years ago, construction demand suffered. however, in sweden a high and stable level of activity due to low rates of interest and the lack of attractive alternative investment opportunities contributed to private sector demand for construction. sweden has rising levels of household debt and high property prices in the residential sector. in the short term, there are (in particular in sweden) rising levels of household debt along with high property prices in the residential sector. this makes construction demand vulnerable to exchange rate turmoil (sweden and norway not being part of the eurozone; the danish currency is however linked to the euro) in the region. the uncertainties related to the development of major and minor eurozone economies have obvious global consequences. in the long term, it is probable that we shall see less concern with price stability, but the effects of higher inflation levels on construction might be ambiguous. if quantitative easing means sacrificing one sacred cow, another cow is the rigorous interpretation of public-private partnerships. instead, we might see more flexible combinations of public and private investment in major infrastructure projects, with carefully designed schemes for sharing various types of risk. from the united kingdom, militantly outside the eurozone but a sort of member of the eu: the global financial crisis had a profound effect on uk construction, with a dramatic reduction in workload and forward orders across the industry. difficulties in financing new projects and dramatic reductions in capital investment in the public sector have led to a very depressed market and to a lack of confidence. although the worst may be over, continuing instability in the eu has maintained low confidence, and the very real prospect of stagflation suggests that things are unlikely to improve in the short term. australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 105 perhaps the only positive relates to skills availability; skills shortages have all but disappeared, particularly given the abundance of labour from eastern europe and ireland following their economic downturn. will this have a detrimental effect on the industry’s ability to reproduce skills? the uk industry remains in a very difficult situation, with forecasts suggesting that only private sector housing and infrastructure will see any growth over the next few years. even if there were a marked increase in output, this is unlikely to translate into a major increase in employment in the short term. government initiatives may stimulate growth in the near future, particularly in terms of the green deal, a scheme to retrofit existing housing stock which would be paid for through increases in utility bills. it remains to be seen whether such schemes will be embraced by home owners and they will do little for the commercial building sector in any case. it is likely that the next few years will be very difficult for the industry in the uk. further out, the outlook for infrastructure is particularly strong sand the nuclear programme will sustain growth. the acute housing shortage in the uk is also likely to stimulate growth. it remains to be seen, however, whether we will see pre-2007 levels of activity again. also from the uk with a stiff upper lip in the face of adversity: since the beginning of the financial crisis, things have panned out in a somewhat strange way. first, the impact on the construction sector was a long time coming. there were many public sector projects already in progress, which was part of the government's problem at the time. they had continued to spend on major public sector projects at considerable rate, and all those major projects in the pipeline kept construction companies in work, though at a more relaxed rate until well after 2010 general election. the new government soon discovered that the adventurous public spending by the previous administration had all but exhausted the countries reserves, so a comprehensive public spending review soon put paid to many planned construction projects. as work for the construction sector finally dried up, new major projects were announced, and the tap of public sector investment was quickly turned on again, to try to avoid too many insolvencies and consequent redundancies. thus, while there is not a lot of work about, the public sector investment programme has maintained a low level of work that seems to have provided a buffer. but the private sector has slowed significantly, largely through the disappearance of capital markets. once the full impact started to hit the construction sector, insolvencies were seen to rise much higher in the construction sector than in others, with a 20% increase in some quarters, compared with the previous year. but most of the time we seem to be seeing insolvencies running at about 10-15% higher than the previous year. of course, these headline figures are increases, not the proportion of companies disappearing. headline grabbers are great for creating disquiet. in the near future, few developers will be able to raise capital from banks, because the banks do not have any. clearly, this is a very lean period for the construction sector. construction workers are being laid off and a proportion of business are disappearing. since most work is sub-contracted, the sector is very resilient. those contractors and suppliers with workflow are now in an odd situation, because if they are making profits, there is a real problem in terms of what to do with their reserves. contractors typically manage their projects so that there is a positive cash flow, ensuring that payments out are always some weeks behind payments received. few people seem to notice that this means contractors do not need to invest in projects; their clients do. this positive cash flow means that contractors with projects have surplus cash to invest, typically in developments of their own. but in such an austere period, the markets into which they sell their own developments are somewhat moribund. since this is often quite lucrative, times are hard. australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 106 in the longer term, locally and globally, i feel that there is chance the construction sector might be able to finally move away from being a cash cow. if we are to make this into a 21st century business sector, it is essential that we abandon the victorian business models and ideals that have served us so well throughout the 20th century. i sense that there is an opportunity for businesses to take more of a stake in the things that they are producing. if we can get contractors and trade contractors to invest in the things that they make, and take a greater proportion of their payment after completion, then we shall see greater incentives and rewards for innovative products and practices. and what better time than now to enable large, successful companies to pump-prime their clients' developments with cash? many more contractors are establishing capital arms to invest in their own and their clients' projects. this is interesting. if it continues, we could see the end of a business sector based on large volumes of cash being pumped around construction sites, and the emergence of significant investment-driven construction companies which will be able to weather financial storms as successfully as any other business sector. the developing world is quite different to europe. most countries present an optimistic picture, e.g. china, india south america and africa although there are dissenting voices form the middle east and korea which both have been very badly affected by the economic crisis. from the rest it is: “what crisis?”. the construction industry is alive and mostly booming. starting in india the current situation and the future is bright with the industry driving the economy at high speed: india and more particularly the ncr (national capital region) and mumbai have witnessed very hectic building and construction activity on account of few factors. firstly, in ncr leading up to the cwg (commonwealth games) infrastructure – roads, flyovers, metro, stadiums and buildings were under construction with a timeline. in mumbai, due to booming real estate industry the building and construction activity was high. secondly, the real estate boom due to genuine demand for housing and commercial buildings has led to private developers having sold off the plan projects. the construction for those sold projects has been happening. projects in this part of india continue to be launched, sold and constructed at a steady pace on account of jobs being created in this part of the country faster than other parts. labour for building and construction industry is in short supply and securing a trained workforce is always a challenge for all contractors, especially because construction industry in india is labour intensive as compared to other economies. due to the national rural employment guarantee scheme, fewer workers are choosing to come to cities from rural settings, which may lead to more mechanization and construction processes suited to the new market conditions. in the near future, the building and construction industry is expanding across the country, creating inflationary pressure with raw material prices increasing especially for steel and cement. this is causing an increase in construction costs, testing the commitments of developers. infrastructure projects are also hit with the inflation with budget constraints leading to delays in delivery. in the long terms the above shortage of labour would lead to more mechanization on site. vocational training for trades in the building and construction industry in india would get a push. all this would lead to better quality delivery of end product. this leads us to china where all is well, but where there may be some dark clouds on the horizon: china's construction market has been booming over the last three years, although for some time now, everyone has predicted that the global economy will cause a australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 107 significant down-turn. after the 2008 beijing olympics, infrastructure works started to slow down with the major projects completed well before the games, however the property market fueled by internal demanding, rocketed for another two years and property prices doubled or even tripled in that time. the government responded by keeping a very tight control on the acquisition of land and used fiscal tools to cool down the market, and were successful as now, there are fewer and fewer new projects being undertaken. the same happened in shanghai after the world expo in 2010, and may happen again in shenzhen after the international university students athletics event. different segments of the construction market react differently. in beijing, while the residential market boomed for two years before grinding to a halt some months ago, the construction of hotel projects slowed down significantly after the 2008 games. office buildings have been in oversupply for some years and not many new projects are currently under construction. retails projects, on the other hand, have been bright spots since the domestic demand is still growing drastically with the government encouraging domestic consumption. industrial construction is never an important sector. perhaps due to concerns about an aging population, demand for health and age care facilities is likely to grow significantly in the coming few years. in conclusion, the global influence on the beijing market has not been strong in the past few years; sometimes it even seems like when the rest of the world is failing investors re-direct their investment to china and its big cities like beijing and shanghai. however, in summary, the construction market is a bit below the 'normal' level of activities at the moment. even within china, not all big cities behave the same. in the second tier or smaller cities the construction market has been booming for the past three years because of the great residential needs of the giant population in china. if we see china as a region, then due to such demand for better housing, it is likely that the residential market is still dominating the construction around china. great infrastructural needs within the developing cities as well as inter-city transport and communications will ensure that the construction market in china is ever developing and booming. as long as the basic/traditional concept of buying and owning home remains central to the chinese population, this will persist until very last day of the world, i believe. as far as the global construction market is concerned, in developed economies with static populations like europe and north america, the influences will be economic and political and i can see no change in the next few years. if australia can attract more migrants, then the construction in all sectors will grow as well. i believe that the growth of population will determine the demand for construction although commercial buildings will continue to be subject to global economic factors. china is an exception at the moment because of low levels of construction for the last 100 years. from hong kong, very dependent on events in china: there is no significant effect from the economic crisis over previous years on the building and construction industry in china mainland, nor in hong kong. this is largely because the construction sector is a major driving force for the national economy and the government has ensured that the sector continues to lead the economic development the industry will continue to grow particularly in those developing countries such as china where huge plans for urbanization are under implementation. china has set an example to other developing countries that the construction for urbanization can contribute to the development of national economy, thus other developing countries particularly in asia will position the construction sector as a priority in their policy making. globally, the construction sector in developed countries and regions will have to make major reforms to the way the production process engages with sustainable development principles. australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 108 building and construction will play an important role in promoting sustainable development. the traditional practice both for construction production and management has to be changed. a kind of new culture in the industry will emerge. from singapore, in south-east asia but also influenced by events in china, the respondent explains how short term financial problems have been avoided in the region but looks at the long term problems not only in financial terms but also in terms of technology to deal with the two major issues of the environment and terrorism: the economic crisis has certainly rattled the confidence of many countries in asia. however, interestingly enough, it appears that the building and construction industry in the region has not been affected as badly as what some doomsayers might have ventured to predict. on the contrary, the building and construction industry in china, the powerhouse of asia, has grown from strength to strength, with the chinese government pouring in huge investments in upgrading existing and creating new infrastructures with a view to stalling the onset of a flagging economy that might result from the lacklustre economic performance of western countries, particularly the us. funds fleeing from the west, and pouring into asian countries, further stimulate growth in the building and construction industry, with ample liquidity fuelling insatiable demand for investment properties. coupled with the speculative element, property prices went through the roof in some countries (for example, in hong kong and singapore). while many properties in the us went into foreclosure, the asian property market seemed to remain unperturbed. from the public sector point of view, the economic crisis appeared to be an opportune window for many asian governments (for example, china, vietnam, indonesia, malaysia and singapore) to bring forward their infrastructure work-plans, capitalizing on the pump-priming effects of such built investments to stimulate backward-andforward growth linkages in other lagging economic sectors, and reaping the benefits of lower tender prices with hungry construction firms competing more aggressively for jobs. as for the near future, the economic crisis has also surfaced the need for financial prudence in the building and construction industry, which run parallel to increasing evidence of the adverse effects of global climate change. the sustainable agenda is likely to feature more strongly and prominently in the industry, both regionally and globally. while funds continue to pour into the industry, investors are increasingly looking towards buildings that are sustainable in terms of energy use and recyclability. carbon neutral buildings will increasingly be brought to the drawing board as running costs of buildings can be an undue burden for owners in the life-cycle of the built assets. the growth of eco-cities is likely to perpetuate both regionally and globally. in tandem with this trend, it is expected that the education and training needs of building professionals have to be reviewed and/or revamped to meet these challenges, balancing financial prudence with sustainability goals in the built environment. in the long term, the global financial market, the natural habitat and terrorism are three areas worth watching with respect to developments in the industry the world will continue to watch developments in the financial markets in the us and the european community, for signs that may possibly lead to a financial meltdown that was narrowly averted in 2008 only through quantitative easing (qe) measures implemented by the obama administration. the world will continue to watch to see if the qe is only a temporary stop-gap measure, and that a global depression cannot be averted. this coupled with the financial problems in the euro-zone (particularly in portugal, ireland, greece and spain or pigs as well as italy) are cause for concerns. the health of the global financial markets certainly has vast implications for the wellbeing of the building and construction industry. the natural habitat is another area worth watching in the long term. increasingly, the world is witnessing more natural disasters and calamities, from flooding, hurricane, australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 109 earthquake, tsunami and raising sea levels. the building and construction industry must rethink how technologies can relate to and pro-actively account for such events to safeguard lives and properties. this is particularly important in small nation states (such as the maldives, tonga, vanuatu and so on) whose very existence is being threatened with each passing day. sea defence systems, floating cities, etc. are some of the issues that have not been brought to the forefront for active engagement globally. terrorism has taken on a more global dimension in recent decades, the most devastating visuals being the 911 attacks on the world trade centre in new york, us, the mumbai attacks, among others. terrorism has immense implications for the building and construction industry, both for new and existing buildings, and in all parts of the world. from africa there were two responses. the first, from south africa, paints an optimistic picture of the long term future after some consolidation in the short term: the 2010 world cup, together with stringent foreign exchange controls, played an important role in protecting the south african construction sector from the global financial crisis. the development of numerous sports facilities and airports across the country underpinned the performance of the sector between 2008 and 2010. yet the south african economy has slowed significantly in recent months, and this is having a negative impact on the sector. recently published figures by the bureau for economic research (ber) suggest that the building sector is rapidly contracting. this is true for the residential, commercial and civil sub-sectors. the public sector has stalled numerous projects and the private sector is largely experiencing an excess of retail and office space. it has been estimated that the sector is operating at a level some 10% lower than two years ago. forecasts for the next two years suggest that the sector will see growth below 10% per annum. in africa, the building sector is being stimulated by relatively high levels of economic growth. forecasts suggest that economies such as nigeria, ghana and angola , will, on average, be recording economic growth rates in excess of 8% per annum in the next few years. this will largely be driven by the mining and petroleum sectors. these countries also need to improve their infrastructure in order to facilitate further economic growth and development. it should be underlined that the economies of africa have, to a significant degree, been decoupled from the financial crisis that raged through north america and europe. this has protected the construction sector across the continent. in the short term the sector will likely continue to consolidate and shed employment opportunities. this will largely be caused by a decline in public sector infrastructural expenditure. the private sector will also continue to find it difficult to raise the finance in order to undertake commercial and residential developments and this will have a negative effect on the construction sector. added to that, the commercial and residential sectors need to mop-up excess retail space before commencing new developments. the poor performance and uncertainties related to the european economies will, in the short term, continue to have a negative impact on investor perceptions and their willingness to undertake new developments. the continuing greek debt crisis, and its potential impact on the eurozone, is worrying in this regard. in the longer term, the african continent will offer exciting opportunities, driven by relatively high levels of economic growth and improved investor perceptions. the shortage of housing across the continent will also remain an important driver for the sector. australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 110 the urbanization of african cities will in the longer term place significant pressure on the existing infrastructure and this will invariably offer opportunities for the construction sector. investors will also continue to focus on the telecom, mining and energy sectors. in south africa, significant attention is being given to the development of rapid transportation systems. it is likely that this infrastructure will offer construction opportunities in the public as well as private sectors. the demand for low income housing in south africa will also drive the sector. the second is from nigeria where the financial situation has made more of an impact and changed the balance between local and expatriate companies to the detriment of the former due to an increasing reliance on ppps: the construction industry has remained one of the most vibrant and active sectors of the nigerian economy in recent years. the increased funding of the housing sector by the private sector, several integrated power plants, development of rail transportation, establishment of free trade zones and industrial zones and several road projects going on in the federal capital territory (fct) and all the states in nigeria have increased the tempo of construction in recent years. the situation which has created huge investment opportunities and markets for both local and foreign investors brought about several issues of major concern to stakeholders and non-stakeholders alike. among these issues are local and foreign participation, duties of construction professionals, collapse or failure of structures, high cost of construction inclusive of construction materials and the issue of fake or inferior construction materials. the construction industry in nigeria has in the last few years been dominated by expatriate (foreign) contractors. the economic crises of the last few years coupled with the inability of governments (federal, state and local) to get the funds to finance required infrastructural projects has brought about a shift from traditional procurement approaches to the modern partnership approaches of public-private-partnership (ppp) specifically in infrastructures. with the current economic crisis, local (indigenous) contractors do not have the financial capacity for such partnership therefore; expatriate contractors remain the sole beneficiary of the partnership. the effect of foreign domination of construction contracts in nigeria is noticeable in the construction cost index. despite the economic crisis, construction costs remain on the increase such that the costs of construction in nigeria are considered as the highest globally. the situation has brought about the need for standards in construction costs and increased local content in construction. the nigerian oil and gas industry development content act of 2010 has set the pace for local content in nigerian economy, therefore a similar act for the construction industry is expected in the nearest future. from south america there were two responses. the first is from brazil where things are going splendidly: due to a combination of factors the brazilian construction industry was not affected by the world economic crisis, going through the best period of growth since the mid seventies, partly because the brazilian economy was not strongly affected by the economic crisis. moreover, the government decided to invest strongly in the construction sector, especially in the social housing market. there is also much investment in infrastructure projects. some residential building companies have increased their turnover fivefold. prices of dwellings have also increased considerably. as a consequence there is a shortage of materials and labour. some companies are also facing problems in the quality of management for a much larger number of projects (and for bigger projects). australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 111 i do not think the country will slow down much until 2014, at least. one of the immediate consequences is the use of prefabricated components. many companies have also decided to hire their own labour, rather than using subcontracted labour only. by doing that, they can have more control over their crews and provide incentives to reduce labour turnover. if the boom continues for a while, it is a unique opportunity for developing the construction sector, especially in terms of moving towards industrialized construction. there may also be a positive impact in terms of industrial relations. our second respondent from south america (chile) also sees the current situation as very good but can see warning signs in the future if the euro crisis is not resolved: south america and latin america have not been strongly affected by the economic crisis. after 2009 things started moving again. this year is going to be very good here in chile and in general around the region. the growth of the construction sector has been strong (6-8%) pushed by favorable economic conditions of most of the countries until now. particularly peru, ecuador, brazil, argentina, colombia, chile have been doing quite well during the last two years. if there is a european recession as it is feared, it is expected that economic growth will go down and so, the construction industry growth. however, if the crisis is solved, then the growth will recover and construction will do okay. in any way, economic expectations are already affecting the market to some degree and some projects are being delayed for a while. if the economic crisis is solved and the world start growing again at good/normal rates, i believe that countries of the regions will perform well and so will do the building and construction industry. this region is in need of many infrastructure, building and industrial projects and development and those needs will push the industry for many years. but it depends on the stability of the world’s economy, particularly china, usa and europe. while so far developing countries have been doing well, this is not uniform as the reports from korea and the middle east show. first the response from korea: in korea, the global economic crisis in 2008 deeply influenced the construction market. the decrease between 2007 and 2011 was around 20%, and very serious in private housing. the effect has caused bankruptcy of many local construction companies, sacking of employees, unemployment crisis to university students, and so on. the financial problems cannot be solved easily and may continue for some years, so the downturn of korean construction may be prolonged and many companies which have been just surviving will be collapse. the financial crisis in many advanced countries cannot be easily resolved due to domestic politics, increased social security, average life extension, and so on. also in korea populist trends in politics is gaining ground, causing increases in welfare and decreases in soc. these trends and decreases in the birthrate means reductions in the construction budget. if there is no drastic change in korea such as for example the unification of south and north korea, about 5 years of a weak construction market is expected. there are also problems in the middle east: the economic crisis has deeply affected the construction industry in the gulf cooperation council (gcc) region, especially the private real estate development sector, where many projects have stopped, real estate developers’ stocks have sharply dropped, and land prices have taken a nose dive. consequently, many investors have suspended most, if not all, of planned future projects. however, the rise australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 112 in oil prices has encouraged the government to pump more liquidity in the market and accelerate the developments already in the pipeline, a measure that, to a certain degree, has lessened the effect of the financial crisis. the impact of the crisis, however, is expected to last for many years to come, and it is anticipated that the construction market will witness a “reshuffle” among the various industry players, where only the strongest, both financially and technically, shall survive. as the case with most developing countries, the civil engineering and building construction cycle is expected to rise again within the coming few years, nevertheless, more towards the public rather than the private sector, with more emphasis on ppp and pfi procurement methods. finally, there were two responses from “the lucky country”, australia which show that maybe, we are not quite either as lucky or as unlucky as our politicians try to tell us. the first one looks at the changes in the industry that are taking place: the industry has changed considerably. the bread and butter commercial building work has dried up and firms have had to be innovative and adapt to new micro markets such as university buildings or be opportunistic in responding to one-off iconic projects. business strategy has therefore become much more short term and dynamic. this has meant that construction firms have had to learn new business models and sectors that perhaps they would not have in ideal core business conditions. one area where the larger firms have sought to diversify into is the resources sector. these incredibly large projects pose many new human resource and logistical risks which are not well understood by those who have traditionally not operated in this sector. the many years of fragmentation of the industry have also now come home to roost in the skills shortage which we see in the resource sector. companies are having to recruit heavily from overseas to resource these projects so there will be a large influx of foreign workers into australia at an operational and managerial level. the credit crisis has also affected the ppp market adversely although this is expected to pick up again in the future as credit becomes more available particularly in the roads and infrastructure sector which is likely to be a source of future work. in the near future, there will inevitably be an increase in foreign competition locally and regionally. what was a domestic industry will become more internationalized as foreign firms immersed in depressed overseas markets look to distant shores for work opportunities. chinese, japanese and eu firms are seeking to buy up companies as a road into the australian construction sector and are starting to take work off local contractors. many foreign firms have been burnt in the past but will be a lot smarter this time around. the long term outlook surely can't be anything other than better than the current outlook. the economy will also recover as confidence recovers. but this will be a slow process as eu seeks to restructure its debt over the next 5 years. i think that bim will have an enormous impact on the industry, changing traditional relationships and i believe that the so called green revolution will gather pace and fundamentally change the industry at least on the outside. the second australian response: for ppp/pfi deals the gfc certainly made financing projects difficult, but did not stop activity in australia with several significant infrastructure projects being financed. many other major infrastructure projects were already under construction. the australian construction market has been overheated for the last five years with supply constraints pushing up prices, exacerbated by the resources boom in recent years. softness in the residential and commercial sectors has helped by taking some of the demand pressure of construction resources. australasian journal of construction economics and building de valence, g and runeson, g (2011) ‘on the state of the building industry after the gfc and the euro crisis’, australasian journal of construction economics and building, 11 (4) 102-113 113 in the near future, continuing growth in demand for engineering resources is likely to continue driven by growth in the resources sector with significant shortfalls of skilled labour. there is also a strong pipeline of work in infrastructure including road, rail, ports, airports, hospitals, schools and defence facilities. the european sovereign debt crisis is having a positive impact on financing for australian ppp/pfi projects with flight to quality in evidence. many foreign equity houses are investing in australian infrastructure projects with triple a rated state or federal government cash flows. foreign banks are actively competing with the locals for a piece of the debt finance action with reductions in margin spread and increases in tenor. longer term there will inevitably be a turnaround in the resources sector but china is unlikely to stop growing for the foreseeable future. india is also becoming a significant economic powerhouse. unfortunately all this resources growth has led to appreciation of the aud with negative impacts on both the industrial and services sectors. this has greatly narrowed the base of australia’s economic diversity and we are becoming very vulnerable to any collapse in the resources sector. there is a significant backlog in transport infrastructure in australia that could feed the construction industry for decade so long as there is enough wealth to pay for it all. while the resources boom continues the growth in wealth continues and this is unlikely to change dramatically for the next 3 to 5 years. concluding comments the pattern that is developing to some extent follows the mckinsey survey findings in finding a significant difference between developed and developing countries. the financial crisis has had a major impact in europe and is expected to continue to affect the industry in the near future. in contrast, in developing countries, it is the population growth, urbanisation and infrastructure development that are now and will, over the foreseeable future, be the driving forces behind the demand for building and construction. mckinsey has a map of global cities that captures the scale of this trend, (http://www.mckinsey.com/insights/mgi/ research/urbanization and go to the interactive map of global cities). the map shows 600 cities with their population, gdp and gdp per capita growth between 2007 and 2025 and underscores the importance of these developments for the future of the construction industry. another thing to come out of the survey is the conviction that the nature of construction will (have to) change. whether it is the approach to technology, to new business models, to sustainability or investment, there is a near unanimous assumption that we need to do things differently if we are to adapt to trends in the long term. maybe the final word should go to the respondent from singapore, who has given us our long wished for first opportunity to publish something in chinese – although very short by pointing out that the chinese word for “crisis” is written as: this is pronounced as “wei qi”; “wei” being danger and “qi” being opportunity. this should remind us that even in the midst of a crisis, opportunities will still abound if one is well prepared. as evidenced by this survey, we have at least given it a lot of thought. http://www.mckinsey.com/insights/mgi/%20research/urbanization http://www.mckinsey.com/insights/mgi/%20research/urbanization ajceb[vol4,no1] ������� � �� ��,���� �����*��� ��� ����)��������� ���"������#�a'���?�����6b ?; "//&� �)'$)� ��� � �� ��� �� ����� ��������� �����#�-������#����!������ ����; (�=��� ���� ��� ������-��! )�� ��� -�� ��� ������� &��� �� g0�$%�h�� ���� ��� � �� �� $�� � � �� ��� %� � � �� ����������� ::� .. ��������� -�� ������ � � ������ g����� �� � � #���� ���� ��� � �� �� $�� � � �� ��� %� �� �� ���������h ����� ������ � �� ��� �� ����� ��������� �����#�"������#����!��)�� ����; ��.� ����)�� ����?����6qqc�� ����������=�� �� �����=�������� 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�����-��!��������#� ���� 4��� ����� ���=������ ������6qqc�������� ��� ���.�������� ������� !�� ����.�� �������������� �� ����;� ��� ���� ���� ������� � ����� ������������� ���.�-��� ��� �����.�-��� ������� ��������� ����.������� ������ ����.�-��� ��������#��������� �� ����-�� ������� �� �!������#����� ��������; ��$ �������������8?��� ��.�� ����� �����l�!��#� ��� �����m� ��l#� 3��#������ �� ����������m� ��l� ������! ���������� ������� m $ ���� �� ���#������������������� ������������ �������;� ����������-������������ �� ������� � �� ��� ���� �� ���.���� ������� � �.�-��� ��� achieving supply chain integration within construction industry peter mcdermott (scri research centre in the built and human environment (buhu), university of salford, salford, greater manchester, uk) and malik m a khalfan (scri research centre in the built and human environment (buhu), university of salford, salford, greater manchester, uk) abstract the main driver behind the adoption of supply chain management (scm) philosophy into the construction industry was the successes within other industry sectors. scm can be defined as network of different organisations, linked upstream and downstream in a chain, aiming to produce quality and value in the services and products for the end consumers through integrated processes and activities. in order to achieve the optimised level of integration of the whole supply chain, the industry has responded in various forms. this paper will discuss different initiatives by the researchers,construction industry, and the uk government in order to achieve optimal level of supply chain integration. this paper will discuss the concept of aggregation, and also look at other supply chain integration related concepts including client-led supply chain, knowledge about the whole supply chain, effects of procurement on integration of supply chain, etc. the paper will give a brief overview and initial findings of a project undertaken by the authors, and also include examples from the uk construction industry on bundling of the supply and demand. keywords: supply chain management,supply chain integration, construction industry. introduction since the middle of the 1990's, the researchers and practitioners within the construction industry have moved towards supply chain management (scm) philosophy in order to make construction industry more effective and more efficient. the main driver behind the adoption of this philosophy was the successes within other industry sectors. scm can be defined as network of different organisations, linked upstream and downstream in a chain, aiming to produce quality and value in the services and products for the end consumers through integrated processes and activities. in order to achieve the optimised level of integration of the whole supply chain, the industry has responded in various forms. this paper will give an overview of what is being done in general and specifically within construction industry to support the integration of supply chain. saad et al. (2002) argue that the construction industry has moved to the adoption of scm philosophy, without having benefited from earlier philosophies in other industry sectors such as just-in-time, totalquality management, and concurrent engineering {khalfan et al. 2001). in other words, features from the above mentioned philosophies have become part of current practices of construction industry because of the adoption of scm which lay the foundation of integrated construction supply chain. one of the features of the integrated construction supply chain is that they are centrally coordinated and the relationship between firms is maintained for the duration of a specific project and beyond. these chains are not only directed towards the minimisation of transaction costs, but also towards enhancement and transfer of expertise between all the parties (vrijhoef and voordijk, 2003).this paper will review the literature related to the construction supply chain integration; efforts in the form of current reports; industrial practices in order to achieve supply chain integration within construction industry; and will also give a brief overview and initial findings of a project undertaken by the authors at the scri research centre at university of salford. a review of supply chain management in construction in construction industry, increasing number of construction organisations have started showing a realisation towards the importance of scm concept (akintoye et al, 2000; vrijhoef and koskela, 2000; dainty et al 2001a) however unlike retail and manufacturing sectors, construction industry has been slow and reluctant in employing the concept of scm (love, 2000).according to ofori (2001) by using a scm philosophy, various problems associated with the traditional practices in the construction industry can be resolved. these problems may arise due to the presence of win-lose arrangements; uncertainties encountered by ...j ""'oj( various construction processes; lack of exchange of information and knowledge; increasing price competition due to the purchases of supplies from numerous suppliers; and the existence of environment of fear, dishonesty, and frustration (asad et al., 2005). proverbs and holt (2000) advocate the use of the scm philosophy as a mean to effectively reduce the overall construction costs. they advocate early involvement of subcontractors and suppliers in a manner similar to the early involvement of the contractor during the procurement process. according to them this would give an opportunity to the concerned parties to offer their expertise which could result into potentialcost savings and can become a stepping stone in improving two way communication among the collaborating partners. on the other hand, dainty et al. (2001b) have stressed on the need to facilitate inter-firm relationships, achieve mutual benefits, and build trust among key interfaces in the supply chain. according to them it is crucial to take away the deep-rooted barriers of traditional relationships and the adversarial culture, and instead, introduce a change management framework to facilitate the implementation of supply chain management at the operational level. tan (2001) on the other hand has identified the key drivers towards fully integrated supply chain. according to him, these drivers may include; changes in the corporate culture, trust and communication among all the parties involved, information/knowledge sharing, suppliers' evaluation for supplier development process, and sharing common goals of waste elimination and increased efficiency. dainty et al. (2001a) have suggested changes which are required to make supply chain integration more effective. these changes include developing trust between parties; ensuring fair payments; early involvement with projects; educating the construction workforce; improving communication skills; knowing the operations of other type of organisations within construction supply chain; knowing the benefits of supply chain integration and partnering; understanding new contractual documents; client and main contractor organisations accepting that sub contractors can bring added values to the construction project delivery process; and willingness to share knowledge. barratt (2004) proposes a 'collaborative culture' for enhancing integration and improving collaboration among the supply chain partners within the construction industry. they are of the opinion that the collaborative culture is made up of number of elements including; external and internal trust;mutual pain and gain, information exchange in the supply chain, transparency and quality of information flow, communication and understanding, effective cross-functional activities and process alignment; joint decision making;use of measures to assess the performance of the whole supply chain, commit resources at the early stages of project development process, intraand inter organisational support, corporate focus on scm, demonstration of a business case for collaboration, and a notion that collaboration does not need to be based on technology.one of the ways to bring collaboration and integration within the industry is through aggregating the supply and demand, which would result into enhancing the collaboration among the construction firms. this will be discussed in details in the next section. recent reports in the uk the office of government commerce (ogc) works with the uk government to improve procurement and project/programme management. they also work with suppliers to make the government marketplace more efficient and attractive to business. another government department, the department of trade and industry (dti) drives the uk government's ambition of 'prosperity for all' by working to create the best environment for business success in the uk. they help people and companies become more productive by promoting enterprise, innovation and creativity. this section will give a brief overview on some of the recent reports published by the above mentioned organisations, which has already started impacting the integration within the construction supply chain, as these reports are now forming the shape of the naw publ;c procurement policies. the purpose of the ogc guide (2002) is look at the three areas of procurement: • analysing demand information both within a government organisation and across different organisation; the australianjournalof constructioneconomia and building(vol6,no 2] 45 46 the australian journal of construction economics and building [vol6, noll • taking decisions on whether to seek aggregated deals, i.e. to engage in collaborative deals between departments; and • taking decisions on whether to bundle good and services together into a single contract. the report discusses both the aggregation or coordination of demand and the aggregation or consolidation of supply (see figure 1). aggregating demand means: • analysing historical purchasing data to provide the management information necessary to assess purchasing practices and trends; • drawing together information on common or similar current or future requirements, either within an organisation and/or with other organisations; and • assessing the potential for collaborating with other business units within an organisation or with other organisations and agreeing to present these requirements in a coordinated way to the market. sometimes, instead of grouping together the information on common or similar requirement, we include diverse but related requirements then we refer to this as bundling. aggregation of supply: when the aggregated demand is presented in a consolidated way to the market, a single supplier or fewer suppliers may respond and contract with us. this is a likely market response to aggregated demand presented in a consolidated way to the market. aggregation issues should be considered as early as possible in any project that involves procurement. the potential advantages of aggregation are: • better management information through aggregation of demand; • greater leverage; • lower prices through reduced production costs; • lower transaction costs; • better management of the market; and • better management of the supply chain. • on the other hand, there are some potential drawbacks of aggregation: • need for highly skilled procurers and contract managers; • distorting the market and missing out on innovation; and • invisible supply chain. the aggregation report also presents a checklist of questions to be considered in reaching decisions about aggregation. the basic aim of another report of the ogc, the kelly report (2003), was to advise ogc on what further steps can be taken in order to increase competition and encourage better long-term capacity planning in markets (including the construction industry), where the government possesses significant purchasing power. demand-s1de aggre he»'! a. gathering hlstorical spend data ... • .... • ... • • ...•. • • • • • • ... • • • • • • • • • • b. identifying options for rationalising current/future demand 0 0 0 0 0 0 0 c. deciding to consolidate reqwrements to present them to the market aggregation ojsuppiy d. market provides a response to the aggregated demand ·0\0\(.\cd figure 1: an illustration of the aggregation process (ogc report, 2002) the report suggests that all government departments should work towards providing the information on their future needs (e.g. for a specific area, say construction),in order to correspond with industry lead times, engage early with key suppliers throughout the supply chain and take supplier's needs into account in their business planning. this will also result into a better understanding of the public sector's likely demands on the industry and the nature of the market to meet those demands. the australian journal of construction economics and building [vol6, no 21 47 48 the aurnalian journal of construction economics and building [vol6, no 2) the government, as a client,needs to develop the markets in order to improve their capacity but on the other hand, needs to improve its own capability. improvement within the procurement system is crucial. this may include development of a guideline on how to engage in early dialogue with suppliers while adhering to the principles of open competition and work on better ways of sharing information between departments about the performance of individual suppliers. this is also believed that if the public sector (government) and the industry work together and help each other, they both could bring about substantialimprovement within the construction sector. examples in the north west of england, an initiative by the local government and the social housing landlords (rsls) has resulted into fusion 21 (http://www.fusion21.co.ukl). the initiative has adopted the whole idea of bundling the present and future demands of different client organisations and putting them forward into the market to get the best price from the sub contractors and suppliers in return of certainty of continuous workflow. the organisation is also involved in skill development of the local labour and the details can be found on the website provided above. another project with the same region, called elevate (http://www.elevate eastlancs.co.uk) is also trying to introduce the ideas and lessons learnt from fusion 21. as discussed above, the bundling of demands by the local government and initiatives by central government departments have raised awareness and now more and more companies, especially smes are collaborating and offering their services as a package, as a supply in response to the demands. prime contracting, a type of construction contract, is becoming popular among the local government because the prime contractor comes with the integrated supply chain to offer the supply of services and products in response to the demands of client organisations. ministry of defence (mod) is the main player in getting benefits from prime contracting. research and consultancy work is also being done with manchester city council by the authors, who are taking lead in the north west of the england to bundle their demands for educational facilities in different packages and in response they have awarded prime contracts to three contractors who have come forward to supply products and services in the integrated manner for primary schools. the supply chain integration project as part of the investigation into drivers of supply chain integration, the authors are conducting a series of case studies as part of their research project with different companies including the public sector. fusion 21 and elevate,both organisations, are part of the case studies. these case studies are generating the propositions around the concepts, theories and policies presented earlier in the last section. some of theories will be discussed in the later sections as well. the project is now intended to test both theory and policy implementation within the companies that influence supply chain integration and will also investigate the extent to which the above mentioned concepts are being implemented with the construction industry. the original aim of the research proposal is to determine if there are ways of integrating the supply chain that will ensure service and product quality whilst still supporting the government and client initiatives, aimed at increasing the competitiveness of the construction sector (khalfan et al., 2004). literature reviews has already been carried out and semi-structured interviews are being conducted as part of the project which will explore the changes that are occurring throughout the supply chain. the project has already looked at some of the concepts that are important within the supply and demand management context and affect the overall supply chain integration within the construction industry, which will be discussed in the next sections.this includes knowledge of suppliers' capacity; clients' role in demand aggregation; achieving demand and supply management through innovative procurement routes; etc. when this paper is being written (end of may 2005), the researchers have identified the projects and companies represented on the steering committee based on the unit of analysis and selection criteria to conduct the in-depth and small case studies. at this stage, the findings from the first round of interviews are being analysed by using soft system methodology (ssm), which researchers are intending to use for the rest of the case studies as well. figure 2 shows the transformation within the construction industry due to introduction of scm. ,. and downstream an integrated construction supply chain arrangement to enable supply chain participants to work in collaboration over a longer period in order to develop relationship based on trust and bring value for money for the construction clients. actors: all participating organisations within a construction supply chain ..// ... ......... owners: both upstream _9.. .a organisations within a ./ supply chain 9 a separated supply chain participants c ® integrated supply chain d. wori<ing as an integrated supply chain on different projects for a .5 longer period of time will bring improvementsin relationship among the project participants and organisations,and also !2 bring better value for money for the clients. the relationship .c within the integrated supply chain is based on the principles of trust, collaboration, and pain/gain share. customers: users of facility, client, project supply chain participants environmental pressure on the activity: resistance to change from non-integrated to integrated arrangements. fragmented nature of the construction industry. figure 2: an example of the transformation to integrated supply chain within construction industry fragmentation the fragmentation issue within the construction industry came out clearly during the first phase of interviews. the problem is how to manage the fragmentation and also how to reduce that fragmentation. this is fact that we can not eliminate fragmentation! and in order to manage this fragmentation, we need some management mechanism, including concurrent engineering, lean thinking, supply chain philosophy, etc. fragmentation is classified as the number of participants working on one project. if it is a complex project then there is likelihood that there would be more participants involved in that project, resulting in a more fragmented project. the question arises; why there is a fragmentation? since there are no barriers in place for people to enter into the construction business, therefore, there are many smes and one-man companies involved in the business, some with literally no sklil at all! secondly, all project participants coming from different backgrounds and have different goals related to their current work on a specific project. unless we have common understanding and common goals to achieve in a supply chain, it is difficult to manage everybody involved in the project supply chain. one of the solutions is to integrate all the participants at different levels, which could help in resolving this problem, i.e. by integrating them, by bringing common understanding at different levels within a supply chain. ------------------------the a_um_alia n-jou1 -'"""""..,"'""" 50 the australianjournalof construction economics and building [vol6,no 2) integration of supply chain means knowing the supply chain it is very important for the each member or participant of an integrated supply chain to know first of all the whole process of the construction and secondly and the important thing is to know the business of the other participants/members of the supply chain. people come together as a team, and work for a number of years and then disperse; this trend is now out of fashion due to new procurement methods adopted by different companies within the construction industry as discussed earlier.it is now becoming necessary to know more about the people, personally and professionally, with whom we work within a team because the concept of construction project team is now moving from temporary to virtually permanent team (vrijhoef and voordijk, 2003). knowing the people and their business will not only bring new culture within the industry but will also bring benefits which will be enjoyed by everybody within an integrated supply chain (khalfan et al., 2005). construction clients' role and power in integration clients have played a central role in construction, and this has been studied for a long time (cherns and bryant, 1984), including with regards to supply chain integration (khalfan and mcdermott, 2005). some authors have criticised and called for change in clients' procurement strategies and tendering procedures (millett et al., 2001; wong et al., 2000). it has been argued that clients have a critical role for integration of the supply chain because it is the client that makes the initial decision to procure construction works and the way in which procurement takes place (briscoe et al., 2004). however the majority of clients within the construction industry are not in a position of dominance over the supply chain because of the nature of their ad-hoc construction profile combined with their limited understanding of the marketplace. only the regular clients are in the better position to be able to leverage the supply chain effectively and implement integrated supply chain management concept successfully through introducing new procurement strategies such as partnering, strategic alliances etc. in addition to the type and position of clients within the construction sector they are in, various external factors are affecting clients' roles and power vis-a-vis their supply bases, including size of the suppliers market, global or local suppliers market, influence of regulations on clients (public or private), and market share of the client, e.g. large clients dominating other smaller clients in particular client markets, having major influence on suppliers, and thus the ability to exercise power on the supply chain, or even mobilise own integrated supply chain, e.g. through framework agreements with contractors, specialists, suppliers, architects, structural engineer etc. achieving effective integration through procurement figure 3 shows the direct link of high degree of supply chain effectiveness and efficiency to the high degree of the integration among the supply chain participants. this also concludes that in order to get more effective and efficient performance from construction personnel, integrate them into a team. and one of the ways to achieve is through procurement. the historical or traditional procurement process (see figure 4) was the acceptable process in the construction industry for many decades. the process had made a specific culture within the construction industry relying on a mere lowest price focus and project based approaches contributing towards inefficiencies of the construction process. more recently new procurement processes are being initiated aimed at more integrated organisation of processes. this can be considered as a "transitional process" (see figure 5). this process includes two-stage selection procedures and partnering concepts. a desirable next step is to move towards the "aspirational process" (see figure 6), which is based on the whole concept of integration and collaborative working and shared objectives within a reconfigured and integrated supply chain. 0 high degree of supply chain effectiveness and efficiency collaboration co-ordination ([]) co-operation 00 open market negotiations low degree of interaction and collaboration interaction and collaboration b/w two organisations high figure 3: move from traditional open market negotiation to collaboration (khalfan et al., 2004) i vdop i 8 figure 4: the historic procurement process implement implement figurer 5: the transitional process the australianjournalof constructioneconomics and building [vol6,no 2) 51 52 the australian journalof constructioneconomics and building [vol6, no lj figure 6: the aspirational process various examples of strategic thinking and long term structured action by clients in terms of their procurement policies and methods have shown positive effects on value and efficiency levels of construction processes (khalfan and mcdermott, 2006). summary integrated procurement approaches and supply and demand management are often associated with conditions of mutual dependency, integration, collaboration, goal sharing, and trust. this notion is largely reflecting what most previous authors have been arguing with regards to the above mentioned concept. this paper briefly described the concept of supply chain management and demand and supply management which are in the literature and are being practiced currently within the construction industry due to the publication of different reports. the paper also gave an update on the supply chain integration project, being carried out at the scri research centre. the impact of the discussed concepts is beginning to be felt by construction practitioners through the uk government construction procurement policies and is being investigated by the authors. the basic aim of conducting case studies as part of the research project is to observe an organisation working on a specific project and observe integration of the supply chain on that project. the prospective company is expected to give researchers access to one of their projects. on completion of the case studies, planned for the research project, the authors are expected to be able to comment and describe the validity and application of the discussed concepts in more detail, and report on their successful implementation and changes experienced by different organisations involved in the process. references akintoye, a.; mcintosh, g. and fitzgerald, e. (2000), a survey of supply chain collaboration and management in the uk construction industry, european journal of purchasing and supply management , vol. 6, 2000, pp. 159 168. asad,s.; khalfan, m. m. a. and mcdermott, p. (2005), managing knowledge across the construction supply chain, scri symposium in salford, 12 -13 april, pp. 2.25 235. barratt, m. (2004), understanding the meaning of collaboration in the supply chain, supply chain management: an international journal, vol. 9, no. 1, pp. 30 42. bertelsen, s. {1997), just-in-time logistics in the supply of building materials, in proceedings of 151 international conference on construction industry development: building the future together, 9-11 december, singapore. briscoe, g.h.; dainty, a. r. j. and millett,s. 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(2006), innovating for supply chain integration within construction, journal of construction innovation, vol. 6, pp.143 157. london, k.; kenley, r. and agapiou,a. (1998), theoretical supply chain network modellinin the building industry, in proceedings of 141 annual arcom conference, university of reading, 9 11 september, vol. 2, pp. 369 379. love, p.e.d. (2000), construction supply chains, european journal of purchasing and supply management, vol6 no. 3-4, pp. 145-7. millett, s.j., dainty, a.r.j., and briscoe, g.h. (2001),client procurement strategies:a cross sectoral analysis, in:proceedings 17th annual arcom conference. 5-7 september 2001, salford.university of salford. 907-915. o'brien, w.; london, k. and vrijhoef, r. (2002), construction supply chain modelling: a research review and interdisciplinary research agenda, 1oth annual conference of the international group for lean construction, gramado, brazil, 6-8 august, pp. 129 148. ofori, g. (2000), greening the construction supply chain in singapore, european journal of purchasing and supply management, vol.6, 2000, pp. 195-206. ogc report (2002), aggregation, ogc report. ogc report (2003), increasing competition and improving long-term capacity planning in the government market place, ogc report, chancellor of the exchequer, december. proverbs, d. g. and holt, g. d. (2000), reducing construction costs: european best practice supply chain implications, european journal of purchasing and supply management, vol. 6, pp. 149 158. saad, m.; jones, m.and james, p. (2002), a review of the progress towards the adoption of supply chain management relationships in construction, european journal of purchasing and supply management, vol. 8, 2002, pp. 173 183. tan, k. c.(2001), a framework of supply chain management literature, european journal of purchasing and supply management, vol. 7, 2001' pp. 39 48. vrijhoef, r. and koskela, l. (2000), the four roles of supply chain management in construction,european journal of purchasing ----------------------the au_str_a-lian""""'"""'""'"'.....,"'"''"'""'"'• no n fll 54 1m au.stralian journal of construction economicsand building [vol6, no 2) and supply management, vol. 6, 2000, pp. 169 178. vrijhoef, r. and voordijk, h. (2003),'improving supply chain management in construction: what can be learned from the food and grocery sector?', cib joint international symposium on knowledge construction, 22-24 october, singapore. wong,c.h., holt,g.d., and cooper, p.a. (2000). lowest price or value?: investigation of uk construction clients' tender selection process, construction management and economics 18, 767-774. untitled payment mechanisms for integrated teams in construction ibrahim motawa and ammar kaka school of the built environment, heriot watt university, uk abstract the overwhelming consensus for process and team integration has emerged as an enabler to manage construction projects. the performance of integrated teams is highly affected by the adopted payment mechanism. however, the payment mechanisms available for a project may need the team to compromise in order to agree on a fair mechanism for as many members as possible. this paper introduces a methodology to simulate the profiles of alternative payment mechanisms. the methodology aims to help project teams define the most appropriate mechanism for each member. the proposed methodology is therefore novel and superior to existing cash flow models where the focus has been limited to main contractors only. to promote its use as a performance enabling mechanism, the methodology utilizes “the project process map”, “the stakeholders & supply chain”, “the pricing method” and “the payment mechanism”. this will act as an aid to design or “fine-tune” payment mechanisms to individual projects characteristics considering payment for off-site materials and components, which always concerns project fabricators and supply chain. keywords: payment mechanisms, pricing methods, construction process. introduction the role of payment mechanisms in construction contracts inspired many researchers to categorise the types of contracts by the types of payment mechanisms, for example: williams (1992), o'reilly’s (1993), potts (1995) and smith (2002). contracts that specify ‘lump-sum’ and wholly ‘cost-reimbursable’ payment are acknowledged by icheme (2003) to be the extremes of a wide range of forms of contracts that allocate risks and responsibilities between the contracting parties in different ways. a variety of forms of payment was listed by icheme (2002) as: • reimbursable cost-plus a percentage-fee; • reimbursable cost-plus a fixed-fee; • target cost (shared over-run and/or underrun); • unit-rate (including re-measure); • guaranteed maximum price; • lump-sum services and materials with reimbursable construction; • lump-sum (i.e. wholly lump-sum). nonetheless, other payment methods such as the open-book accounting, stage payments, incentive contracting, direct payment, trust accounts/funds, mobilisation advance payment and the mechanic’s lien have been shown to be versatile and useful in different project situations. such alternatives may allow for better and active participation of the project members so as to ensure that the project objectives are well understood and delivered. for example, with the use of a costreimbursable method, the contractor is involved at a very early stage in the project and contributes by his/her own expertise in buildability, costing, material ordering, and programming, masterman (2002). a stage payment method reduces administration time and cost to prepare interim payments and allows the responsible project personnel to be engaged in more productive project activities, potts (1988) and cheetham et al. (1995). incentive payment method is often employed with disincentives so as to instil efficient contract arrangement and to reward the successful contractors who are fully motivated so as to achieve the client objectives with high performance standards, arditi & yasamis (1998) and bubshait (2003). a direct payment method allows subcontractors and suppliers to be paid promptly and in full which should result in lower prices, better performance and faster completion, clough & sears (1994). trust accounts and mechanics liens could be set up to protect and compensate the project participants who have invested in the project against a client or main contractor going out of business and/or not fulfilling their payment commitment, clough & sears (1994) and latham (1994). projects’ contractors and subcontractors could also be paid in advance to assist them in starting the project and maintaining a healthy cash-flow, abeysekera (2002). 1the australasian journal of construction economics and building [vol 8, no 2] 1 each payment mechanism could be appropriate for certain conditions of a project and client circumstance. for example, the traditional methods of the lump-sum and unitprice are useful when there is adequate information to produce a complete design, thereby, allowing proper contractor competition, low tender prices, easy assessment of interim valuations and variations for payment, and higher level of certainty that quality and functionality standards will be attained, smith (2002), icheme (2003) and masterman (2002). research aim this research was motivated by three observations. the first observation came out of the results of the above literature review that have shown that each payment mechanism has its advantages and disadvantages. choosing the appropriate pricing and payment method, from the available ones, has a positive effect on the management and delivery of projects. meanwhile, the overwhelming consensus for process and team integration in construction projects emerges the need for considering the potential payment method in cash flow modelling for integrated teams. the agreed payment mechanism motivates the team to perform efficiently. as the team integration creates different direct/indirect managerial and contractual links throughout the supply chain, these links are undoubtedly influencing payment and cash flow mechanisms. payment mechanisms therefore, have to be designed in response to the sensitivity of these links to the team performance and satisfaction. the degree of involvement of the team members in deciding on the appropriate payment method affects the behavioural aspects of project teams. this could be improved if the negotiation to reach the most suitable payment method efficiently allows all options to be considered. however, the current practice starts by the agreement between the client and the main contractors. the main contractors may then negotiate, based on this agreement, with the other team members. this obviously limits the margin of negotiation and put unfair strain on the other parties, which in turn affects their satisfactions. therefore, this research aims to address the need for performance-based contracts, which are gaining momentum in construction contracts. the concept of these contracts is to align targets and clients’ satisfaction with payments, encourage collaborative working, ensure that risks are allocated accordingly, remove the adversarial approach by reimbursing the contractor fully and guaranteeing his profit, and provide a source of motivation that make project delivery much more effective. in this respect, and by enhancing the cash flow profile of the project team members, this research will help improving the team performance and satisfaction. the second observation was based on the fact that many contractors have used different ways to enhance projects cash flow. some ways have been found in more efficient management processes and information systems which allow contractors to minimise the outstanding balances owed by clients. some other ways have been found through pricing policies (e.g. unbalancing and front-end loading) or unfair procedures such as overmeasurement and delaying payments to subcontractors and suppliers. however, enhancing cash flow through analysing alternative payment mechanisms from a supply chain perspective has not been fully addressed. taking a wider supply chain perspective, the conventional payment mechanism places a considerable and unfair strain on particular parties and thus on the overall spirit of team working, partnering and supply chain management, egan (1998). therefore, this research is also aiming to promote and facilitate the use of appropriate payment mechanisms considering the flow of payments throughout the supply chain. the third observation was based on the fact that the problem of the payment for off-site materials and components is among the causes of cash flow failure. contractors are usually paid for the work done in addition to any materials already on site. off-site materials and/or work, which become substantial in the modern prefabricated and pre-assembled components, are not paid until provided on site. this mechanism of payment affects the contractors’ cash flow negatively and consequently the supply chain. therefore, this research is also aiming to enable the project team to effectively manage the payment for off-site work/materials. in this paper, a methodology to simulate different payment mechanisms for integrated teams in construction projects is proposed. the methodology defines all construction stages and when each project member will be involved. the available pricing and payment mechanisms will then be tested in order to define the most appropriate ones for each member. this methodology is based on the 2 the australasian journal of construction economics and building [vol 8, no 2] system developed by the authors, motawa and kaka (2006), to further simulate payments for the supply chain members and payment for off-site work/materials. methodology to select payment mechanism the adopted methodology to select the appropriate payment mechanism, as shown in figure 1, considers first the stages of the project process map (ppm). ppm defines the products, services, management, design, engineering, and prefab & assembly needed for a project. having a process map enables the project team to agree on a common framework for managing and controlling a project in order to meet the client’s business needs. this will result in far fewer problems and minimizing effort and duplication. the project team can use their experience to continually refine and improve such process. a typical process map represents a logical sequence of action that will not prejudice progress. most of the detailed actions that must be taken under the common framework of a process map are considered to be matters of normal good practice of a particular profession, and must be planned and carried out in the light of each project conditions. many process maps have been developed to represent construction projects. among the maps known to practitioners in the uk, there are the architect’s plan of work (riba (2001)) and the process protocol (kagioglou et al (1998)), which are adopted for this research. having such a process map will help simulating the payment requirements within design and construction stages in order to analyse the effect of using alternative payment mechanisms on the cash flow of the stakeholders and supply chain members. the “stakeholders & supply chain” defines the products and the services they will be providing, and the contractual and cash flow arrangements between them. the concept of supply chain management is emerging as a significant performance enabler for the construction industry. partnering arrangements are enabling stakeholders to take more strategic and long term approaches to the production, running and maintenance of buildings. contractual organisations are becoming more complex to define and manage the managerial and contractual links throughout the supply chain. these links are undoubtedly influencing payment and cash flow mechanisms. the involvement of the supply chain members from the early stages of projects needs suitable contractual agreements and procurement methods to regulate the relationships between these members. this proposed methodology explores the cash flow between the partners to a contract, as procurement decisions have been malleable to project situations then payment mechanisms can similarly be made bespoke to the benefit of project performance and client satisfaction. the process maps give details to all construction processes that cover a project from the conceptual stage to the operational and maintenance stage. this will help identifying who is paying whom from the defined stakeholders and supply chain and when payments are due. a full project program will then be generated using a project management tool. the pricing and payment methods, as shown in figure 1, refer to the way in which each product or service is to be priced and paid. all available options can be considered, for example: payment time lags, retention arrangement, payments for off-site materials, etc. at this stage, the adopted methodology covers the features of the payment mechanism for fixed price contracts, cost reimbursement contracts, and incentive contracts. different payment conditions within these payment mechanisms are considered, such as: interim payment (e.g. monthly payment), stage payment (when certain milestones are defined for payment), and mobilized advanced payment. the it system developed to automate the adopted methodology will generate the cash flow for each project member, as defined by equation 1 and shown in figure 2, with all data required to test different payment mechanisms for each individual member. cashflow(i)= l ip d c tpftcf )),(),(( 0 − ….……eqn.(1) where c is the total cost at the time tc, p is the total payment at the time tp, d is the total project duration, i represents the assigned stakeholder or supply chain member, and l represents the level of the i member on the chain (l = 1 or 2) 3the australasian journal of construction economics and building [vol 8, no 2] figure 1. methodology to select payment mechanisms mechanism defined what-if model selection criteria system case base cash flow (stakeholders) project process maps stakeholders & supply chain project programme level 1 level 2 financial institution client main contractors sub-contractors/ suppliers main project con1 con2 conn payment mechanism & chain – (1) fixed price payment mechanism & chain (2) cost reimbursement payment mechanism & chain (3) incentive t he st ak eh ol de r & su pp ly ch ai n th e pr oj ec t p ro ce ss m ap se le ct io n of th e pa ym en t m ec ha ni sm th e pr ici ng & p ay m en t m et ho ds 4 the australasian journal of construction economics and building [vol 8, no 2] payment for off-site materials payment for off-site materials and components has always been a concern for project fabricators. the proposed methodology considers the costs of off-site activities (e.g. materials and prefabricated or pre-assembled units) as a percentage to the total costs of individual activities, as defined in equation 2. =− d c d siteoffc tcfytcf 00 ),(*),( eqn.(2) where y is the percentage assumed for the off-site activities the system allows breaking down the costs of off-site activities with corresponding time lags for installation on-site, which allows for activities done before the actual start of construction to be considered as defined by equations 3: − − − − = d siteoffc td t siteoffc tcfxtcf 0 1 1 1 1 ),(*),( eqn.(3) where x1 represents the percentages of the off-site costs to the total off-site costs, corresponding to a time lag t1. t1 may represent off-site units ordered before the actual start of construction. other percentages and time lags (xj and tj ) can be defined to represent the costs of all off-site activities. the total costs of off-site activities can then be determined by equations 4: .........),(),(),( 2 2 2 1 1 1 0 ++= − − − − − −− td t siteoffc td t siteoffc n siteoffcx tcftcftcf eqn.(4) where n is the earliest start time of off-site activities before construction start. the system allows for the off-site activities to be considered for any chosen payment mechanism in any of the following ways: 1. not to be considered until provided on site and when construction starts. 2. to be fully considered before provided on site and before construction starts. 3. to be partially considered before provided on site, then fully considered once construction starts. the payment profile will be modified to accommodate these assumptions, as shown in equation 5, payment-profile(i)= + 0 0 ),(),(* n d l ip l ip tpftpfz eqn.(5) z represents the percentage of the payment for the off-site materials/components: z = 0, means the off-site materials are not considered until provided on site z = 1, means the off-site materials are fully considered before provided on site 0 < z < 1, means the off-site materials are partially considered the cash flow for each project member can then be modified, as defined by equation 6. cash flow (i) = l ip d c n l ipsiteoffcx tpftcftpfztcf )),(),(( * y) (100 )),(*),(( 0 0 −+−− eqn.(6) the it system developed to automate the adopted methodology is based on a large database. the database is used to retrieve the stages of project process maps. the database is integrated with microsoft project database to enable producing the project programme relevant to each member of the stakeholders and supply chain. it is also retrieving the necessary data to calculate the effect of different payment mechanisms on project cash flow. other planning and control data, as categorised in figure 3 and 4, may also be entered, if needed. the system produces numerical and graphical outputs that represent the effect of different payment mechanisms. the system output describes the cash flow profile for any combination amongst the available methods, for example: a lump-sum with monthly payment or cost reimbursement with stage payment. system application an example has been developed to illustrate the system use, as shown in table 1. the example shows the typical activities of a building project with components constructed off-site and requested before construction starts. five main companies, given the names a, b, c, d, and e, are working as the project contractor and paid directly by the client. table 1 also shows a number of subcontractors; a1, c1, e1, e2, and e3, who will be paid by the corresponding main contractor for the assigned activity. 5the australasian journal of construction economics and building [vol 8, no 2] the methods of interim payment, stage payment, and advanced payment are used in this example for each company. the system retrieves the relevant data for each company from the database of the project and calculates its own cash flow considering the defined payment mechanisms. the scenario of considering the costs of off-site materials is shown in table 2. the system output for this scenario is shown in figure 5 and 6. the maximum negative cash flow and the date at which it will occur are calculated. the net area of the cash flow, which is the area under the cash flow diagram, is also calculated. the system has the ability to implement what-if analysis by changing any data elements and finding out the effect on the output. changes can be made for the cost/duration of any process in the project and also for any payment conditions such as payment delay, payment retention, and the amount of advanced payment. the system will act as an aid to design or “fine-tune” payment mechanisms to individual projects characteristics and each member of the project team can compare different payment methods and select the most appropriate one. conclusions the performance of integrated teams in managing construction projects can be enhanced if a fair payment mechanism is adopted. appropriate payment is considered among the satisfactory factors for any project member. a considerable number of disputes in construction are linked to problems in payment, hence building an integrated cash flow for the project team would assist in less disputatious industry. therefore, a methodology for testing different payment mechanisms to improve the effectiveness of project management has been presented in this paper. this methodology and the developed system to automate its usage can help projects’ stakeholders and supply chain to forecast and plan their cash flow patterns in different payment mechanisms. the developed system has an advantage over the existing cash flow models where the focus has been limited to main contractors only. the system has the facility of comparing alternative payment mechanisms and helps selecting the most appropriate payment one. this will help in solving the problematic issues of cash management such as reducing bankruptcies, optimising cash flow by gaining fair payment on time, payment for off-site materials and enhancing the quality of the project process. nr activity name dependency durations values (£) contractors main sub 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 site set-up foundations drainage ground floor frame external walls ground external walls 1st external walls 2nd internal walls ground internal walls 1st internal walls 2nd internal doors lift / stairs roof watertight(milestone) windows & ext. doors plumbing & sanitary-ware mechanical services electrical services floor finishes ceiling finishes wall finishes fixtures & fittings external works handover & clean 1 2 2 2 5 6 6 6 9 9 9 14 5 12 11 11 11 11 16 11 20 20 2 24 15 days 20 days 5 days 25 days*a 100 days*b 20 days 20 days 20 days 35 days 17 days*c 17 days*c 10 days 15 days 50 days*b 10 days 10 days*d 15 days*e 15 days 15 days*e 12 days 20 days 22 days*d 20 days 15 days 7 days*d 18000.0 27950.0 6070.0 30360.0 162900.0 40105.0 40087.5 40087.5 70087.5 34087.5 34087.5 12000.0 20480.0 80900.0 4140.0 28500.0 10420.0 16000.0 7000.0 10300.0 16700.0 17950.0 18100.0 12350.0 5600.0 a a a a b c c c c c c d d b e d e e e d d d d d d a1 a1 a1 c1 c1 c1 c1 c1 c1 e1 e1 e2 e3 * for stage payment, this indicates that after this activity a company will be paid table 1: data of the example project 6 the australasian journal of construction economics and building [vol 8, no 2] % of the off-site activities (materials ordered) costs to the total costs (y) : 30 1) % of the material costs to the total costs of materials (x1): corresponding time lag (t1): 2) % of the material costs to the total costs of materials (x2): corresponding time lag (t2): 3) % of the material costs to the total costs of materials (x3): corresponding time lag (t3): 20 1 month 30 2 months 50 3 months % of the payment considered to the material costs (z) : z = 0 (no consideration) z = 100 (fully considered) 50 table 2: costs/payments for off-site activities figure 2. project cash flow d l iptpf ),( l ictcf ),( time 0 cash in/out 7the australasian journal of construction economics and building [vol 8, no 2] figure 3. planning and control data figure 4. data for payment mechanisms project process data p.p. riba user phases deliverables p0 , … p9 d1 , ……d19 tasks basic data progress data durations dates constraints relationships resources costs type lag working hours materials fixed time related % complete actual work/cost remaining work/cost at start at end standard rate overtime rate per use cost on durations on resources work stages per, a, …., m payment data fixed price cost reimbursement incentive interim payment stage payment the first payment date payment dates delay in payment retention in payment advanced payment reimbursement in arrears monthly advance of cash repaid method one-off -when needed paid back the first payment date periodic payment contractor fee delay in payment retention in payment (%) advanced payment schedule incentives cost incentives a a fixed one-off cost b variable cost per day of using additional resources the inefficiency resulting from allocating more resources x no. of days which the project is speeded up c the extra value to the client per day of early completion sc the sharing rate tp target profit ca actual cost sc contractor sharing rate p contractor profit tc target cost cost plus incentive fee fixed price incentive 8 the australasian journal of construction economics and building [vol 8, no 2] figure 5. system output (reports on different payment methods for company c) figure 6. system output (cash flow patterns for company c considering off-site material costs) 9the australasian journal of construction economics and building [vol 8, no 2] references abeysekera v., (2002). re-engineering payment procedures: an agenda for client financed construction. in: ng, s.t., cheung, s., lam, k. & poon, s. (eds.) re-engineering construction: enabling and motivating excellence, hong kong, 79-85. arditi d. & yasamis f., (1998). incentive/disincentive contracts: perceptions of owners and contractors. journal of construction engineering and management, 124(5), 361-71. bubshait a.a., (2003). incentive/disincentive contracts and its effects on industrial projects. international journal of project management, 21(1), 63-70. cheetham d.w., lewis j. & jones s.t., (1995). the effect of stage payments on contractors’ cash flow some possible consequences. proceedings of cib w96 architectural management dublin. clough r.h. and sears g.a., (1994). construction contracting. sixth edition. new york: john wiley & sons, inc. egan sir j., (1998). rethinking construction. london: department of the environment, transport and the regions. icheme., (2003). form of contract: target cost contracts the burgundy book, first edition. rugby: icheme. icheme., (2002). form of contract: reimbursable contracts the green book, third edition. rugby: icheme. kagioglou m., cooper r., aouad g., hinks j., sexton m. & sheath d.m., (1998). a generic guide to the design and construction process protocol. university of salford, isbn 0902896-17-2. latham sir m., (1994). constructing the team: final report of the government/industry review of procurement and contractual arrangements in the uk construction industry. london: hmso. masterman j.w.e., (2002). an introduction to building procurement systems, second edition. london: spon press. motawa i. and kaka a., (2006). the architecture of an it system for payment methods in construction. proceedings of the fifth international conference on engineering computational technology, las palmas de gran canaria, spain, 12-15 september 2006, paper 143. o'reilly m.p., (1993). principles of construction law. essex: longman group uk ltd. potts k.p., (1988). an alternative payment system for major ‘fast track’ construction projects. j. of construction management and economics, vol. 6, 25-33. potts k., (1995). major construction works: contractual and financial management. harlow: longman group limited. riba publications (2001). architect’s handbook of practice management, 7th edition. london: riba publications. smith n.j. (ed.), (2002). engineering project management second edition. ames, ia: blackwell science. williams k., (1992). civil engineering contracts volume 1: the law, administration, safety. west sussex: ellis horwood limited. 10 the australasian journal of construction economics and building [vol 8, no 2] microsoft word the australian journal of construction economics and build… the australian journal of construction economics and building [vol7, no 1] 45 abstract the australian construction industry is now facing skills shortages in all trades. as an industry focused on the skill of its workforce, there is now concern the australian standard in quality, workmanship, and productivity will inhibit both at national and international level. this research paper addresses the underlying, influential factors concerning skills shortages in the australian construction industry. the influential factors addressed include funding, training statistics, employer expectations, financial limitations, industrial relations and immigration. given the reference to skills shortages within the industry, and documented in related literature, if skills shortages are to continue to exist, their effect will impact upon the overall performance of construction companies throughout australia. keywords: construction, skills, employment, training, labour, industry introduction the construction industry in australia is currently undergoing revolutionary changes. taylor (2004) draws attention to employment and skill retention, and outlines shortages are being influenced by the changes the economy has experienced and the unpredictable and erratic cyclical nature of the construction industry. in 2003 the “building and construction industry improvement bill” was drafted to amend some issues and implement some of the strategies found by the cole royal commission national review of the conduct and practices in the building and construction industry in australia (royal commissioner, 2003). when assessing the cole royal commission report, the employment, workplace relations and education references committee (2004) found a “growing shortage of skilled labour”. furthermore, cole (1998) established from a report based on the future of the construction industry that evidence provided by building and engineering contractors shows concern of the declining levels of skills amongst site staff. the employment, workplace relations, and education references committee (2003) found that “the causes of skill shortages and skill gaps are often complex and multi-faceted with the specific causes varying with the industry and occupation”. the national industry advisory body (2003) identified a diverse range of factors contributing to current and future skill shortages. these include: an ageing workforce and forthcoming retirement rates; changing skills required from various occupations; differences in demand and/or supply of skilled workers as a result of employment arrangements; poor educational qualifications translating into smaller and lower numbers of successful job applicants; inadequate apprenticeship rates and difficulties in attracting and retaining employees (the employment, workplace relations and education references committee, 2003). investigating issues similar to those expressed by the employment, workplace relations and education references committee (2003), this paper is divided into correlating themes that relate to skills shortages in the construction industry. these themes have been highlighted in accordance with how they impact upon skills shortages; in addition the literature was studied to identify common trends and associated issues (hampson and brandon, 2004), together with relevant statistical data using historical and correlation methodologies. to conclude, a summary of the influential factors contributing to skills shortages is provided. objectives the research question this paper aims to address concerns the underlying issues surrounding skills shortages in the australian construction industry. the objective of the paper is to assess a collection of informed opinion on skill shortages and their causes in the australian construction industry. the influential factors addressed include of funding, education and training, labour supply and demand, employer expectations and industrial relations and immigration on skills development. this paper reviews statistical data relating to the skills shortages to support the likelihood of future repercussions of skills shortages in the construction industry. concerns for skills shortages in the 21st century: a review into the construction industry, australia michelle watson, (spotless services limited (defence cmc cnnsw)) the australian journal of construction economics and building [vol7, no 1] 46 as there is little evidence on methods and/or procedures for alleviating skills shortages, the assessment of such techniques is outside the limits of this paper. in addition, the paper does not make direct reference to law, policies, or regulations, which may be associated with retirement or industrial relations and immigration. the majority of the literature concerning skills shortages acknowledges its existence and outlines a cause. yet, little is provided as future initiatives or methods of prevention. it is therefore important to assemble a collection of the underlying contributors influencing skills shortages so future solutions can be established, identified and implemented. funding one of the common themes found within the literature concerns the funding crisis of training. the employment, workplace relations and education references committee (2004) found “funding for training is a highly contentious element of the skills debate”. rance (2005) makes reference to government underspending on training and quoted opposition leader kim beazley to state, “the problem is that we have had chronic under-investment in education and skills training”. the funding of education and training is not a recent occurrence. several authors discuss the historic pattern of a depleted level of investment in training and skills development. toner, green, croce and mills (2001) found that, between 1993 and 1996, the expenditure allocated by the australian government to training in the construction industry fell by 25.5%. ranch (2005) also stated that 1996 witnessed the first significant cuts made by the australian government to the national training and educational expenditure. these budget cuts entailed two $240 million chunks from the vocational education and training budget and, for nine years, has had no increase. furthermore, cully (2002) found the “commonwealth funding for the tafe system remained fixed between 1997 and 2001, which has placed the system under considerable strain”. in addition to the nation’s annual budget being allocated to training, expenditure is distributed at state level, which, if desired, is available for education and training purposes. many of the state governments within australia have established training levy schemes dedicated to the building and construction industry. cully (2002) found that most states excluding, the northern territory, victoria and new south wales allocate a budget for developing skills amongst construction trainees. in a proposal to address the construction industries skills shortages the cfmeu (2005a) has produced a 10-point plan focusing on apprentices. the cfmeu (2005a) indicates that one issue of concern is to “establish industry training funds in nsw, victoria and the nt – in keeping with other states and territories”. opposing literature, however, suggests that there has to be a level of financial commitment not only from government sectors but also from all stakeholders involved (cully, 2002). it has been found that, to successfully operate within training markets, the costs and benefits of training need to be distributed between all those concerned (toner, 2000). at present, some government subsidies exist for employers of apprentices/trainees. toner (2003), however, found that “the incentive programme fails to strategically target scarce training funds on key skill shortages. the bulk of incentive funding is supporting traineeships in lower skilled occupations”. currently, there is an increase in pressure from the australian government for private enterprise/employer funding of training (pawle, 2004). the royal commission (2003) found that “a major weakness in the funding base for skills in contemporary australia arises from the inadequate contribution to the training effort made by many employers. many employers take skills for granted”. cole (1998) found that, because of the competitive nature of the building and construction industry, companies are now becoming smaller and more specialised. this trend of “specialised trades” is of concern as companies cannot implement all round adaptable skills and immobilise their provision to appropriate training programs (cole, 1998). it is understood that the majority of construction firms in australia are small companies and, as the department of industry, tourism and resources (2002) found, “less than 1 percent employ more than 50 people”. thus, many employers within the construction industry cannot afford to employ trainees if there is no incentive and no reassurance they will continue working for the company after their training is complete (cully, 2002).the employer and group training company (1997) found that, from a survey conducted into apprenticeship employability, employers who undertook the survey expressed a need for an increase in employer subsidies or a reduction in apprentice wages, and a reduction or restructure in terms of off-the-job training. taylor (2005) highlighted a need to understand employers’ ‘profit’ in terms of the employees’ the australian journal of construction economics and building [vol7, no 1] 47 capabilities to produce more than his or her employment costs. similarly, cole (1998) found that, within construction sectors, there is “a need for apprentices working for these companies to be productive as soon as possible”. as the employer requires an apprentice to work for minimal pay, there is now conflicting issues arising from the wage of an apprentice in building trades. in the northern territory, the wage for a first year electrical apprentice is $5.40 an hour, which the employment, workplace relations and education references committee (2004) states, “is not a living wage”. similarly, the cfmeu (2005a) found skills shortages would improve if an increase in apprenticeship wages (especially for first year apprentices) and an introduction to adult apprenticeship wage rates was implemented. the cfmeu (2005b) states that, “skill shortages will only be overcome when government and employers start investing in the long term future of young australians”. decrease in apprenticeship rates as the primary form of education within the construction industry, apprenticeships promote the importance of trade learning through industrial experience, an attribute that has been found to place greater emphasis on the skills formation process (harris and simons, 2005). however there is currently an increase in the number of incomplete apprenticeships and an overall reduction in entrants into the apprenticeship program (toner, 2003). the master builders association of australia (2006) found that “high drop out rate of building industry apprentices as they fail to complete their training, over the past ten years averaged around 50 percent, which translates into a loss of approximately 8,000 to 10,000 apprentices a year”. furthermore, the australian national training authority “australian apprentice & trainee statistics” showed that, between 1995 and 1998 there was a decline of 26,128 to 24,921 students/trades in training. research also showed that, although 8,326 students started their training in 1995, by 1998 only 6,045 of those students were completing their studies. in 1996-1997 the department of employment, education and training and youth affairs (1998) found that apprenticeship approvals “were the lowest in 12 years”. the cfmeu (2005a) found “with high rates of non-completion among apprentices, volatile training rates and an aging workforce, the union argues that unless action is taken now, the industry will be plagued by skill shortages for many years to come”. the employment, workplace relations and education references committee (2004) recognises a “cyclical pattern” amongst apprenticeship enrolments and, despite a moderate increase in the number of enrolments, the peaks and troughs of this cycle are now low compared to those of the last decade. in addition, cole (1998) found “a fall in demand results in a fall in intake; thus the apprentice training patterns tend to follow short term cyclical demand for industry services, rather than the more desirable position of the development of long term skill base”. to resolve such issues, the government has created new training regimes that aim to provide basic or “soft skills” through short-course programs. the employment, workplace relations and education references committee (2004) states that the industry must now decide “whether expenditure on training of low-level skills is justified in the absence of effective financial incentives for training at the high-end level of skills essential to the industry and construction”. as the construction industry emphasises high levels of skill, its survival depends on longer duration training (as in the apprenticeship system) promoting the optimum output of qualifications. in relation to the influence apprenticeships has on skills shortages within the construction industry the employment, workplace relations and education references committee (2003) effectively summarise this and find that “the apprentice training rate will often need to increase in order to resolve the skill shortage and meet new training needs associated with employment growth and to replace retirements and attrition”. increase in aged population demographic trends are highlighting escalating retirement rates in the construction sector (the employment, workplace relations and education references committee, 2004). the australian workforce is retiring earlier than workers in comparable countries. parker (2004) found that “in australia, only 49% of people between the ages of 55 and 64 are in the workforce, compared to 59% in the us”. in 2004 the australian government allocated $12 million towards a campaign designed to encourage mature-aged australians to stay in the workforce. parker (2004) states that employers need to show understanding in terms of “the benefits that older workers provide, both in terms of accrued expertise and through their alignment with an ageing community and customers”. the australian journal of construction economics and building [vol7, no 1] 48 a review of the literature surrounding ageing populations illustrates the need for an increase in apprenticeship numbers to replace retirees. furthermore, retention of mature staff members, should been seen as a valuable source for “soft skills” in which new entrants to the industry may take a lifetime to learn. moreover, the employment, workplace relations and education references committee (2004) found “the looming critical skills shortage needs to be seen in the context of expected high levels of construction over the period to 2007 and the effects of retirements from the industry”. using samples from the australian bureau of statistics (abs), the employment characteristics of transitions from education into the construction industry can be established. using data from the abs “labour force” statistics, a graph has been developed to represent the percentages of employed persons in the construction industry in terms of age group. see table 1 table 1 illustrates a cycle in terms of new entrants into the construction industry. age group 15-19 only accounts for 6% of the total persons in the industry, whereas age group 4554 (workers who may be considering retirement) represent 19%. it is thus critical to predict supply and demand in order that the skills supply to the future of the industry is maintained. em p l o ye d p e rso n s i n th e c o n stru ctio n in d u stry (%) 0 .0 0 % 5 .0 0 % 10 .0 0 % 15 .0 0 % 2 0 .0 0 % 2 5 .0 0 % 3 0 . 15 19 2 0 2 4 2 5 3 4 3 5 4 4 4 5 5 4 5 5 a n d o v e r p e r c e n t a g e table 1 employed persons in the construction industry as a percentage supply and demand the employment, education and training affairs youth (1998) conducted a survey from 19971998 into the ‘demand’ for people to fill skilled vacancies in the construction industry. from the data, it is found that the construction industry comprises 19% of the total skilled vacancies that exist in australia. the master builder association of australia (2006) estimates that “80,000 skilled building workers will exit the industry by 2010 to be replaced by only 40,000 new apprentices who will have completed their trade courses, leaving a shortfall of 40,000 skilled tradespeople”. the department of employment, education, training and youth affairs (1998) concluded from this that one of the factors influencing skills shortages relates to insufficient manpower prediction. “manpower” has been traditionally used to predict and represent the forecasted supply and demand of labour. when referring to the importance of manpower prediction wong, chan and chiang (2004) identified that “imbalances between the demand for and supply of specific skills in the construction industry is particularly important since it contains a large number of distinct skill categories”. a historical comparison of supply and demand can be made through the “occupational outlook, 1986”. the previous department of employment and industrial relations occupational analysis branch (1987) found that, within construction sectors, very few completions of formal training were made, limiting provision to the supply of the labour. in addition, the department of employment and industrial relations occupational analysis branch (1987) acknowledged that levels of activity influence the demand required and indicated “replacement demand is stable at 1-2 per cent per annum”. the australian journal of construction economics and building [vol7, no 1] 49 as a comparison to these figures the australian national training authority (2002) recorded that, for every 8-employment vacancy available, eight people were employed. both percentages from 1986 and 2002 indicate that levels of supply and demand are equivalent, contrary to previously establish data stating otherwise. typical supply and demand trends within the construction industry are cyclic in nature, consisting of short-term levels of construction performance and an increase in demand for construction services, resulting in a rise in apprentice intake (cole, 1998). toner (2000) found this to be partially influenced by the industry’s high level of self-employment and temporary employment. low levels of permanent employment result in high levels of “turn-over”, leading to a low-level return on investment in training. as a result skilled labour becomes high in demand (the employment, workplace relations and education references committee, 2004). the department of employment, education and training and youth affairs (1998) found that a “combination of continued growth in demand and low supply from apprenticeship completions indicates that more widespread shortages in building trades may develop”. training the employment, workplace relations and education references committee (2004) draws attention to low levels of qualifications in the industry and states that “only 45 per cent of the workforce” has formal qualifications and “29 percent of employers in the industry provide structured training”. assessing the training packages available, the master builders association of australia (2006) have found the “training system is struggling to keep up with the new demands of the building industry in response to changing building technologies and construction techniques particularly in the highly competitive residential building sector”. hampson and brandon from the cooperative research centre for construction innovation (2004) developed a booklet that captured the views of those currently working in the australian construction industry on the future innovations for the year 2020. results of this study highlighted skills and education as high priorities, and expressed concerns that skills are not adequately being developed to ensure the future of the industry (hampson and brandon, 2004). the housing industry of australia (2006) found that “unless reforms are enacted to make training more attractive and accessible, the industry will face a growing shortage of skilled workers”. previously, students gaining qualifications through tafe (technical and further education) comprised 95 per cent of all apprenticeships in the construction industry (toner, 2005). today, there is a wide variety of training programs available, which vary in terms of course delivery and flexibility. the traditional form of training, the apprenticeship, is under pressure to deliver the qualities that are exhibited by some of the more current forms of training. the employment, workplace relations and education references committee (2004) found that the apprenticeship system is built on “trade skills training” and that there is uncertainty as to whether such a method of skill development “is sufficiently enterprise focused and sufficiently specialised”. it has been found that, for the apprenticeship system to continue, close attention must be paid to ensure that apprentices are offered the range of skills and knowledge that a trade or profession of modern practice requires (toner, 2003). in addition, the outcomes of all stakeholders involved need to be clearly defined and justified, as toner (2005) found that teachers in tafe education can show “self-interest in supporting traditional training as the continuity of their jobs depends on funding for longer duration training”. the employment, workplace relations and education references committee, (2004) found that resentment has been witnessed on the behalf of builders and contractors towards tafe components of an apprenticeship. it is argued that tafe dedicates too much time and places too much importance on theory at the expense of practical experience (the employment, workplace relations and education references committee, 2004). correlations are found in the literature in terms of whether training packages are sufficient in meeting industry demand (buchanan and sullivan, 1996). cole (1998) found that, in terms of skills development, the main area of concern include: training in interpersonal skills in marketing, negotiating and communicating with clients and others involved, training in building processes and building materials, training in the management and operation of small plant and site communication equipment, and training in occupational health and safety issues. it is necessary for australia to continue to reexamine training and skill development packages to meet current industry demand. toner (2005) found that continually revising “training packages over the last decade have led to a more nationally consistent content in training the australian journal of construction economics and building [vol7, no 1] 50 delivery”. an example of one such upgrade to training package is school based vocational education and training. this is an aspect that most found necessary to accommodate for the latest skill requirements needed for both the construction industry and the requirements of employers (stromback, 1996). to address the key areas of concern within the training packages available, the housing industry of australia (2006), found there is a need to: • encourage a flexible course delivery and choice in training courses • attract young people to trades training • reverse the high rate of drop-out from training • address the cost to small business employers when employing apprentices • reform industrial relations restrictions preventing more relevant and timely training from a review of the annual report into the australian vocational education and training system, 2002, levels of competency were measured over a four-year training package (the australian national training authority, 2002). it was shown that, in the initial stages of training, competency units were measured at 4,359 units and, in the final year of training, at 128,265 units. ultimately these figures draw attention to poor levels of trainees’ education and/or skills in their first year of study. however, in the second year of training, students are found to have 41,446 units of competency, which is an increase of close to ten times the initial level displayed by students in their first year. to give an indication of the qualifications that exist in the construction industry, the following data collected from the australian bureau of statistics has been tabulated. table 2 represents the qualifications of people working full time in the industry over a five-year period starting from 1996. see table 2 (abs, 1996, 1998, 2000): year higher degree ‘000 postgraduate degree ‘000 bachelor degree ‘000 undergraduate diploma ‘000 associate diploma ‘000 skill vocational qualification ‘000 basic vocational qualification ‘000 1996 3.4 1.2 21.7 6.0 43.9 276.5 23.7 1998 2.8 2.6 21.2 14.8 16.1 240.7 43.7 2000 2.7 3.2 27.6 16.2 22.4 263.7 50.9 table 2 (australian bureau of statistics, pg. 14, 22, 1996, 1998, 2000) from the data shown in table 2 there is a significant difference between the levels of qualification, individuals working in the construction industry possess. as outlined, a continuing trend of vet or apprenticeship qualifications is seen within the industry. in addition, there is an increasing pattern of lowlevel educational qualifications within the industry and, as previously addressed, a trait that an industry experiencing skills shortages should abstain from. from a study conducted by the employer and group training company (1997) on the assessment of apprentices’ skills and qualifications on recruitment, out of 515 applicants assessed from the construction industry, only 20% were suitable for employment. in addition, the study showed that, on employment, positions were originally filled but the apprentices had either left soon after recruitment or employers were not satisfied and had discharged them during their probationary period (the employer and group training company, 1997). opposing literature, however, states that employers are finding apprenticeship skills and knowledge to be of satisfactory levels (the australian national training authority, 2002). toner (2005) showed that “it is also important to note that surveys of employers reveal a high level of satisfaction with the quality of tafe training”. from a survey of views from employers within the construction industry on the vet system (2002) it was found that the median satisfaction rating was 6.97. industrial relations, immigration & migration another concern the employment, workplace relations and education references committee (2004) expressed when reviewing the report from the royal cole commission was the australian government’s changes to the construction industry industrial relation (ir) regimes. the recent amendments the the australian journal of construction economics and building [vol7, no 1] 51 government made to install “order and discipline” to the ir policy has been predicted to result in the opposite effect of what was intended (employment, workplace relations and education references committee, 2004). calver (2005) found that, in general, the outcome of ir amendments was “further streamlining of industrial awards, with anticipated changes to the national building and construction industry award”. this change to the wage structure is intended to produce cheap labour. however, the overall cost to employ labour will rise as there is an overall national skills shortage (employment, workplace relations and education references committee, 2004). sutton (2006) from the cfmeu stated that “wages in the commercial construction industry have increased by approximately 60% over the last 10 years”. buchanan and sullivan (1996) also acknowledge this issue, and find “wage pressure arising from skill shortages in construction will be detrimental to the economy in general and owners in particular”. due to decreases in the supply of skilled labour and rises in the cost of skilled labour the australian government deregulated the law regarding temporary entry work visas in 1996, resulting in skilled overseas workers currently in temporary employment opportunities in australia (birrell et al, 2004). although this is so, toner (2001) found that “migration has a neutral effect on overall employment growth, in that migrants create as many jobs as they take”. giving further consideration to skills migration and immigration, toner (2001) highlighted the difference in qualifications and percentages of immigrants and australian residents in the workforce, employing data from 1981-1999. using these data, two tables have been established that compare the qualifications of immigrants and australian residents and illustrate the percentages of those in the workforce. see table 3 and 4 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00% immigrants australian residence no post-school qualif ications vocational qualif ications degree or similar table 3 qualifications of immigrants and australian residents (total %) construction electrical, gas and water supply all other industries immigrants: non-english speaking background 6.80 0.60 92.60 immigrants: english speaking background 7.50 0.60 91.90 australian residence 7.30 0.70 92.00 table 4 percentages of immigrants and australian residents in the workforce the australian journal of construction economics and building [vol7, no 1] 52 table 3 illustrates a substantial percentage of highly educated/skilled immigrants in the australian workforce. however, there are also similar percentages of immigrants who possess low-level education/skill, causing concern for the approval of these unskilled immigrants, as australia continues to maintain skills shortages. table 4 shows that a major percentage of the construction industry is comprised of immigrants. the most common forms of migration into australia are currently skilled independent and skilled-australiansponsored. two of the key problems faced by these immigrants include their lack of understanding of employment procedures in australia and their little or no grasp of the english language (pawle, 2004). in response to these issues, the national office of overseas skills recognition (noosr, 2004) was implemented. noosr outlined their “mission is to help the overseas trained to work and study in australia”. furthermore, various states and territories have introduced booklets to assist employers in implementing “overseas skills” into their company (overseas skills unit, nsw ames, 2004). such aids are developed so that the australian construction industry can utilise the quality attributes that skilled immigrants possess, which, in turn, will promote a more diverse and skilled workforce. continuing an examination of skilled immigration and migration, birrell et al (2004) found that, over an 8-year period from 1995-2003, 36,259 temporary longterm residents were found to be skilled occupants with building and construction qualifications. birrell et al (2004) found the number of residents departing from australia over an 8-year period (19952003) in the construction sector were 32,634 building professionals and 11,911 tradespersons. birrell et al (2004) found that “a substantial loss of skilled australian residents, particularly those with professional occupations, naturally causes concern because it means there is a departure of people who have been trained at the australian community’s expense”. immigration as a solution to skills shortages is still under debate to whether or not it is having anything more than a “neutral” effect. the cfmeu (2005b) believe that “rather than bringing in cheap labour from overseas, the howard government needs to look at improving pay and conditions, and rewarding good employers who put effort into training local apprentices”. conclusions for the future the australian construction industry relies heavily on the skills of its workforce to be productive at both national level and international level. hampson and brandon (2004) found “as construction is highly labour intensive, one goal for 2020 is for an ongoing supply of skilled workers to service this vital australian industry”. when revising the literature review, it has become evident that there are several trends and interrelated issues that are impacting upon the skills shortages faced by the construction industry. in relation to funding contributions made to training and skill development, some common themes where highlighted. these include: an historic pattern of low-level investment to education and training made by both the australian national and state governments, a need for there to be joint contributions made on behalf of all stakeholders involved, construction downsizing resulting in less investment in apprenticeships, and the wage structure of the apprenticeship system. it was also recommended that dedication to apprenticeships and training systems is a solution that may improve future skills shortages. such improvements, found by the house of representatives standing committee on employment, workplace relations and workforce participation (2005) include “the australian government in cooperation with the state and territory governments, industry, unions and educational bodies expand programs to maximise the uptake of apprenticeships in areas of skills shortages and ensure that the training is relevant to the apprentices, the businesses and the industry”. when reviewing the correlation between an ageing population and skills shortages, attention was drawn to the high demographic trends of early retirement seen within the construction industry. concern was established, as an inadequate percentage of people are entering the industry, which do not accommodate for retirement losses. it has therefore been recommended that ageing members of the workforce be seen as the australian journal of construction economics and building [vol7, no 1] 53 valuable assets and are employed for longer durations. as previously stated, the levels of supply and demand are imbalanced. it was found, that in order to ensure these percentages improve, there must be a greater emphasis placed on education and training. when assessing the influence of training on skills shortages, it was found that a culture of scrutinising has promoted the adaptive skills required by the demand of a modern society. furthermore, with a history of success and appropriate modifications, the apprenticeship system, is still a valuable source of training for a new entrant to the construction industry. to summarise the impact industrial relations has on skills shortages, it was found, that concerns were expressed over changes to wage structure. deregulation of the award and wage determinants is predicted to substantially increase the cost of future labour as a result of skills shortages. in terms of immigration as a solution to skills shortages, it was found that the percentage of immigrants needed to fill skilled vacancies is equal to the percentage of vacancies immigration produces. for the construction industry of australia to be promoted as innovative and productive in terms of supplying resources and raising levels of gross domestic product, stakeholders at every level need to assist in implementing strategies and preventatives to reduce the level of skills shortages. as the employment, workplace relations and education references committee (2004) concluded, “if training fails to deliver the skilled workforce required then other issues become irrelevant”. references australian bureau of statistics, (1996). transition from education to work. 6227.0. australian bureau of statistics, canberra, act, australia. australian bureau of statistics, (1998). transition from education to work. 6227.0 australian bureau of statistics. canberra, act, australia. australian bureau of statistics, (2000). transition from education to work. 6227.0. australian bureau of statistics. canberra, act, australia. australian bureau of statistics, (2003). australian labour force. 6203.0. australian bureau of statistics. canberra, act, australia. australian national training authority, (2002). "annual national report of the australian vocational education and training system 2002." report on the key performance measures for the australian vocational education and training system 3. bennington, l. and tharenou, p. (1996). "older workers: myths, evidence and implications for australian managers." asia pacific journal of human resources 3(34): 13. birrell. b, dobson. i.r, rapson. v, and smith. t.f, (2004). "skilled movement in the new century: outcomes for australia. department of immigration and multicultural and indigenous affairs. canberra, act, australia, centre for population and urban research, monash university: 103. buchanan. j, and sullivan, g. (1996). skills formation in the construction industry lessons from some recent innovations. working paper no. 45. australian centre for industrial relations research and training. sydney, university of sydney: 28. calver, r. (2005). building and construction workplace relations reform. newcastle, australia, national director industrial relations, and legal counsel. clabuagh, c. a., ed. (1998). the implications of downsizing. managing an ageing workforce. warriewood, nsw australia, woodslane pty ltd. cole. l. j. r, (1998). the future of the construction industry 1998-2010. jeasa nominees ltd. south australia, construction industry training board, south australia. 44. construction, forestry, mining and energy union (2005a). "apprentices building australia's future." hard hat(nov/dec): 1. construction, forestry, mining and energy union, (2005b). "protest against importing apprentices." hard hat(nov/dec): 1. construction, forestry, mining, and energy union, (2006). "priority issues for workforce skills development". construction and property services industry skills councils conference, sydney, nsw, australia. construction and property services industry skills councils (2005). draft industry skills report. department of the australian journal of construction economics and building [vol7, no 1] 54 education, science and training. canberra, act, australia: 95. cooper, d. (2004). improving people performance in construction. aldershot, england, gower publishing group. crock, m. saul, b. (2002). nation skilling: immigration, labour and the law. sydney, desert pea press. microsoft word paper 2 dec.doc aspects of market differentiation in the building industry by dr teo ai-lin and dr goran runeson page 14 the australian journal of construction economics & building aspects of market differentiation in the building industry dr teo ai-lin, department of building, national university of singapore, singapore and dr goran runeson, department of building, newcastle university, newcastle new south wales, australia introduction the use of neo-classical micro-economics for analysing various industries, including the building industry, has been criticised on many grounds (de valence, 2000; runeson and raftery, 1998). one of the major criticisms has been that firms are not, as assumed in the theory, attempting at all times to maximise profit. instead, their major aim is to survive, to stay in business, and many firms are prepared to trade-off short-term profit for a more secure market position. in industrial economics, survival techniques have long been considered necessary complements to, or substitutes for, the assumption of profit maximisation employed in micro-economic theory. the survival techniques acknowledge that a single-minded pursuit of short-term profit may leave a firm behind when market conditions change in a dynamic economy (johnson and scholes, 1999; singh, 1971; schumpeter, 1954; downie, 1958). the survival techniques are also used by firms that operate in markets where demand is subjected to rapid short-term fluctuations, ie. the sort of markets that firms in the building industry work in. here, the survival techniques allow the firm to modify the structure of the overall market in which it operates (walker, 1996). this paper deals with theoretical issues of a specific survival technique in the context of the building industry, ie the use of differentiation as a strategy to survive and to maintain growth and profitability in a rapidly changing environment. aims the specific aim of the study was test the hypothesis: that different markets have significantly different requirements in terms of resources, organisational structure and skills1, and to establish the main strategic aspects of the use of differentiation as a survival technique in the building industry. the quantitative information is derived from a survey of 108 building contractors operating in the sydney area. considering its size and importance for the economy, there has been very little research into microeconomic aspects of building, and virtually no research directed towards the market structures that face firms in the building industry. there even seems to be a tradition in construction economics to regard the building industry as a special case, separate from and different to the rest of the economy in important aspects of economic theory (hillebrandt, cannon and lansley, 1995) although runeson and raftery (1998) do argue for the applicability of economic theory. in fact there has been no research into establishing what constitutes individual markets or what separates different markets. the hypothesis behind this paper is that different types of buildings require different types of resources and therefore are produced in what is in effect different markets, but very little is known about movements between different markets, what the opportunities and constraints are and in particular, how firms select the markets they diversify into, or how they obtain and allocate their resources between different markets. markets, market power and organisational niches in neo-classical micro-economic theory, the behaviour of a firm is determined by the structure of the market in which it operates (gans, et al, 1999; caves, 1 resources, organisational structure and skills, these are the three criteria that describe the firm. aspects of market differentiation in the building industry by dr teo ai-lin and dr goran runeson the australian journal of construction economics & building page 15 1992). the structure determines not only the conduct and performance of the firms operating in the market, but it also determines the performance of the market itself. the structure-conduct-performance model or hypothesis of micro-economic theory suggests that particular types of market structures are associated with specific types of market behaviour and performance (caves, 1992; lee, 1979). the market structure refers to the specific characteristics of a market that establish the inter-relationships between the buyers and sellers of a particular product (caves, 1992). the defining characteristics are the degree of seller and buyer concentration, the degree of knowledge, the extent of product differentiation and the conditions of entry into and exit from the market. the structure determines the pricing, output and marketing strategies open to the firms in the market, and are influential also in the markets for labour and other resources (scherer, 1980; scherer and ross, 1990; scherer and ross, 1990). what is not reflected in microeconomic theory which is static – is that over time, the structure of a market may change considerably (lee, 1979; mackintosh et al, 1996). economists who have attempted to create a dynamic theory within industrial economics suggest (church and ware, 2000; bain, 1968) that the major reasons for differences in structure and therefore also changes in structure, are economies of scale, differences in market size and/or growth rate, barriers to entry, government policies and merger activities. changes in market structure may also result from technological change and process innovations, which may alter the range of products and the number and size of sellers and buyers as well as changing entry conditions to the market (mansfield, 1968). however, it is also hypothesised (singh, 1971; schumpeter, 1954; downie, 1958, walker, 1996) that at least part of the change is the result of a deliberate strategy by producers the use of product differentiation (wong and logcher, 1986; walker, 1996). the reason why differentiation is so widespread as a survival technique is that it allows firms to escape the confines of the current market into more favourable markets (johnson and scholes, 1999, thompson, 1989, male, 1991). the new markets may be more favourable to the firm because they convey more market power, because the combination of the old and new markets makes the firm’s output less subject to fluctuations in demand or because they offset a secular decline in demand in the original market (obinero uwakweh, 1996). differentiation will, almost always, effectively change the structure of the overall market for a firm since it gives the firm a certain market power. new products or markets give the firm an ability to control the market environment in which it works to grow or maintain profitability even if the original market is declining, to meet temporary fluctuations or a secular decline in one of the markets simply by relocating resources from that market to another (walker, 1996). while a market is traditionally identified in terms of a product, which may be a good or a service (miller and meiners, 1986), the supply of that product requires a more or less unique set of resources. the ease by which a firm is able to differentiate into new markets depends on the degree to which there is an overlap between the necessary resources for the original and the new markets. resources here include not only fixed capital but also, in particular, the skills and experience, at all levels of the organisation, which are relevant to the outputs of the different markets (benes and diepeveen, 1985; fisher, 1986; mukalula, 1996). the degree of overlap between the resources of a firm and the requirements of different markets determines the organisational niche or the capacity of the firm to operate in different markets. baum and singh (1994) define organisational niches in terms of domain similarity or complementarity, which, in turn, determines the degrees of mutualism (symbiosis) and competitiveness aspects of market differentiation in the building industry by dr teo ai-lin and dr goran runeson page 16 the australian journal of construction economics & building (commensalism) in the markets. these aspects therefore, measure the attractiveness of a niche to potential new entrants. the organisational niche, much more than the individual markets, determines the nature of the competitive environment of the firm (baum and singh, 1994). to measure the potential competition in both product and resource markets, it is necessary to desegregate the industry into overlapping and non-overlapping niches. the firms that occupy an organisational niche compete in both the product and resource markets. firms that occupy partially overlapping organisational niches compete for some resources and may have the capacity to produce the same output, but may also enhance the markets by their complementary resources (baum and singh, 1994). organisations that occupy non-overlapping niches may affect either of the markets by complementary resources or products2. one of the very important consequences of the complementarity and competition in a system of several overlapping markets is that even when individual markets have 2 in general, organisations in two organisational niches (i) and (j) have a potential for competition that is directly proportional to the extent their niches overlap. this potential for competition is denoted by an organisational niche overlap weight wij, where 0 < wij < 1. at one extreme, when wij is = 0, there is no potential for competition for either output or resources. at the other extreme, where wij = 1, the organisations occupy the same organisational niche, and there is implicit or explicit competition in either or both the product and resource markets (baum and singh, 1994). the competitive market density (cmd) with overlapping organisational niches (i) at any time is given by: cmd = nit + ∑witnjt where i ≠ j (1) where: nit = the number of organisational niche (i) at time (t), njt = the number of organisations in organisational niche (j) at time (t), and wit = the organisational niche overlap market weight of organisational niche (i) with organisational niche (j). unstable equilibrium, the system will have a stable equilibrium (bilas, 1972). if there is a stable equilibrium, it means that when producers are aware of the resources required in a particular organisational niche, they can, theoretically, assess the competition for products and resources at any time in that niche. this assessment will give a clear indication of their ability to compete effectively and survive in any such niche, and is therefore an essential part of any planning for diversification. strategy for the firm having established the theoretical framework for diversification as a survival technique, it is now possible to look at the empirical implications for firms operating in the construction industry. construction firms that are not differentiated operate in markets where they have little control over the demand for their output, and may therefore experience highly variable workloads over time. industry-wide, the number of firms is so large, and the mix of demand and hence the required combination of production factors so diverse that there may not necessarily be a recognised optimum level or combination of output where the costs of production are at a minimum (ofori, 1990). while this, in itself, represents a problem for the firm, the survival of the construction firm does not depend on cost alone. the firm needs at all times, not only to match its resources and capabilities to a workload that is uncertain and changing, but also to deal with changes in the demand for their output and competition for resources. this ability has been defined as survival “power”. the survival “power” can be identified as the ability of the firm to control its environment (etzioni, 1988, devine, 1979, seldon and pennance, 1965), or linked to the ability to grow in a constantly changing environment (singh, 1971). differentiation into new markets with the aim to occupy a suitable organisational niche is an effective strategy to achieve survival power. knight and morgan (1995) and aspects of market differentiation in the building industry by dr teo ai-lin and dr goran runeson the australian journal of construction economics & building page 17 bernhardt (1980) both stress the importance of a strategy for change, and the impact of such a strategy internally and externally. particularly important aspects of this strategy are the organisational relations with competitors, suppliers, sub-contractors, public instrumentalities, workers, etc. similarly, schroeder, gongden and gopinath (1995) see the strategy as identifying, assessing and comparing the specific needs of techniques appropriate within specific market environments in order to operate efficiently in these markets. oller and giralt (1995) also point to the effects of changes in internal characteristics. diversification thus contributes to survival power, not only by changing the environment, but also by providing the organisation with the kind of focus and direction necessary for “managing” the uncertainties of competitive markets and sensitive environments. when discussed at all, there appears to be an implicit assumption that building firms move effortlessly from one type of building to another. briscoe (1988: 100), for instance, suggests that “in practice, a construction firm is likely to encounter all shades of competition, as it attempts to sell a wide range of products and services in a variety of different markets”. this implies that there are no constraints in the form of specialised resources or organisational skills. either the requirements are not different in different markets or any required resources or skills can easily be obtained and effectively integrated into the firm without any cost disadvantage. if this is correct, contractors may move from one market to another without any problems and the idea of diversification as a special survival technique obviously would not apply in the construction industry in the same way as it does in other industries. in order to establish if this is so, or if (i) there are identifiable markets with distinctly different resource requirements and market conditions, and (ii) if firms operating in different organisational niches see their market environment as being different, we conducted a survey of 108 contractors operating in the sydney area3 (90 respondents answering all questions = 83 per cent response rate). the respondents were selected at random from cordell’s who’s who report for builders. the list represents the more advanced segments of the industry whose management would be expected to have an informed and rational approach to business strategy, hence the sample was considered to be adequate. the interviewee was the manager for small and medium sized firms and a person nominated by the manager for large firms. the interviews consisted of closed and open-ended questions to ensure that no aspect of the perception of different markets was left unexplored and lasted approximately 30 minutes. there is no recognised system of classification of markets for building contractors. while maisel (1953) used a classification of different sub-markets for residential building with different requirements to which builders had responded by developing firms with different structures and characteristics, the only generally accepted classification of building activity in australia is that of the australian bureau of statistics (abs). abs classifies buildings according to end-use only. this is not an ideal classification for the concept of markets based on the productive capacity and skills of the participating firms and their ability to produce different types of output. this classification means for instance that small school buildings (public nonresidential) and small office buildings (private non-residential) similar constructions in many respects are classified into different classes, while small and high-rise office buildings are in the same class, despite requiring very 3 the abs (1999) private sector construction industry, 1996 97, does not publish data on the number of firms operating in different localities, but there are some 15,000 general contractors operating in australia, and approximately 20 per cent, or 3,000, of these could be expected to operate in the sydney area. aspects of market differentiation in the building industry by dr teo ai-lin and dr goran runeson page 18 the australian journal of construction economics & building different resources and techniques for their construction. this means, however, that the concept of clearly identified markets in the building industry would be unfamiliar to our survey respondents. hence, for the purpose of the survey, it was judged that it would be ambiguous to the respondents and probably result in equally ambiguous responses if we introduced a theoretically more satisfactory, but conceptually complex and foreign classification of markets in the questionnaire. a simple classification based on public/private sector clients, on the other hand, has the advantage of being well known, unambiguous and simple, and there would be no or minimal misunderstanding from the respondents. as the aim of the survey was to illustrate the applicability of theoretical principles and some consequences of these principles, it was decided to use the public/private sector client as a basis for the classification also of markets. consequently, three separate markets: residential, public nonresidential and private non-residential, were identified. this can obviously be seen as only a rough approximation of an appropriate classification based on the capacity to produce, but it was assumed and certainly confirmed by the results, that even with this definition, clear evidence of differences between different segments of the industry could be obtained. the survey collected a number of responses on the characteristics of the firm and the environment they were operating in. in particular, it required the respondents to classify 22 factors, divided into four sets relating to the project, external environment, internal factors and output, as important, of some importance or not important for the firm’s operation in its current market. the survey was carried out to test the theories with particular respect to the impacts of both external4 and internal 4 external environment factors such as type of competition, support from subcontractors, support environment5, and complexity of project6 on the outputs7 to suit market demands as illustrated in figure 1. the absolute importance of each factor was calculated and the differences tested for statistical significance (chi-square test). the pair-wise correlations between the relative importance of the different factors were also tested statistically. results the use of the selected classification made it easy for the respondents to classify their activities in the form of markets, and 45 per cent of the respondents (40 firms) operated in one of the markets only, while 20 per cent (18 firms) operated in all three markets8. the firms operating in each of the different markets had clearly different perceptions about the environment in their market, in terms of their perception of the importance of the different factors included in the questionnaire. they clearly differentiated between the types of skills and experience necessary to work in that market, as well as their relation-ships with the environment. from suppliers, availability of materials, type of client. 5 internal organisational environment factors such as finance, site management structure, familiarity of project, communication, capacity, experience in geographical location, construction methods, plant and equipment requirement/management, product knowledge, manpower. 6 complexity of projects factors such as location of projects, nature and size of projects, height of buildings, complexity of projects. 7 outputs to suit the markets factors such as price (cost), buildability skills (quality) and contract period (time). 8 since the aim of the survey was to establish the characteristics of the firms operating in the different markets, rather than the proportion of firms operating in each market, the sample was not tested for representativeness in this respect. hence these proportions of the sample may not be representative for the population. aspects of market differentiation in the building industry by dr teo ai-lin and dr goran runeson the australian journal of construction economics & building page 19 the number of respondents from each organisational niche is given in figure 2. the chi sq. test showed statistically significant differences (at the .05 level) between the three single markets. the differences in ranking of importance of the 10 leading characteristics of the different markets are outlined below in table 1. the pair-wise rank correlation tests were significant at the 0.01 level, which also indicates that the requirements for resources and skills are significantly different in the three markets. rank private nonresidential public non-residential residential 1 2 3 4 5 6 7 8 9 10 finance complexity of project workload support from subcontr. size of project type of competition dist/location of project type of client price method of construction experience with location price workload availability of material finance site manag. structure familiarity with project method of construction support from suppliers size of project finance price type of client complexity of project size of project support from suppliers support from subcont method of construction. communications familiarity with project fig. 2 number of firms operating in individual and overlapping markets private non-residential 7 5 18 7 residential public non 22 20 resid. 11 table 1: rank of importance given to the ten most important aspects of environment and project by contractors working in different markets. aspects of market differentiation in the building industry by dr teo ai-lin and dr goran runeson page 20 the australian journal of construction economics & building for the firms operating in two or all three markets, the indicated importance and ranking were composites of the requirements in the individual markets, distinctly different in the different markets. discussion the survey shows that the need for skills and resources were significantly different in the different markets, as were the ranking of their relative importance. the classification of firms in the industry into only three markets groups grouped together firms that are quite different in terms of size and output, but even in this aggregated form, there are clear differences between the skills and resources required in each segment. with a theoretically more valid classification, it is likely that these differences would have been even more significant. the results clearly indicate that contractors perceive very clear differences between different markets, across a broad range of aspects such as the skills, the relationships with other organisations and the structures of organisations that are required to operate in the different markets. several respondents also volunteered opinions to that effect during the interviews. the implication of this is that firms which use differentiation as a survival strategy whether to grow, to reduce fluctuations in demand or to compensate for a secular decline in the home market must move into markets where the organisational structure required, the skills and the relationships to external organisations are different in both relative and absolute terms. the results show for instance that firms operating in the public nonresidential section need to ensure that they have much greater access to finance, if they intend to expand into any other market. on the other hand, firms in the private non-residential market need to use price, rather than other competitive strategies, if they move into any of the other markets. rather than firms moving in and out of markets as a matter of course, as suggested by briscoe (1988), this study shows that different markets require different resources and skills. this indicates a need for strategic planning for new resources and new organisation requirements when firms intend to enter new markets. differentiation is not a shortterm response to a short-term problem, or a chance event. to be successful it is conditional on the building up of the desired resources and skills. this conclusion is strongly supported by the fact that, although demand had changed rapidly in all three markets in the years prior to the survey, a substantial proportion of firms had elected to operate in a single market, despite the obvious disadvantages of doing so in terms of fewer options and less market power. the study has not revealed the exact process by which firms expand into new markets. it is, however, likely that the same strategy is required in the building industry as in other sectors of the economy. there, such moves are preceded by structural changes, designed to develop the new skills and relationships necessary in the new market environment. moreover, any such move is preceded by an analysis, not only of the demand in the new market, but also of the competition for resources in the new organisational niche. while differentiation has obvious advantages, and a large proportion of the firms do use it, it is obvious that a number of firms do not engage in different markets, but prefer, for whatever reason, what they are familiar with. it should be noted, that while the results show statistically significant differences between the different markets, the actual definitions of the different markets were based more on a perceived need to be unambiguous and clear to the survey respondents, than on strict theoretical considerations. it is quite possible; in fact quite likely; those more theoretically satisfactory definitions of relevant markets would have given even more clear-cut results. the original hypothesis and the conceptual framework are supported, but for practical applications, it would be aspects of market differentiation in the building industry by dr teo ai-lin and dr goran runeson the australian journal of construction economics & building page 21 necessary to establish more discriminating definitions of the various markets. such definitions would be based on considerations of resource use, size and skills, rather than end use of the output. conclusion this study has shown that firms in the building industry perceive the structure and operation of different markets in the building industry as substantially different. if firms are to improve their market position by differentiating their output, they need therefore to adjust the way they operate, their resources and their skills base. the survey result also showed that while the majority of firms do operate in two or more markets, a substantial proportion of all firms are not prepared to be involved in diversification but elect to operate in one market only, despite the obvious advantages of diversification. it would therefore seem likely that building firms are operating under similar restrictions as are firms in the rest of the economy, meaning that differentiation requires substantial changes in the way firms operate. references abs (1999) private sector construction industry, 1996 97, abs cat no 8772.0 bain, j., (1968) industrial organisation, 2nd ed, new york: wiley, baum j. & singh j. 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(1996), structural adjustment for a competitive environment: survival strategies for medium sized construction firms in zambia, cib w65, the organisation and management of construction shaping theory and practice, vol. 1, managing the construction enterprise, edited by langford d. a. and retik a., e & fn spon, london, pp 55-63. obinero uwakweh b. (1996), a framework for managing strategic change in the construction industry, cib w65, the organisation and management of construction shaping theory and practice, vol. 1, managing the construction enterprise, edited by langford d. a. and retik a., e & fn spon, london, pp 4-12. ofori g. (1990), the construction industry: aspects of its economics and management, singapore university press oller r. f. and giralt m. (1995), competition and co-operation within a multidivisional firm, the journal of industrial economics, vol. xliii, march 1995, pp 77 99 runeson, g. and raftery, j. 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(1965), everyman’s dictionary of economics, j. m. dent & sons ltd. singh (1971), take-overs, university of cambridge department of applied economics, monograph 19, cambridge, cambridge up. thompson, a. a., (1989) economics of the firm: theory and practice, 5th ed., englewood cliffs, nj: prentice-hall aspects of market differentiation in the building industry by dr teo ai-lin and dr goran runeson the australian journal of construction economics & building page 23 walker a. (1996), contractors’ strategies in hong kong’s competitive construction market, cib w65, the organisation and management of construction shaping theory and practice, vol. 1, managing the construction enterprise, edited by langford d. a. and retik a., e & fn spon, london, pp 107-118. wong k. t. and logcher r. d. (1986), contractors in cyclical economic environments, journal of construction engineering and management, vol. 112, no. 3, september, pp 310-325. a bim-based approach to reusing construction firm’s management information ma zhiliang, (tsinghua university, china) abstract nowadays most construction firms have begun to use information management systems in their business to work more efficiently. at the same time, a lot of management information is being accumulated and some of the information can be reused to support the decisionmaking. up to now, the information has not been reused so effectively in construction firms as expected. this paper introduces a new approach to reusing construction firm’s management information, which is based on bim (building information modeling) technology. in the paper, the current approaches are reviewed at first, and then the framework of the new approach is described. next, the key issues of the new approach are clarified. finally, a use case of the new approach is demonstrated. it is concluded that the new approach can be used in construction firms to better reuse the accumulated management information. keywords: information resources, reuse, bim, ifc introduction nowadays most construction firms are using information management systems as management tools and more and more information is being accumulated in the systems over time, related to productive information on elements such as labor, machine, and material and so on, and covering aspects such as schedule, cost, quality, etc. (rujirayyanyong 2006) just as the term “information explosion” indicates, huge amount of information thus may be accumulated in the system, because each project leaves several gigabytes of information after completion, while a moderate large construction firm have hundreds of projects in china each year. the information of reuse value is referred to as information resources in the context of this study and it is expected that by making full use of information resources, the ability of decision-making could be improved, which thus enhances the competitiveness of construction firms. there exist two approaches to reusing information resources. one approach is to manage the major information (e.g., engineering documents) and make it easy to query. for example, tserng (2004) analyzed five phases of knowledge management, i.e. knowledge collection, knowledge extraction, knowledge storage; knowledge sharing and knowledge update, and developed a system to support information reuse. the other approach is to extract useful information to build data warehouse and excavate potential knowledge by using data mining techniques. for example, soibelman (2004) conducted schedule delay analysis using decision tree method and artificial neural network method to analyze the information accumulated in enterprise databases. some construction firms hired management consulting firms to implement business intelligence (bi here after for short) tools for them in china. however, the existing approaches are still not convenient and efficient for construction firms to use. there are mainly two reasons for this. one is that the huge amount of the accumulated information prevents the users from extracting the right information easily and generating valuable information through handling the information. the other is that the existing australasian journal of construction economics and building ma, z l (2012) ‘a bim-based approach to reusing construction firm’s management information’, australasian journal of construction economics and building, 12 (4) 29-38 30 information does not include that of the relationship among various information items explicitly. bim (building information modeling) technology makes it possible to express the relationship of various information items explicitly so that the various information items in the lifecycle of construction projects can be shared easily. in the study, the classification and identification of information resource items were carried out so that only information resources are extracted for storage from the information management systems and bim technology was used to represent the information resources in order to simplify the extraction of information resources for analyzing. a new approach based on bim technology was formulated in order to reuse information resources more efficiently and effectively, and a prototype system was developed to verify it. this paper is intended to present the approach in an integrated way. a new conceptual framework for reusing construction firm’s information resources though investigations against senior managers in construction firms, it is estimated that only about 10 percent of the accumulated information in construction firms’ information management systems can be regarded as information recourses in the sense that they can be reused in future. so it is necessary to extract information resources firstly from the information management systems of construction firms to make efficient use of them. accordingly, a conceptual framework is established for reusing construction firm’s information resources, as shown in figure 1 (ma 2009). traditional information systems enterprise information systems historical information bim technology result to support decision-making detailed analysis of info. resources extraction of info. resources project information systems specialized application software standardization of info. resources management of info. resources data mining expert workshop object-oriented databases info. resources referred to directly key issues key technologieslegend bim information systems design systems 4d management systems …… managers figure 1 conceptual framework for reusing construction firm’s information resources (ma 2009) according to the framework, information resources need to be extracted from the information management systems after a project is completed. the information resources then should be standardized and added to a dedicated system for information reuse; just like reusable spare parts that are removed from used cars and stored in the warehouse. whenever the support for decision-making is needed, the managers can then analyze the information resources by using the dedicated system. this framework reduces the quantity of information stored in the database of the dedicated system so that the information resources could be reused efficiently. australasian journal of construction economics and building ma, z l (2012) ‘a bim-based approach to reusing construction firm’s management information’, australasian journal of construction economics and building, 12 (4) 29-38 31 in order to implement the framework, several key techniques need to be used to clarify the key issues; for example, expert workshop is used for identifying the information resource items, bim technology is used for the representation of information resources, an objectoriented database management system is used for managing them, and data mining technology is used for extracting knowledge to support the manager’s decision-making. research on the key issues classification and identification of information resource items while the classification and identification of information resource items is the basis of the new approach, it is very difficult to carry out the work because it not only involves many aspects of the management of construction firms, but also depends on the experience of the managers. an experienced manager knows what kind of information resources could be reused in his decision-making. in addition, the classification and identification has to be systematic, so that the information resource could be extracted from information management systems without losing the valuable ones. hence, the procedure for the classification and identification of information resource items is formulated and implemented in the study as shown in figure 2. as step 1, the major decision-making processes in construction firms were summarized based on extensive literature review. as a result, the decision-making processes are divided into two parts, project level processes and enterprise level processes; the former includes 5 project stages such as bidding and contract-signing, and the latter includes 8 functional management categories such as planning and production. as step 2 and step 3, the information resource items that are required in the processes and their usage were summarized. thus totally 63 information resource items were proposed, among which, 37 items are related to projectlevel management and the rest are related to the firm-level management. then a questionnaire form was formulated for use in next step. in step 4, a workshop was held and 5 experts from top construction firms in china were invited to discuss and fill in the questionnaire form to evaluate the reusability of the information resource items. the reusability of the information resource items was divided into three levels, i.e. a-level, b-level and c-level, where a-level corresponds to the largest reusability, b-level to the medium one and c level to the smallest one. as an example, table 1 shows the information resource items of a-level and b-level reusability. step 1 summarize processes of decision-making step 2 summarize primary information rescources step 4 estimate reuse value of information resources step 5 verify the result of estimate literature review expert workshop typical users verify activity outputinput control method legend processes of decision-making primary information resources information resources literature information resources step 3 summarize the way of usage the way of usage figure 2 procedure for the classification and identification of information resource items (lu 2011) australasian journal of construction economics and building ma, z l (2012) ‘a bim-based approach to reusing construction firm’s management information’, australasian journal of construction economics and building, 12 (4) 29-38 32 the evaluation results on information resource items were verified by holding a meeting in a construction firm which had implemented information management systems successfully for several years. ten high-level managers including the general manager attended the meeting and were asked to evaluate the reusability of the information resource items independently. as a result of comparison, the evaluation was in agreement with that given by the experts. thus it is concluded that the result of classification and identification of information resource items is applicable for extracting the information resources from information management systems of construction firms (ma 2010b). code information resource items reusability level code information resource items reusability level 1 project bidding detail a 16 cost accounting record a 2 certificate info. a 17 design documents b 3 cooperation record a 18 abstract info. of bidding b 4 cost planning detail a 19 abstract info. of contract b 5 actual schedule detail a 20 contract documents b 6 material procurement record a 21 abstract info. of constr. planning b 7 direct cost record a 22 material planning detail b 8 indirect cost record a 23 equipment planning detail b 9 annual plan a 24 labor planning detail b 10 project contract info. a 25 labor work record b 11 project cost info. a 26 equipment procurement/rent record b 12 construction method a 27 quality inspection record b 13 material procurement record a 28 employee performance info b 14 cash flows record a 29 deployment of staffs recorded b 15 income and expenditure records a table 1 partial information resource items (ma 2010b) representation of information resources in order to manage the information resources that are extracted from existing information management systems, it is better to define a neural format for storing them. in recent years, with the development of bim technology, the ifc standard has been recognized as a mainstream data standard. the study adopts the ifc standard as the storing format of information resources. there are three reasons for doing this. first, because of the direct or indirect relationship between the construction firms’ information and the building products, it facilitates future integration of the information resources with the design information. second, the ifc standard, which is object-oriented, contributes to classifying and storing information resources semantically and thus can make it more convenient for the construction firms to retrieve information resources that they want than using other representation method. finally, the ifc standard contributes to better sharing and exchange of information resources since it does not change with information management systems. however, the ifc standard has not been used in the field of construction management up to now, except for a few aspects such as schedule management and cost estimating. hence, in order to use the ifc standard in this approach, it has to be expanded. australasian journal of construction economics and building ma, z l (2012) ‘a bim-based approach to reusing construction firm’s management information’, australasian journal of construction economics and building, 12 (4) 29-38 33 in the study, the expansion of the ifc standard was carried out for representing the information resource items of a-level reusability. object-oriented analysis method was used and eleven classes including labour and organizations were identified. by examining the ifc standard, it was found that only three categories of information related to “data records”, “drawings” and “the relationship with drawings” need to be defined as expansions. the hierarchical structure of existing and expanded entities about the above-mentioned categories is shown in figure 3. in the structure, two entities related to drawing are in the resource layer, so they do not inherit from ifcroot (ma 2010a). (abs)ifcroot (abs)ifcobjectdefinition (abs)ifcpropertydefinition (abs)ifcrelationship _ifcdrawinginformation (abs)_ifcdatarecord _ifccostcheckrecord _ifccashrecord _ifcdrawingrelationships _ifccooperationrecord _ifcexpenserecord _ifcprojectbiddingrecord _ifcmaterialprocurementrecord _ifcprojectcontractrecord (abs)ifcrelassigns (abs)ifcrelassociates _ifcrelassignsrecord _ifcrelassociatesdrawings main expanded entities (abs)ifcobject legend existing entities figure 3 the hierarchical structure of existing and expanded ifc entities related to “data records”, “drawings” and “the relationship with drawings” (ma 2010a) thus, the ifc-based model of information resources is formulated as shown in figure. 4. the expanded entities are properly arranged into the domain layer, interoperability layer, core layer and resource layer in the ifc standard respectively. based on the model, the information resources are supposed to be extracted from the information management systems of a construction firm and transformed to ifcxml files before they are imported into the prototype system in this study. the way to extract information resources depends on the information management systems that the construction firm uses. a mapping between the information items in the information management systems and the information resource items needs to be established by an engineer and a script program needs to be developed based on the mapping in order to extract the information resources from the information management systems. next, the mapping between the information resource items and the ifc entities’ data member needs to be established by the engineer who has the knowledge of the ifc standard. then the mapping can be established in the dedicated system for reusing the information resources by utilizing the functions provided in the system. it deserves to note that the quality and consistency of information resources depend on both that of the information in the original information management systems and the quality of the two mappings established by the engineer in the construction firm. while the former is out of control of this study, the latter can be controlled if the construction firm can find an engineer who knows or can learn the information items involved in the information management systems, information resource items and the ifc standard well. the control of the latter is not a problem, since it needs the engineer to do only once in short period as long as the information management systems is not changed and it is not difficult for him to master those knowledge. australasian journal of construction economics and building ma, z l (2012) ‘a bim-based approach to reusing construction firm’s management information’, australasian journal of construction economics and building, 12 (4) 29-38 34 resource layer organization labourdocument drawing core layer project interoperability layer task divisional-item project cost item resources information resources main objects in information resources clients subcontractors suppliers …… tender documents contract documents …… plane graph design drawing machine material labour …… material consumption record direct cost record legend: domain layer figure 4 information resources model based on the ifc standard (lu 2011) when making use of the information resources stored in the system, an inverse process needs to be carried out. since the combination of information resource items may be needed in many cases of decision-making, the mapping between the data member of ifc entities and the process of decision-making support need to be established in advance before the data are used for the analysis to support decision-making. the process of obtaining the data of information resources for decision-making is shown in figure 5, where the main ifc entity represents ifc entity whose attributive data can be use directly, while the basic ifc entity represents that whose attributive data have to be obtained through relation entities before being used. management of information resources since vast amount of information are anticipated to be in such a system in order to make use of information resources in construction firms, it is necessary to adopt an efficient database management system. traditionally, relational databases (rdb) management systems are used to manage data in information systems (demian 2006). considering that the ifc data are object-oriented, it was expected that object-oriented database (oodb) management system are more efficient than the traditional rdb management system. to verify it, comparisons were carried out by using an oodb management system, versant object database 8 (versant 2011), and a relational database, sql server 2005, respectively. australasian journal of construction economics and building ma, z l (2012) ‘a bim-based approach to reusing construction firm’s management information’, australasian journal of construction economics and building, 12 (4) 29-38 35 the comparison was carried out in the following way, i.e., establishing databases for simple data (e.g. a single ifc entity), combined data (a relation entities is used for combining two ifc entities) and complex data (more relational entities are used for linking more ifc entities), and then manipulating the databases by inserting information and retrieving information up to 100000 times. the results are shown in figure 6. it is clear that in most cases, the oodb management system showed much higher performance than the rdb management system (ma 2011). hence, the versant object database 8 was used in the development of the prototype of the dedicated system for information reuse (the prototype system hereafter) in this study. start select the information resources read mapping record analysis ends? analyze ifc entities involved in mapping record main ifc entity? basic ifc entity? record the entity and its attribute yes no no query relation entities related to main ifc entities query main ifc entities query ends? query basic ifc entities related to each ifc entity yes yes no information resources end yes no figure 5 the process of obtaining the data of information resources (lu 2011) reuse of information resources through investigations it is concluded that the statistical analysis method can satisfy construction firms’ daily needs for supporting decision-making in most cases. so the prototype system that was developed in the study provides only the basic analysis functions, i.e. graphical representation and multiple linear regression analysis. besides, to satisfy users’ need for complicated analysis, the prototype system facilitates outputting information resources in the form of xls, csv and arff files so that users can make in-depth analysis with dedicated software such as bi tools. prototype system introduction to the prototype system based on the above-mentioned research, the author et al. developed a prototype system called the information resources reuse system for construction firms (inforeuse for short) by using c# language and versant object database 8. figure 7 shows the system model. the system has two types of users, i.e. information managers and information analysts. the former are supposed to be an engineer in the construction firm who know information resource items and the ifc standard and are responsible for importing information resources from the information management systems. in addition, they are responsible for setting departments, users and user rights, maintaining information resources, decision-making processes and analytical models, and setting the mapping of ifc entities, etc. in the system. the latter can browse, search, use and output information resources that they want by using the system. australasian journal of construction economics and building ma, z l (2012) ‘a bim-based approach to reusing construction firm’s management information’, australasian journal of construction economics and building, 12 (4) 29-38 36 insert information query information simple information combined information complex information figure 6 comparison of oodb and rdb for the efficiency of manipulating ifc data (ma 2011) using the system for case studies in the study, a construction firm that has used an erp system for about 8 years was selected to test the prototype system. the extracted information resources cover project information, suppliers, material, wbs, material purchase records, cost records and enterprise cost records etc. there are about 5000 information resource instances from 21 projects. the size of ifcxml files is about 10mb involving 30,000 ifc entities. the imported information resources are then used it to predict project cost, to assist in material purchase and so on. for example, the information resources of wood-based panel factory projects were used to predict the cost of a planned project. it was found that the construction cost of a wood-based panel factory project mainly depends on the output of the factory and duration of the project. based on this feature, the cost of the planned project was predicted by using multiple linear regression analysis method. due to the shortage of similar data, the system could not be validated by predicting a new case. however, when the results were explained to two senior managers of the same construction firm and they valued the findings very much. 0 50 100 150 200 250 300 350 0.1 0.2 0.4 0.6 0.8 1 2 4 6 8 10 消 耗 时 间 （ 秒 ） 插入简单信息个数（万） 关系数据库-简单实体 关系数据库-复杂实体 面向对象数据库-简单实体 面向对象数据库-复杂实体 0 2 4 6 8 10 12 14 16 0.1 0.2 0.4 0.6 0.8 1 2 4 6 8 10 消 耗 时 间 （ 秒 ） 当前简单信息个数（万） 关系数据库-简单实体 关系数据库-复杂实体 面向对象数据库-简单实体 面向对象数据库-复杂实体 0 100 200 300 400 500 600 1 2 4 6 8 10 20 消 耗 时 间 （ 秒 ） 插入组合信息个数（万） 关系数据库 面向对象数据库 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 1 2 4 6 8 10 20 消 耗 时 间 （ 秒 ） 当前组合信息个数（万） 关系数据库 面向对象数据库 0 100 200 300 400 500 600 1 2 4 6 8 10 20 消 耗 时 间 （ 秒 ） 插入复杂信息个数（万） 关系数据库 面向对象数据库 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 1 2 4 6 8 10 20 消 耗 时 间 （ 秒 ） 当前复杂信息个数（万） 关系数据库 面向对象数据库 australasian journal of construction economics and building ma, z l (2012) ‘a bim-based approach to reusing construction firm’s management information’, australasian journal of construction economics and building, 12 (4) 29-38 37 legend import standard info. resources output info. resources and analysis models inforeuse existing info. systems input module output module analyze deeply with bi analyze with info. resources info. resources utilization module system manage transform to ifcxml files store and manage info. resources, decision processes and analysis models info. resources extraction info. resources standardization info. resources management info. resources use info. resources set module direction of info. flow application of tools system module key step steps of reusing info resources division of steps figure 7 system model of inforeuse (lu 2011) conclusions a new approach for reusing information resources in construction firms was established based on bim technology in the study. to verify the approach, the related key issues were clarified by using key techniques and a prototype system was developed and applied. the following summarizes the findings. (1) this paper reviews the previous undertakings of this study, i.e. the classification and identification of information resource items based on literature review and an expert workshop, the representation of information resources based on the ifc standard, and managing the information resources by using object-oriented database management system. these works has laid a sound foundation for the new approach. (2) the new approach proposed in this study, which is based on bim technology can help to achieve higher efficiency of managing and reusing information resources than traditional approaches in order to support the decision-making of construction firms. (3) as the contribution to the body of knowledge, the integrated use of identification of information resources based on pre-defined items, representing them by using the ifc standard and managing the them represented by using object-oriented database management system provides a more efficient approach for making full use of information resources of construction firms. acknowledgement this study is supported by the national science and technology support program for the 11th-five-year plan of china (no. 2007baf23b02). mr. zhang dongdong’s help on preparing the paper is highly appreciated. references demian p. and fruchter r. (2006) ‘methodology for usability evaluation of corporate memory design reuse systems’, j comput in civil eng, 20 (6), 377-389 lu n. (2011) ‘study on the information resources reuse system in construction firms based on bim technology’, dissertation of tsinghua university, beijing, china (in chinese) ma z.l. and lu n. (2009) ‘conceptual framework for reuse of information resources in construction firms’, tsinghua science and technology, 49 (12), 1909-1914 (in chinese) australasian journal of construction economics and building ma, z l (2012) ‘a bim-based approach to reusing construction firm’s management information’, australasian journal of construction economics and building, 12 (4) 29-38 38 ma z.l. and lu n. (2010a) ‘approach to representing information resources in construction firms by using ifc based on object-oriented method’, in proceedings of the international conference on computing in civil and building engineering, w. tizani (ed.), 30 june-2 july, nottingham, uk, nottingham university press, paper 89 ma z.l. and lu n. (2010b) ‘identification of reusable information in construction firms’, managing it in construction / managing construction for tomorrow – dikbas, ergen & giritli (eds), taylor & francis group, london, 323-330 ma z.l. and lu n. (2011) ‘comparison of managing ifc data by using object-oriented database and relational database’, tsinghua science and technology, to appear (in chinese) rujirayanyong t. and shi j.j. (2006) ‘a project-oriented data warehouse for construction’, automation in construction, 15 (6), 800-807 soibelman l. and kim h. (2004) ‘data preparation process for construction knowledge generation through knowledge discovery in databases’, j comput in civil eng, 16 (1), 39-48 tserng h. p. and lin y. c. (2004) ‘developing an activity-based knowledge management system for contractors’, automation in construction, 13 (6), 781-802 verant. (2011) ‘versant database’, http://www.versant.com http://www.versant.com/ the australian journal of construction economics and building [vol 5, no 1] �� 6 balancing study and paid work: the experiences of construction undergraduates in an australian universityhelen lingard (ark consulting group pty ltd, clifton hill, australia). abstract a questionnaire survey was undertaken among third year students enrolled in the university of melbourne’s bachelor of property and construction (bpc) programme. the survey explored students’ experiences in balancing paid work with study. hours spent in paid employment were at least as long and, in many cases, were in excess of hours spent at university. while work was not perceived by students to pose a difficulty for attending lectures and tutorials, students indicated that their paid work made it difficult for them to engage in independent learning activities, such as using library resources or preparing for classes by reading beforehand. two scales, previously used in other countries to measure students’ burnout and engagement, were tested. both scales were found to be valid and reliable in that the factorial structures found in previous studies were confirmed and acceptable internal consistency reliability coefficients were generated for each of the scales’ component factors. this opens the way for more in-depth multivariate analysis to determine the linkages between work hours, work-study conflict and students’ burnout or engagement with university life. keywords: paid work, work-study balance, burnout, engagement, well-being. introduction the work-university interface the bachelor of property and construction (bpc) is offered by the faculty of architecture, building and planning at the university of melbourne. between 1994 and 2002, the university of melbourne’s bpc ranked eighth out of the twelve australian tertiary “building” courses in terms of good teaching and students’ overall satisfaction with the course, as assessed by the graduate careers council of australia’s course experience questionnaire (love and newell, 2004). the course structure involves three years of study, followed by a 12 month industry placement. following this placement, students return to the university for a final year of study. the industry placement is greatly valued by staff and students who regard it as an important learning experience. many students work part time for the company in which they undertook this practicum when they return to complete their final year of the bpc. in recent years, the extent to which bpc students work in paid employment during semester time has become a source of concern. in 2002, the average hours worked by third and final year students was 20.5 and 19.0 respectively compared to only 9.5 among first year students (lingard et al., 2003). in some cases, students report working up to 39 hours each week during semester time. anecdotal evidence from staff suggests that many students are missing lectures and tutorials because of work commitments. concerns also centre on the students’ disengagement from university life and the possible impact of excessive workloads on their stress and well-being. the extent and impact of students’ participation in paid work during semester-time continues to interest higher education researchers. despite the fact that the bpc students report working considerably long hours in industry-based jobs, little is known about the experiences of these students at the work-university interface. the current study sought to explore these experiences. students in paid work in recent years, the cost of financing an education has increased to such an extent that combining work and study may be a necessity for many students (lipke, 2000; curtis and lucas, 2001; curtis and williams, 2002). curtis and williams (2002) write of the “routinisation” of students combining paid work and study, suggesting that this is now the norm. benefits of combining paid work and study some research suggests that semester-time work can provide positive benefits to students. lucas (1997) reports that many students derive enjoyment and satisfaction from their part-time work, which forms the basis for much of their social life. other studies suggest that participation in paid work brings educational benefits. for example, watts and pickering (2000) suggest that skills learned at work are transferable and students who work are more employable due to their development of organisational and time management skills. working students are also said to develop good inter-personal skills (lucas and lammont, 1998). when parttime work is related to students’ vocational coursework, it may be particularly beneficial as an aid to academic knowledge and career prospects. possible adverse effects of combining paid work and study however, other writers suggest that semester-time work has a detrimental impact upon students and their study. for example, working long hours is reported to have a negative effect on the study of high school students in the us (hansen and jarvis, 2000). in a study by sorensen and winn (1993), undergraduate students attributed the negative impact of work on study to having less time available for study, tiredness and the need to miss lectures to attend work. in an unpublished study at oxford brookes university in the uk, it is reported that every year, more than 200 students in part time work gain a degree at least one class lower than they would get were they not in paid work (lindsay and patonsaltzberg, cited in curtis and williams, 2002). it is not just educational outcomes that are affected by students’ excessive workloads. research suggests that imposing undue stress upon students can negatively impact upon their well-being. research shows high levels of stress in university students (abouserie, 1994; felsten and wilcox, 1992; cotton et al., 2002). british research suggests that university students experience difficulty in balancing work and study and experience above average levels of stress as a result (humphrey et al., 1998). the potential for work-study conflict the conflict between one’s work role and other life roles is an important aspect of the relationship between work and non-work life. much research and theory building has focused on the conflict the australian journal of construction economics and building [vol 5, no 1] �� between work and family. for example, greenhaus and beutell (1985, p.77) defined work-family conflict as “a form of interrole conflict in which the role pressures from the work and family domains are mutually incompatible in some respect”. time is a limited resource and time commitments to paid work reduce the time available to fulfill duties required of another role. in adult life, work and family are primary life domains and researchers have developed and tested various models of the antecedents (e.g. work hours, number of children etc.) and consequences (e.g. absenteeism, low job satisfaction) of work-family conflict. markel and frone (1998) suggest that that in adolescent life, work and education are likely to be primary life domains. they provide empirical evidence to indicate that the number of hours spent in paid employment each week is positively associated with conflict between work and education among adolescents and young adults. the potential for burnout given the significant time demands and possible conflict between the role of student and that of employee, the issue of ‘burnout’ is a concern. the most widely accepted definition of burnout conceptualises the phenomenon as a syndrome of emotional exhaustion, cynicism and reduced personal accomplishment (maslach et al., 1996). burnout is predicted by long hours, subjective overload (the feeling of having too much to do in the time available) and the requirement to fulfil the demands of conflicting roles (schaufeli and enzmann, 1998). research also suggests that burnout is more likely to occur among younger people than among those over 30 or 40 years of age and among highly educated compared to less educated people (maslach et al., 2001). these findings suggest that university students, particularly those working part-time, could be a high-risk group for burnout. one study revealed that perceived stress predicted burnout among working college students in the us (chang et al., 2000). burnout is reported to be negatively correlated with academic performance (schaufeli et al., 2002a) and a sense of emotional exhaustion has been linked to students’ disengagement from university life (schaufeli et al., 2002a). the impact of the combined workload of paid work and study on students is a concern because students are critically important to the future of knowledge-based economies. student burnout is likely to lead to under-achievement among the student cohort and may even result in withdrawal and loss of talent from the workforce. the construction industry suffers from a poor image. already, construction is dropping in career appeal and shortage of skills has been highlighted as an issue for the 21st century. in the 1999 edition of the jobs rated almanac, civil engineering fell from 18th to 70th position in expressed job preference and 14 construction trades were rated in the bottom ranks (francis and lingard, 2002). the availability and perceived quality of employment alternatives is recognised to be a key factor in job commitment and turnover. burnout is also associated with diminished organisational commitment and an intention to turnover. therefore, if students are suffering exhaustion and burnout before they graduate, they may choose alternative career paths on graduation, which would be a loss to the industry and threaten its long term competitiveness. student engagement consistent with an emerging trend towards positive psychology, in recent years researchers have started to investigate the concept of engagement. engagement is regarded as being the antithesis of burnout (schaufeli et al., 2002b) and is characterised by energy, involvement and a sense of efficacy (maslach and leiter, 1997). engagement has been measured among employees and students. engaged students are said to experience an energetic and effective connection with their study and see themselves as being able to deal completely with the demands of their courses. as the antithesis to burnout, engagement is likely to enhance students’ experiences of university life. the study objectives in 2003, a study was undertaken to investigate the experiences of students enrolled in the bachelor of property and construction programme at the university of melbourne, australia. the objectives of this study were as follows: to investigate the extent to which students were engaged in paid work during semester; to investigate the extent to which students perceived there to be conflict between their paid work and their university commitments; to test the reliability and psychometric properties of burnout and engagement scales developed and used in student samples in other countries; and to assess the relationship between burnout and engagement dimensions in an australian student sample. methods the sample a questionnaire was administered to undergraduate students enrolled in the third year of the bachelor of property and construction degree course. questionnaires were distributed during a lecture in a compulsory subject for year three students. students were asked to respond to the survey during the lecture and place completed, un-named questionnaires into a sealed box provided for this purpose. the questionnaire was administered four weeks prior to the end of semester when student attendance at lectures is generally high. however, the sampling method used was limited in the respect that only students’ attending the lecture were invited to participate. this could introduce bias into the results as students whose workload is the greatest may not have been in attendance. a total of 102 usable questionnaires were returned, representing a 93% response rate among students in attendance at the scheduled lecture at which questionnaires were distributed. while this sample would not be considered large, tabachnick and fidell (2001) suggest that, with respect to principal components analysis (see below), a sample of between 100 and 200 is sufficient for most purposes. questionnaire design the questionnaire comprised six sections as follows: information about the students’ course enrolment and residential status (e.g. living with parents, friends, in a university college, with a spouse/partner etc.); students’ participation in paid work, including hours, schedule requirements, nature of employing organisation and rate of pay; students’ participation and feelings about university life, including contact hours, hours spent on campus, feelings of burnout and engagement (see below); students’ experiences in balancing work and study, including perceived work-study conflict and perceptions of the relative ease/difficulty experienced in meeting university requirements; and qualitative comments regarding the level of satisfaction/ dissatisfaction with university life and paid work. owing to the sensitivity of data being collected, students were not asked to provide detailed demographic information, such as • • • • • • • • • the australian journal of construction economics and building [vol 5, no 1] �� gender and age, as it was believed this could compromise their anonymity (see ethics procedure below). burnout and engagement measures burnout was assessed with a modified version of the maslach burnout inventory – general survey (mbi-gs). schaufeli et al. (2002a; 2002b) adapted the mbi-gs for use within student samples. for example, the item “i feel emotionally drained from my work [italics added]” was changed to “i feel emotionally drained by my study [italics added]”. the mbi-student survey (mbi-ss) consists of 16 items that constitute three scales: exhaustion (5 items); cynicism (5 items); and efficacy (6 items). all items are scored on a 7-point frequency rating scale ranging from 0 (never) to 6 (every day). high scores on exhaustion and cynicism and low scores on efficacy are indicative of burnout. engagement was measured using the utrecht work engagement scale (uwes) developed by schaufeli and bakker (2003). for the large part, the development of the student version of the uwes (the uwes-s) has involved positively rephrasing mbi items and making them applicable to assessing engagement amongst student populations. the uwes-s comprises 14 items, constituting three subscales: vigour; dedication; and absorption. “vigour” is assessed by five items, for example, “when i am studying i feel strong and vigorous.” individuals scoring high on vigour are charactersed as feeling energised and having stamina for study. low scores on the vigour scale indicate less energy and stamina for study. “dedication” is assessed by five items, for example “i am proud of my studies.” individuals scoring high on dedication identify with their study because it is experienced as meaningful, inspiring and challenging. individuals who score low on dedication do not identify with their study, experiencing it as lacking in meaning and uninspiring. finally, “absorption” is measured by four items, for example “when i study, time flies.” individuals scoring high on absorption usually feel happily engrossed or immersed in their study, indeed to the extent that they have difficulties detaching from it. individuals scoring low on absorption do not feel engrossed or immersed in their study, nor do they have difficulty detaching from it. all items are scored on a 7-point frequency rating scale ranging from 0 (never) to 6 (every day). ethics procedure the research was subject to approval under the university of melbourne’s ethics process for research involving human subjects. accordingly, students were advised that participation was voluntary and that a failure to participate would not prejudice their treatment in the faculty. students were also advised that participation was in no way linked to the assessment of any of their university work. the students were advised that returning the questionnaire indicated their willingness to participate in the survey and that data would be stored in a locked, secure location and be treated with strict confidentiality. students were also provided with the option of placing completed questionnaires in a sealed box in the faculty’s student services office, if they preferred. data analysis procedures firstly, descriptive statistics were calculated for hours spent at work and at university. these descriptive statistics were tabulated. descriptive statistics were also tabulated for the work-study conflict items. secondly, given that the mbi-ss and uwes-s are both relatively new psychometric measures, a principal components analysis (pca) was performed in order to examine their factorial structures and compare these to the factor structures hypothesised by schaufeli and bakker (2003). lastly, to determine the relationship between the engagement and burnout factors in the present sample, a bi-variate correlation table was generated. the statistical software package spss was used to conduct these procedures. results students’ circumstances forty respondents (38.5%) were enrolled in the building construction management course stream. nineteen respondents (18.3%) were enrolled in the building economics/quantity surveying stream and 16 respondents (15.4%) were enrolled in the property stream. a further 22 respondents (21.2%) were enrolled in the combined bachelor of property and construction/ bachelor of architecture degree offered by the faculty. a further four respondents (3.9%) did not indicate which course/stream they were enrolled in. the largest proportion of respondents (n=45, 43.3%) indicated they lived with their parents. another 35 respondents (33.7%) indicated they lived with friends in a flat or house-share arrangement. seven students (6.7%) reported living with a spouse/partner and two (1.9%) reported living with a spouse/ partner and dependent child(ren). eight students (7.7%) reported living alone, one of whom also lived with a dependent child. only two students (1.9%) reported living in a university college. the remaining two students (1.9%) did not indicate where or with whom they lived. hours in paid employment table 1 shows the least and most number of hours students reported working in paid work in any week during the month prior to the survey. the least hours worked ranged from 0 to 37 hours (sd 8 hours) and the most hours worked ranged from 10 to 55 hours (sd 10 hours). the mean least number of hours worked was 11.12 hours and the median was 10. the mean most number of hours worked was 23.65 hours and the median was 20. n minimum maximum median mean std. deviation least number of hours worked in any week during last month 78 0.00 37.00 10 11.12 7.99 most number of hours worked in any week during last month 78 10.00 55.00 20 23.65 10.00 nb: n=78 due to missing data table 1: least and most number of hours worked in any week during the last month the australian journal of construction economics and building [vol 5, no 1] �� table 2 shows the least and most number of hours worked by type of work. the results suggest that students working in quantity surveyors’ offices and students working for property developers report working the greatest number of hours. hours spent at university table 3 shows the number of hours students indicate that they spend at university in a normal week. in relation to course contact hours, students reported spending a minimum of 1 and a maximum of 36 hours at university in a normal week. the mean number of hours spent in course contact was 13.40 hours (sd 4.28 hours) and the median was 13 hours. in relation to using the university facilities for recreational purposes, students reported spending a minimum of 0 and a maximum of 25 hours at the university a week. n minimum maximum median mean std. deviation course contact hours 102 1.00 36.00 13 13.40 4.28 recreational activities 100 0.00 25.00 4 6.95 6.70 no of days per week spent on campus 102 0.00 7.00 4 4.08 1.19 table 3: average time spent per week at university the mean number of hours using the campus for recreational purposes was 6.95 (sd 6.7 hours) and the median was 4 hours. the mean number of days students indicated they attended university was 4.08 (sd 1.19 days) and the median was 4 days. perceived work-study conflict table 4 shows students’ perceptions that their work makes it difficult to meet university commitments. students generally perceive that they are able to attend lectures and tutorials, meet with other students to engage in study-related activities, complete assignments before the due date and use internet study resources. however, students rate finding time to perform readings prior to class and preparation for lectures and tutorials and spending time using library resources “difficult.” this suggests that students’ paid work participation makes it difficult for them to engage in independent research-based activities relating to their study. least number of hours worked most number of hours worked type of work n min. max. mean sd min. max. mean sd casual 37 0.00 21.50 8.69 6.61 10.00 50.00 20.88 8.39 contractor 11 0.00 20.00 10.45 6.04 14.00 40.00 24.20 8.73 working in an architect’s office 14 0.00 20.00 10.62 4.79 12.00 50.00 22.85 10.56 working in a quantity surveyor’s office 5 7.50 30.00 19.70 8.61 15.00 55.00 33.20 15.79 working for a property developer 8 8.00 37.00 20.00 11.60 15.00 50.00 26.00 12.37 casual work and working for a contractor 2 10.00 12.00 11.00 1.41 25.00 30.00 27.50 3.54 working for a contractor, a property developer and another employer 2 0.00 6.00 3.00 4.24 20.00 30.00 25.00 7.07 casual work and working in an architect’s office 2 3.00 26.00 14.50 16.26 12.00 35.00 23.50 16.26 all of the above 1 18.00 18.00 18.00 . 34.00 34.00 34.00 . unspecified other type of employment 2 0.00 16.00 8.00 11.31 24.00 38.00 31.00 9.90 table 2: least and most number of hours worked in any week during the last month by type of work table 2 shows the least and most number of hours worked by type of work. the results suggest that students working in quantity surveyors’ offices and students working for property developers report working the greatest number of hours. the australian journal of construction economics and building [vol 5, no 1] �� factorial structure of the burnout and engagement scales prior to performing the pca, the frequency distributions of the mbi-ss were checked for normality and multivariate outliers were removed. the pca yielded four components with eigenvalues larger than 1, explaining 62% of the total variance. both four and three components solutions were submitted to varimax rotation, however, the three component solution provided the less complex solution. the varimax rotated components are consistent with the underlying factor structure suggested by schaufeli et al. (2002a; 2002b). further convergent evidence regarding the underlying factor structure is indicated by cronbach’s alpha coefficients, which were .76, .78 and .78 for the exhaustion, cynicism, and efficacy scales respectively. this indicates that the burnout scales have satisfactory internal consistency reliability in the australian student sample. the same procedure was followed to examine the factorial structure of the uwes-s scale. the pca yielded two components with eigenvalues larger than 1, explaining 62.6% of the total variance. the first component explained 53% of the total variance, while the second component only explained 9.3%. two solutions were submitted to varimax rotation, the two component solution suggested by the current analysis, and the three component solution suggested by schaufeli et al. (2002a; 2002b). both the two and three component solutions proved complex. however, after careful analysis of the content of the components it was determined that the three component solution suggested by schaufeli et al. (2002a; 2002b) provided a clearer theoretical explanation of the data than the two component solution. however, as noted previously, the results were complex, indicating a high degree of overlap between components. this may be an artifact of the smaller sample size of the current study compared with the larger sample sizes of schaufeli et al. (2002a; 2002b), or that fact that the uwes-s has yet to be sufficiently normed against australian samples. despite the complexity of the components, each had high cronbach alpha coefficients. these were .92, .92 and .87 for vigour, absorption, and dedication respectively, indicating acceptable internal consistency reliability in the australian student sample. the relationship between burnout and engagement factors table 5 provides information concerning the relationship between the burnout and engagement scales employed in the current sample. data relevant to the current study has been extracted from schaufeli et al. (2002a) to provide cross cultural comparisons. item n mean sd to attend lectures and tutorials. 72 2.35 1.01 to attend meetings with other students. 72 2.85 1.03 to do readings before a class. 72 3.75 0.95 to prepare for lectures and tutorials. 72 3.60 0.94 to complete assignments before the due date. 72 2.71 0.94 to spend time using library resources. 72 3.28 1.02 to spend time using internet study resources. 72 2.61 1.03 nb: n=72 due to missing data perception of ease/difficulty to undertake each of the activities during semester time rated from 1=very easy to 5= very difficult. table 4: perceived work-study conflict spain (n=621) portugal (n=723) netherlands (n=309) australia (n=102) vi de ab vi de ab vi de ab vi de ab ex -.23* -.17* -.12* -.30* -.27* -.10* -.20* -.08 .03 -.29* -.28* -.26* cy -.38* -.61* -.32* -.41* -.67* -.25* -.43* -.61* -.30* -.19 -.34* -.15 pe -.69* -.67* -.56* -.63* -.59* -.48* -.65* -.60* -.50* -.51* -.64* -.43* note: vi=vigour, de=dedication, ab=absorption, ex= exhaustion, cy=cynicism, and pe=efficacy * correlation is significant at the 0.05 level or greater (2-tailed) table 5: correlations between maslach burnout inventory-student survey (mbi-ss) and utrecht work engagement scale-student (uwes-s) (adapted from schaufeli et al., 2002a, p.473) schaufeli has argued that because student burnout is considered to be an erosion of academic engagement it is expected that all burnout and engagement scales are at least moderately negatively related. according to schaufeli et al. (2002a), a relatively strong association is particularly expected between exhaustion and vigour as well as between cynicism and dedication because these scales are antithetical. the results of the australian study are largely consistent with those reported by schaufeli et al. (2002a). with the exceptions of vigour the australian journal of construction economics and building [vol 5, no 1] �� (vi) and cynicism (cy), and absorption (ab) and cynicism (cy) in the present study, the remaining correlations are significantly and negatively correlated. the current results replicate the trend in the other three samples in that correlations are highest, that is modestly negatively correlated, between personal efficacy (pe) and the three engagement scales. interestingly, it should be noted that the expected relationships between exhaustion and vigour and cynicism and dedication are not as strong as might be expected on theoretical grounds. as can be seen from table 5, this finding is also apparent in the other samples. discussion the results suggest that students in the bpc programme spend a large number of hours in paid employment. on average, hours spent in paid employment equal or exceed those spent at the university. the impact of students’ commitments to paid work on well-being and educational outcomes should now be evaluated. while participation in paid work can undoubtedly yield educational and personal benefits, the possibility that students are “overworked” exists. some studies suggest that students who work up to ten and fifteen hours per week benefit from this but that working longer hours than this can have a deleterious impact on students’ well-being and performance (curtis and lucas, 2001). if this is the case, many students in the bpc programme are working hours in excess of the desirable limit. the results of this study suggest that bpc students are able to attend lectures and tutorials but that their paid work makes it difficult for them to engage in independent study or research, potentially posing a problem for existing models of teaching and learning. from an educational perspective, there is some debate as to whether the quality of education should be judged according to the breadth and width of the problems that education poses for students (lomas, 1997) or by the market model, in which excellence is displayed when the product (the graduate) sells well (mcmurtry, 1991). if the former perspective is taken, then it is possible that the breadth, as well as the depth, of education will suffer where the student attends lectures but is unable to undertake any independent research-based study. however, the fact that bpc students are employed so extensively in industrybased jobs indicates that the construction industry recognises their “value.” despite the employability of bpc students, the motivation of construction industry employers in providing students with “work experience” may also be questioned. curtis and lucas (2001) suggest that students represent a source of “cheap labour” for some employers, who may not always have the students’ best interests in mind. for example, taylor (1998) found that, although students may initially be contracted to undertake work hours that do not conflict with university commitments, often employers subsequently place students under pressure to work hours that do interfere with their study. such behaviour is short-sighted and may pose a further threat to students’ well-being. the mbi-ss and uwes-s have now been tested in an australian student population and the validity and reliability of both measures have been demonstrated. it is now imperative that further research be conducted to examine the extent to which students’ involvement in paid work impacts directly upon their burnout and engagement with university life and impacts indirectly upon their educational outcomes. the results of this future research would identify the extent to which students suffer as a result of over-work arising as a result of combining paid work with study. australian universities need to recognise that paid work is a reality for students and that involvement in paid work is unlikely to recede due to the economic factors impacting upon the cost of undertaking higher education. however, greater cooperation between universities and industry may be needed in the future to better protect students of the built environment sciences from any ill-effects arising as a result of overwork and to ensure that educational outcomes are not sacrificed. this may involve the development of work-based learning models by which the educational benefits derived from students’ part-time work are monitored and assessed and linkages between theory (learned at university) and industry practice are made explicit. conclusions at present, little is known about construction students’ experiences at the interface between university and paid work. the results of this study suggest that students enrolled in the bpc degree course in one australian university engage in paid work to at least the same extent as they spend in university activities and that, as a result of paid work, they find it difficult to engage in independent or research-based learning activities. it is possible that the extensive hours spent in paid employment result in burnout and a disengagement from university life. previously used measures of student burnout and engagement were tested in this study and found to be valid and reliable in the australian student sample. this being the case, research is now focused on testing a multivariate model and assessing the linkages between work hours, work-study conflict and student burnout and engagement. in this study academic outcomes were not evaluated because the questionnaire was completed anonymously. future studies should also investigate the impact of the combined workload of paid work and university study on work-study conflict, burnout/ engagement and academic outcomes. references abouserie, r. 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(2000), ‘pay as you learn: student employment and academic progress’, education and training, vol.42, pp.129-134. introduction architectural firms: workforce, business strategy and performance adedapo adewunmi oluwatayo, (covenant university, nigeria) dolapo amole, (obafemi awolowo university, ile-ife, osun state, nigeria) abstract the intent of this research was to investigate the relationship between the workforce, business strategy and performance of architectural firms. data was collected from 92 firms randomly selected from the cities where architectural firms were most concentrated in nigeria using questionnaires. hierarchical regression analysis was carried out to investigate the direct and indirect impacts of the workforce of architectural firms on their performance. the findings confirm the significant positive impact. with business strategy controlled, the specific characteristics of the workforce and its management which influenced performance were the number of architects, the work structure, and the age and experience of the principal partners. the impact of the number of nonarchitecture professionals and staff participation in decisionmaking on performance was moderated by the business strategy adopted by the firms. the results suggest that workforce characteristics are more important than the management of the workforce in determining performance of architectural firms. this is contrary to the results of previous studies which suggest higher importance of the management. this probably indicates the peculiarity of architectural firm as a professional service firm in the construction industry. keywords: workforce, performance, business strategy, architectural firms, professional service firms introduction the architectural firm is the first choice of most newly-graduated architects. sagada (2002), schwennsen, (2004) and white (2005) however noted that architectural firms are not performing well. an explanation for this failure could be that the fate of the firm depends on the economy as a whole. phua (2006) also noted that performance of firms depend on both industryand firmspecific factors. the study by hansen and wernerfelt (1989) on the relative importance of economic and organizational factors in determining the performance of organizations concluded that while the economy determines the performance of industries and their structure, the unique attributes of a firm are important determinants of its performance relative to other firms within the same industry. an important issue in the research on the survival and success of firms is the resources and capabilities of the firm because their effects on the performance of firms (bainey and hesterly, 1999). the explanation given by bainey and hesterly (1999), for the heterogeneity of performance within a single industry builds on a variety of research traditions in organizational theory, which focus on the attributes of the firm and has come to be known as the resource-based view of the firm a term first coined by birger wernerfelt in 1984. bharadwaj (2000) noted that proponents of the resource-based view generally tend to define resources broadly, to include assets, knowledge, capabilities, and organizational processes. grant (1991) however differentiated between resources and capabilities noting that resources can be financial capital, physical assets, reputation, brand image, technology, and personnelbased resources (as training and expertise of individuals involved), while capabilities include functional and cross-functional capabilities which are rooted in processes and business australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 22 routines. several studies have investigated different resources and capabilities of the firms and how they affect the performances of those firms. these studies may however not represent the scenario in professional service firms whose primary assets are the highly educated workforce and whose outputs are intangible (ettinger, 2009). in fact, the workforces of professional service firms are the critical assets because of the direct interaction of consultants with clients (ettinger, 2009) and are thus a major source of competitive advantage (rose and kumar, 2006). greenwood et al. (2005); in the attempt to explain the determinants of performance of professional service firms; also suggested that human capital is a professional service firm’s most important resource. the implication of this as noted by greenwood et al (2005) is that the loss of professionals (senior professional in particular) may hamper relationships with clients. workforce, as used in this study is a composition of the knowledge, skill and experience of staff in an organization (maister, 1993). it is sometimes defined as human capital or human resource as they are factors of production in organizations. scholars described the workforce as involving a mix of talents that are elusive and difficult to imitate (richard, 2000). richard further noted that human resources allow firms to succeed by giving them the skills needed to adapt products and services to market needs and meet competitive challenges. the resource-based view not only considers the resources but the context within which the resources are embedded (oliver, 1997). such contexts include the strategy, structure, and environment within which the resources are embedded. ginsberg (1994) described strategy as an important context, with wright mcmahan and mcwilliams (1993) asserting that the resource-based view emphasizes the link between the internal resources of the firm, its strategy and its performance. scholars also argue that resources and strategy interact to produce positive returns (hitt, et al, 2001). in addition, hofer and schendel(1978) suggested that at the business level, distinctive competencies and competitive advantages are the most important components of strategy in this regard. this study is thus based on the notion that the workforce characteristics and management determine the performance of a firm and that this relationship is moderated by the strategies which the firm adopts. although this idea has been investigated in many firms, it appears that it has not been examined in professional firms, especially architectural firms. various studies on professional service firms had focused on accounting, law, and management consulting firms (alvesson, 1995; lowendahl, 2000). blua (1984) however noted that the architectural profession is unique. very little literature also exists on the workforce of architectural firms in developing countries and how they influence the performance of the firms. the few studies carried out on the workforce in developing countries include those for sri-lankan (rameezdeen and ramanchandra, 2008; and ganesan, 1994); vietnam (luu, kim, cao and park, 2008) and the malaysian (chan, 2009) construction industry. none of these studies have addressed the professional workforce of the architectural firms. in the light of the resolve of the government of nigeria to diversify the economy of nigeria, a report by nathan associates (2009) identified professional services as a viable measure. this is in the light of the increasing contribution of services to the gross national product of the country. however, there is anecdotal evidence that architectural firms are not doing well. as noted earlier, the resource-based view identified resources, in this case the workforce, as means of building competitive advantage and improving profitability. consequently, we examine the validity of this idea in the context of architectural firms in nigeria. our aim is to investigate the effect of the workforce as well as the interaction of the workforce with the strategy on the performance of architectural firms. we thus addressed four questions. first, to which extent do workforce characteristics and management directly affect performance of the firms. second, which aspects of the workforce characteristics and management are the core competences which affect performance of the firms? third, how does the strategy adopted by the firms influence their performance and fourth, what is the australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 23 relationship between the characteristics and management of the workforce of the firms, their performances and the strategies they adopt? we see this study as very valuable in three ways. first, we empirically identify the aspects of the workforce characteristics and management of the architectural firm which influence its performance. second, we identify the strategies that are associated with higher performance and third, we empirically examine how the relationship between characteristics and management of the workforce of the firms and their performance is moderated by the strategy the firm adopts. the resourcebased view suggests that competitive advantage results from the link between resources, strategy and performance. this study thus argues that the workforce of an architectural firm is a resource, which influences the performance of architectural firms, moderated by the business strategies of the firms. workforce of architectural firm as a resource the resource-based view of the firm states that firms can develop sustained competitive advantage by creating value in a way that is rare and difficult for competitors to imitate (wernerfelt, 1984). this view emphasizes the link between the internal resources of the firm, its strategy and performance. as noted earlier, grant (1991) expanded resources of an organization from its original description as dynamic capabilities to include tangible, intangible and personnel-based resources. acedo et al. (2006) noted that since the name was given to the resource-based view by wernerfelt, in 1984, the approach has been extended to many fields including human resources (lado and wilson, 1994). greenwood et al (2005) defines professional service firm as those whose primary assets are a highly educated (professional) workforce and whose outputs are intangible services encoded with complex knowledge. the major resources of these firms are expertise, knowledge and experience of their professionals since they have very little physical resources (maister, 1993). this is because, as lowendahl (1997), noted the relationship with clients of professional service firms is interactive. this suggests that the firms are highly dependent on their workforce as they have to convince clients of their competencies, which is highly resident in their workforce. this makes it necessary for the professional service firms to attract and retain qualified personnel (kärreman et al.2002) as they embody, operate and translate the knowledge which results in the firms’ output. malhotra, morris and hinings (2006) in their study of variations in organizational forms of accounting and law firms as well as cliff et al. (2006) in their study of start-up law firms found that the dependency of the professional service firms on their workforce made them differ from other organizations. this is because while cliff et al found organizational forms of professional service firms differ from those of other firms, based on their workforce; malhotra et al. found an emergence of the p2 (professional partnership) archetype which they concluded is a response to market and institutional pressures. in addition, the workforce of the professional service firms is the basis of the firm’s relationships. in view of the dependencies, greenwood et al. (2005) in their study of the organizational determinants of performance found that workforce dependency influence the performance of professional service firms. with the professional service firm like the architectural firm, personnel-based resources or the workforce are critical (greenwood et al. 2005). greenwood et al found that in addition to other factors, the reputation of professional service firms, which is dependent on the workforce of the firms, had significant influence on the performance of the firms. workforce in this context is defined as the pool of human capital in direct employment relationship with the firms. this workforce has been described in literature as consisting of knowledge, skills and abilities of australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 24 organizational members (mckelvey, 1983). this is a further classification of flamholtz and lacey (1981) who simply defined the workforce as the skill of human beings in the organization. the workforce is described as a resource because it creates value for the firm, it is rare, inimitable, and non-substitutable (wright, et al, 1993). with the architectural firm, the workforce includes both the staff and the owner(s), or principal(s), who is often directly involved in the dayto-day tasks of the firms. this is particularly so for the architecture firm because the firms are always hired for their expertise and skills which enables them to produce an outcome that the client can use (jones et al.1998). this expertise and skill reside in the workforce because the professional generates the talents and capabilities required for the services offered by the firms. in particular, tasks in the architecture firm involve individual expertise used to solve client’s problems. brown et al. (2010) described architectural firms as creative organizations in which skilled professional turn imaginative ideas into disciplined practices and practices into profit. this probably highlights the importance of the workforce in architectural firms with brown et al further noting that firms of architects rely on the expertise of their staff in order to trade sell a capacity to produce. this goes further to confirm the statement by winch and schneider (1993) that the assets of an architectural practice are its people. jones and lichtenstein (2000) also asserted that design is the architectural firm’s preeminent skill and this is resident in the workforce of the firms. with the architectural firm as a professional service firm however, an important principle is that the client always comes first, necessitating closer owner-client personal relationship. for this reason, professional service firms are generally privately owned (maister 1993). the implication is that the owner/ principal of an architectural firm is mostly a part of the workforce. these characteristics set the architectural firm apart and suggest the need to study the relationship between workforce, strategy and performance in the context of architectural firms as they cannot be assumed to be like other professional service firms. dewan and kraemer (2000) in their studies in developing countries suggested that cultural, socio-economic and regulatory environment may be responsible for differences in findings on information technology (it) in organizations between developed and developing countries. in fact, austin (1990) noted that results of management of organizations in developed economies may not be applicable to a developing country like nigeria for these reasons. this study thus attempts to investigate the relationship between workforce, strategy and performance of architectural firms in the context of a developing country (in this study, nigeria) to provide the true picture of workforce, strategy and performance in a typical developing country. this may define the limits of generalization of previous studies. within the construction firm, ness (2010) also conceptualized people as an asset, noting that they a means to an end in terms of their contribution to the profitability of the firm. different aspects of the workforce have been studied in the construction industry. these include employee participation (coffey and langford, 1998); characteristics of owners, (kim and arditi 2010; fraser, 2000); employment mode (druker and croucher, 2000; jayawardane and gunawardena, 1998); and employee project deployment practices (raiden et al. 2008). lu and sexton (2006) also investigated that the human capital of small construction knowledgeintensive professional service firms as embodiment of their capability to innovate. wright and mcmahan (1992) further in their theoretical paper suggested that the larger human capital pool determines the organization’s success. these authors suggest that the workforce would be more likely to have impact on performance. researchers like reich (1991); and ulrich and lake (1990) have also argued that traditional sources of competitive advantage related to australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 25 markets, financial capital, and scale economies have been weakened by globalization. thus, the workforce may be the ultimate influence on the performance of the firm. workforce resource and performance of firms there have been several studies linking the characteristics of the workforce as a resource to firm performance. many of these studies have been based on the resource-based view of organizational studies. using this view, studies have focused on workforce characteristics or workforce management. some characteristics of the workforce were found to influence the performance of firms in previous studies. for example, hitts et al (2001) investigated human capital in terms of the number, quality of education and total experience of the partners. they found that the effect of human capital on performance is fist negative, but turns positive with higher levels of human capital. the study of professional service firm performance by greenwood et al (2005) however revealed a negative correlation between number of professionals and the performance of the firms. another characteristics of the workforce investigated in literature is gender, which was also found to influence performance of firms in a research on racial diversity by richard (2000). richard however found that the impact of diversity on performance had to do with context and was not in any way direct. daily, certo and dalton (2000) also assert that managers of organizations are a unique organization resource. the characteristics of the managers that have been suggested to influence performance include education, and experience (hitt et al 2001; and pennings et al. 1998). with the architectural firm as a professional service firm, the partners are the most important resource. hitt et al, (2001) explained why this is so. they noted that relationships with current and potential clients and hence social capital of the firms are built by the partners. in addition, partners in a firm have the largest stakes in using the firm’s resources to the greatest advantage. in fact, li et al. (2009) in their study of competency factors in real estate firms found that management competences contribute to competitiveness. this suggests the need to study the characteristics of the principals such as their experiences and education, which may determine their efficiency in task performance and thus the performance of architectural firms. some studies have been carried out on the effect of workforce on performance of firms in the construction industry. examples include the study by fraser (2000) and kim and arditi (2010) which focused on the effect of the characteristics of owners of construction firms on performance. characteristics of the owners of construction firms which have been found to influence performance are educational level, involvement in continuing education, number of firms worked for, membership of professional bodies and leadership style (fraser, 2000). very few studies in the construction industry and particularly architectural firms have however linked the entire professional workforce to the performance of the firms. the afore-mentioned studies focused on workforce characteristics. however, several researchers concluded that it is the management of human capital, rather than the physical capital that is the most important determination of firm performance (patterson et al. 1998). these human resource practices are defined as the organizational activities carried out to manage the workforce. a significant aspect of the firm’s resources has been the human resources management practices. previous researchers found a positive relationship between human resource management practices strategy and performance (rose and kumar, 2006; huselid, 1995). the works of kleiner et al. (1987); russell et al. (1985); terpstra and rozell (1993); u.s. department of labor (1993) for example, provided empirical evidence that human resource practices directly influence performance. human resource practices that were found to influence performance of organizations include staff selection standards (ichniowski et al. 1993; macduffie, 1995); staffing techniques (huselid, 1995); rewards and incentives (macduffie, 1995; youndt et al. 1996) and employee participation in decision-making (arthur, 1994; ichniowski et australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 26 al, 1993) and job specialization (ichniowski et al, 1993). human resource practices in this study is thus defined in terms of the criteria for staff selection, mode of staffing, means of compensation, task specialization and level of employee participation in decision-making. arthur (1992, 1994) carried out his study in manufacturing organizations. he found that human resource practices which focused on enhancing employee commitment (e.g., decentralized decision making, comprehensive training, salaried compensation, employee participation) were related to higher performance. he found however, that human resource practices that focused on control, efficiency, and the reduction of employee skills and discretion were associated with increased staff turnover and poorer performance. the finding of huselid (1995) was similar. in the empirical study of human resources huselid found that investments in human resource (hr) activities such as incentive compensation, selective staffing techniques, and employee participation resulted in lower turnover, greater productivity, and increased organizational performance through their impact on employee skill development and motivation. for the architectural firm, larsen (2005) also noted that personnel management is a criterion differentiating successful architectural firms from their less successful counterpart. workforce characteristics in this paper is thus defined in terms of the number, qualifications, designation, and gender of staff as well as the age, gender, education, registration with professional body, leadership style and experience of the principal. this paper builds on previous studies by investigating these workforce characteristics, including characteristics of firm’s principals in addition to human resource practices of architectural firms. carton and hofer (2006) defined performance as a contextual concept associated with the phenomenon being studied. they further argued that measures used to represent performance are selected based upon the circumstances of the organization being observed. the dimensions of performance measured in literature include efficiency, growth, profit, size, liquidity; success, market share, and leverage. this study defines the performance of the architectural firms in terms of their profitability. workforce, business strategy and the performance of firms the resourcebased view of the firm emphasizes the link between the internal resources of the firm, its strategy and its performance (wright et al 1993). this is one important context that researchers agreed should be considered when studying resources of a firm using the resourcebased view (miller and shamsie, 1996; ginsberg, 1994). in fact, an important aspect of the definition of resources given by barney (1991) is that they enable the firm to conceive and implement strategies that improve efficiency and effectiveness (schoenecker and cooper 1998). this suggests that strategy may interact with workforce as a resource to influence performance. hofer et al (1978) opined that at the business level, distinctive competencies and competitive advantages are the most important components of strategy. business-level strategy constitutes one factor that warrants consideration. the study by cheah et al. (2007) focusing on large construction firms found that the strategies which directly influence revenue and profit growth are market and product differentiation, which are related to the business strategy that a firms adopt. a similar study by houthoofd (2009) found that performance of firms varied with the construction market served. the business level strategy that we seek to address is defined in terms of the actions taken by firms to select market and generate new jobs (wang and yang 2000). these include the means of building clientele, the client types; the project types handled and criteria for project selection. various classifications of the business strategies exist (miles and snow 1978; sherer 1995, lowendahl, 2000 and greenwood, et al, 2005). researchers have found a relationship between the previous strategy types and performance of firms. using the strategy types derives by miles and snow (1978), conant, et al (1990) studies health maintenance organizations and australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 27 found that defenders, prospectors and analyzers performed equally well and outperformed reactors. building on the works of conant et al. (1993) studied catalogue and mail order houses and found a similar result, although in their study, prospectors were best performers, followed by analyzers. with the professional service firm, becker et al. (2001) in a study of international law firms found that the more profitable firms were those with narrow specialization strategies as against firms with a diversification strategy. this agreed with the findings of david (2001) that specialization reduced the failure of consulting firms. these researchers concluded that appropriate implementation of business strategy result in better performance. lee and miller (1999) in their study of employee commitment also asserted that human capital is a vital resource in the implementation of strategy, which further influence performance. this assertion have been confirmed in the works of scholars like youndt et al (1996) who found a moderating effect of manufacturing strategy on the influence of human resource management on manufacturing firm performance. greenwood et al (2005) in the study of determinants of performance of professional service firms and hitt et al (2001) in their study of human resources, strategy and performance also confirmed the moderating effect of human the workforce on the relationship between diversification strategy and performance of law firms. very few studies have however investigated this assertion in the context of architectural firms. it is in this context that we examine the relationship between the business strategy adopted by architectural firms as firms in the construction industry and their performance. we also examine the interactions of workforce characteristics and strategy types which influence the performance of the firms. for the construction industry, katsanis and katsanis (2001) identified the following business strategies: the prestige, selective (specialization), sustenance and harvester strategies. these strategies were based on the project type, criteria for project selection, client types and means of building clients (table 1). the selective strategy nurture and develop expertise in a specific area, while the harvester strategy ‘explore and pursue” in order to remain abreast of market developments. the prestige strategy aim at high-profile projects, while the sustenance strategy lacks a coherent strategy. the relationship between these strategies and the performance of firms in the construction industry, especially architectural firms has however received little empirical support. these strategies are investigated in this study. harvester selective prestige sustenance project type determined by recent trends specialized projects high profile broad category means of building clientele public relations other professionals brand name/ past projects personal relationships/ request for projects (rfp) client types determined by prevailing conditions specialized diverse criteria for project selection booming project type determined by govern-ment legislations expertise technical complexity/ aesthetic potential availability table 1 characteristics of strategy types derived by katsanis and katsanis (2001) source: adapted from katsanis and katsanis (2001) australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 28 conceptual framework often, professional service firms are faced with the task of selecting market segments and generating new jobs (wang and yang, 2000). this is important if the firm is to remain profitable. the architectural firm in particular selects such markets and jobs based on the availability of relevant manpower. this is because different markets and jobs pose different challenges and opportunities. the conceptual framework adopted by this study, as presented in figure 1, proposes that workforce influence profitability performance and that this impact is moderated by a firm’s business strategy. as mentioned earlier, the workforce of a professional service firm, like the architecture firm, is a vital resource which contributes to the competitive advantage of the firm. in addition, workforce as a resource facilitates the implementation of strategies (hitt et al, 2001). figure i suggest a direct influence of the workforce on the performance of the firms. the study suggests that business strategy may influence performance directly, and in addition interact with workforce to further influence performance. figure 1 workforce, business strategy and performance staff characteristics principal’s characteristics workforce human resource practices business strategy harvester selective prestige sustenance architectural firm performance profitability australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 29 method data collection instrument the aim of this study is to investigate the effect of the workforce as well as the interaction of the workforce and strategy on the performance of architectural firms. we therefore designed a close-ended selfadministered questionnaire for data collection. we administered the questionnaire personally and with the help of research assistants, after unsuccessful attempts at using electronic mails. the chosen informants in each firm were individuals intimately involved in the operation of the specific firms; in most cases the principal, partners, or senior associates as in recent studies by hitt et al (2001) and brock et al (2006). the firms were chosen from the list of architectural firms that were registered to practice in nigeria (arcon, 2006). these firms were core architectural firms which in some cases have other building industry professionals as employees. they were however not registered with the architects registration council of nigeria as consortiums. in the first section of the questionnaire, we gathered information on the characteristics of the firms such as size, employee and principal characteristics, and perception of firm’s performance in terms of profit. in the second section we gathered information on the actions taken by firms to select market and generate new jobs which constitute business strategy. we initially conducted a pilot test of five architectural firms to improve the questionnaire. measurements the works of richard (2000) on racial diversity, business and performance used the gender of the workforce as control variable. similarly, youndt et al (1996) in a study of workforce management, strategy and performance used the size of the workforce as control variable. these researchers attempted to isolate the effects of these characteristics because they were believed to influence performance. we however investigate the direct influence of workforce characteristics on the performance of architectural firms. the workforce characteristics variables which we used in the questionnaire were the number, gender qualifications and designation of professionals (hitt et al, 2001); while the human resource management strategies examined were the staff selection criteria, staffing techniques, rewards and incentives, employee participation in decision making and job specialization as earlier discussed. business strategy type was measured using the responses of the principals to questions on their client types, means of attracting clients, project type as well as criteria for project selection taking a cue from the work of katsanis and katsanis (2001). data on profitability was not available in the architectural firms. tax returns would have shown this but data on tax returns were not reliable. information on assets, revenues, investments, market share, actual profit, and other accounting measures were only known to the principals who were reluctant to divulge such information. we were also not able to access the audited accounts of the firms. however, the principals were willing to indicate their perception of profit on a scale. dess, and robinson (1984) also confirmed that objective measures of performance are often not available in privately-held firms, noting that subjective measures, obtained from top management teams are often used. in fact wall et al. (2004) found that such measures are as valid as the objective measures. we therefore operationalized the performance of the firms as perception of the firms on the profit made in the previous year since we had to depend on the memory of the principals (carton and hofer, 2006). sample of the study the sampling frame comprised architectural firms registered with the architects registration council of nigeria (arcon, 2006). we used random sampling methods to select the firms in the study, which was the unit of data collection and analysis. we adopted the mode of determination of sample size for a finite population developed by frankfort-nachimias and australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 30 nachimias (1992). in this study, we determined how large the sample of architectural firms was assuming 95% confidence that the probable error of using a sample rather than surveying the whole population did not exceed 0.05. with a population of 341 registered architectural firms, the calculation gave a sample size of 157, which were sampled. the questionnaires were administered between february and may 2008. a total of 92 questionnaires were returned duly completed, giving a response rate of 59%. the sample size was similar to those in previous studies (hitt et al, 2000; brock et al, 2006) analysis first, we reduced the workforce and human resource management variables using the principal component method of analysis. this was carried out to assess the convergence and divergence among the workforce and human resource management variables in order to determine the underlying dimensions. this reduced the variables into non correlated variables as can be seen in table 2. second, to identify groups of architectural firms which had some degree of commonality among strategic views, we carried out a two-step cluster analysis (arthur, 1994) followed by analysis of variance to determine the differences between clusters. the different types of strategy and their distinguishing features were thus identified. third, as in similar studies (youndt et al, 1996; richard, 2000; hitt et al, 2001) we carried out hierarchical regression analysis in order to isolate the main effects of the workforce characteristics and human resource management systems on performance and to independently assess how the business strategy adopted by the firms moderated the relationship between workforce and performance. with the hierarchical regression, the direct effect of business strategy was first measured, and then the direct effect of the workforce, before the interaction effect of the workforce and strategy was measured. results in this section we present the results of the study. the result of the principal component analysis is first presented, followed by the results of the cluster analysis. this clearly defines the workforce factors and the business strategy types which are further investigated in relation to the performance of the firms. the principal component analysis revealed that some of the variables of workforce and human resource management converged; revealing five underlying dimensions (appendixes 1 and 2). these were the architects and work structure; the number of professional employees that were not architects (such as builders, quantity surveyors and engineers); staff participation in decision making; skill flexibility; and age and experience of principal. to identify the strategy types adopted by the architecture firms, we carried out two-step cluster analysis, using the log-likelihood distances between groups, to identify groups of architectural firms that shared some degree of commonality among strategic views. the confidence level was set at 95%. a 4clusters solution was obtained. of the 92 cases, 33 (36%) firms were assigned to the first cluster, 30 (32%) firms to the second cluster, 19 (21%) firms to the third cluster, and 10 (11%) firms to the fourth. the discriminant analysis classification reveals that 82% of the firms were determined to be correctly classified through cluster analysis. this suggests that the four cluster solution was internally valid, thus supporting the resulting taxonomy of architectural firms based on their business strategy. we found significant differences among the clusters for some variable, using analysis of variance. the variables which differentiated the clusters were target of local clients (individual and organization); business development through family and friends, public relation strategies, other professionals and previous projects; and variances of projects in the firm’s portfolio. the first cluster of firms consisted of firms that do not appear to have specialized in any project type. australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 31 the cluster was further characterized by the strongest tendency to build clientele through family and friends and was similar to the sustenance strategy of kastanis and kastanis (2001). the second cluster, characterized by the highest number of educational, transportation, healthcare, civic and hospitality projects as well as the highest tendency to build clientele by public relations, resembled the harvester strategy. these projects are capital intensive projects, the availability of which may have been influenced by the recent focus of the government of nigeria on the development of these sectors of the economy. resembling the selective strategy, the third cluster obtained was characterized by apparent specialization in commercial projects and the least interest in other project types. the last cluster was characterized by focus on hospitality, religious and healthcare projects. these types of projects have high aesthetics potentials; thus this cluster could be seen as resembling the prestige strategy of kastanis and kastanis. analysis of variance was carried out to examine the influence of the business strategy adopted by the firms on the performance of the firms. the results show that there were significant mean differences in business strategy in relation to the performance of the firms (f = 2.810, p < 0.05). the proportion of variance in performance accounted for by the business strategies was 1.4%. the post hoc multiple comparison showed that the firms adopting the selective strategy were more profitable than firms adopting sustenance (mean difference = 0.31, standard error = 0.13, p < 0.05); harvester (mean difference = 0.095, s.e = 0.13, p < 0.05); and prestige (mean difference = 0.34, s.e = 0.18, p < 0.05) strategies. the result also show firms adopting the harvester strategy performed better than those adopting the sustenance (mean difference = 0.22, s.e = 0.11, p < 0.05) and prestige (mean difference = 0.24, s.e = 0.17, p < 0.05). in addition, the firms adopting the prestige (mean difference = 0.03, s.e = 0.17, p < 0.05) strategy were outperformed by the firms adopting the sustenance strategy. this suggests that the highest performers were firms that adopted the selective strategy while the least performers were the firms that adopted the prestige strategy (figure 2). prestigeselectiveharvestersustenance business strategy 1.90 1.80 1.70 1.60 1.50 m e a n p e rf o rm a n c e figure 2: strategy and performance figure 2 strategy and performance australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 32 the correlation of the variables in the study is presented in table 2. hierarchical regression analysis was used to investigate the relationship between workforce, strategy and performance of the firms, in line with the work of richard (2000). business strategy variables were entered first to control for any effect that business strategy may have on workforce characteristics and human resource management. a direct relationship will be indicated by significant effects. the workforce characteristics and human resource management was entered second to test direct association between workforce characteristic and managements, and the performance of the firms. this also eliminated the main effect of workforce prior to examining potential business strategy/ workforce interaction effects. the interaction between workforce and strategy was entered in the third step. significant effect here would indicate that the relationship between workforce and performance is moderated by the business strategy. table 3 displays the results of the hierarchical regression analysis for performance. the results show that with the business strategy controlled, the workforce was significantly related to performance (r2 change, = 0.277, p < 0.01), accounting for 28% of the variance in performance of the firms. specifically, architects and work structure (wald =8.697, p = 0.003); and age and experience of principal (wald =4.030, p = 0.045) significantly influenced performance. in addition, the workforcebusiness strategy interaction accounted for significant incremental variance (r2 change = 0.091, p < 0 .05), resulting in a further 9% differences in performance. this result suggests that business strategy does in fact moderate the workforce-performance relationship. business strategy interacted through the number of non architecture professionals (wald = -6.028, p = 0.014) and staff participation in decision making (wald = -2.501, p = 0.077) to influence performance. perception of success architects and work structure number of nonarchitecture professionals staff participation in decision making skill flexibility age and experience of principal performance 1 architects and work structure .24(**) 1 number of nonarchitecture professionals -.16 0 1 staff participation in decision making .22(*) 0 0 1 skill flexibility -.13 0 0 0 1 age and experience of principal .19 0 0 0 0 1 table 2 correlations ** correlation is significant at the 0.01 level (2-tailed), * correlation is significant at the 0.05 level (2-tailed) figure 3 shows all high performers except those adopting the sustenance strategy had lower number of non-architecture professionals than their low performing counterparts. however, all high performers except those adopting the harvester strategies exhibited higher staff participation in decision making than their low performing counterparts. this probably suggest that adoption of the sustenance strategy coupled with high number of non-architecture professionals resulted in high performance while staff participation in decision making coupled with the prestige, selective or sustenance strategy also resulted in higher performance. the results further suggest that proper alignment of workforce with business strategy results in maximum performance of architectural firms. australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 33 variables performance b step 1 step 2 step 3 business strategy business strategy 1.252 1.328 0.406 workforce architects and work structure 8.697** 3.580 number of non-architecture professionals 0.411 4.806* staff participation in decision making 1.812 4.198* skill flexibility 2.518 0.002 age and experience of principal 4.030* 0.280 strategy/ workforce interaction business strategy x architects and work structure 0.094 business strategy x number of non-architecture professionals 6.028* business strategy x staff participation in decision making 3.125 + business strategy x skill flexibility 0.546 business strategy x age and experience of principal 0.229 r2 change 0.277** 0.091* r2 0.015 0.292** 0.383* table 3 results of simultaneous hierarchical regression analysis for performance * p < .05, two-tailed test, ** p < .01, two-tailed test, + p < .10, two-tailed test discussion the purpose of this study was to deepen insight into the relationship between workforce of the architectural firm as a professional service firm and the performance of the firm. the study confirms the assertion of ness (2010) that people are an asset in an organization. the results reveal the workforce characteristics which influence the performance of architectural firms as well as the dimensions of workforce characteristics that interact with strategy to further influence performance. a positive relationship between workforce and the performance of the firms was observed as in previous literature (richard, 2000; hitt et al, 2001). this supports the resourcebased view which notes that the workforce is a resource of an organization and support recent arguments by these scholars on the importance of the workforce to the performance of firms. it is amazing that even with the business strategy controlled, workforce accounted for a notable 27.7% of the variance in performance of architectural firms. this is high compared with the 3.6% variance found in the study of workforce of large law firms by hitt et al (2001) and 3.8% variance in the study of workforce management of manufacturing firms by youndt et al (1996). this suggests that the workforce is an area to watch if the architectural firm is to remain profitable. the study confirms that expertise of a firm in the construction industry is essential to its success (xia, chan, and yeung, 2009). as mentioned earlier, this expertise resides in the workforce in the case of the architectural firm. it is interesting to note that although patterson et al (1998) asserted that the management of the workforce was the most important determinant of firm performance, none of the workforce management practices had direct influence of the performance of architectural firms. only workforce characteristics had direct influence of the performance of the firms. the workforce characteristics that accounted for the 27.7% variance in performance were the architects (number, qualifications, designation, professional registration and gender) and the age and experience of principal partners. australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 34 contrary to the findings of brock et al (2006), the number of professionals (in this case, architects) is a significant determinant of performance. the results suggest that firms with more architects with higher qualifications and placed on higher designations perform better. this is contrary to the findings of greenwood et al (2005) which found that larger professional service firms were poor performers. this probably confirms that architectural firms are different from other professional service firms. p r e s tig e s tr a te g y s e le c tiv e s tr a te g y h a r v e s te r s tr a te g y s u s te n a n c e s tr a te g y b u s in e s s s tr a te g ie s high performerslow performers performance 1.00 0.75 0.50 0.25 0.00 -0.25 -0.50 m e a n 1.00 0.75 0.50 0.25 0.00 -0.25 -0.50 m e a n 1.00 0.75 0.50 0.25 0.00 -0.25 -0.50 m e a n 1.00 0.75 0.50 0.25 0.00 -0.25 -0.50 m e a n number of other professionals staff participation in decision making figure 3: interaction results figure 3 interaction results australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 35 the results also confirm the findings of hitt et al (2001) and fraser (2000) that the experience of partners positively influence performance. contrary to the findings of fraser (2000) however, the education level of the principal partners did not influence the performance of the firms, although the education level of the staff mattered. similarly, the leadership style of the principal partners did not influence the performance of the architectural firms. in addition however, the work structure of the firm and the ages of the principals were significant determinants of the performance of the firms. the results also suggest that firms with task specialization as well as experienced principals performed better. this probably implies that professional service firms seeking to improve performance should pay attention to the skilled professionals within the firms as well as their job design (arthur, 1994). business strategy was also found to influence the performance of the firm, although the level of direct influence was low. the results confirm the findings of li et al (2009) that market coverage is indeed essential to the performance of firms in the construction industry. the findings suggests that the selective strategy, probably due to its narrow focus which only necessitates the improvement of efficiency of existing operations (kastanis, 2001) outperformed the three other business strategy types. this confirms the results of david (2001) and becker et al (2001) who found that professional service firms with narrow focus were best performers. it is not clear why the selective strategy outperformed the harvester strategy, which handled projects which were mostly carried out by the government including educational, transportation, health, civil, and hospitality projects and would have been expected to be best performers in line with the findings of houthoofd (2009). an explanation for the firms adopting the harvester strategy coming next to those with the selective strategy in performance may be that firms with the harvester strategy strive for early entrance into new market segments, exposing them to risks they may be unprepared for. in addition firms with the harvester strategy probably outperform those with the sustenance and prestige strategies because they pursue the most active market segment. the sustenance strategy also probably outperformed the prestige strategy because they accepted jobs as they come to keep the firm busy as against specific project stance taken by the firms with prestige strategy irrespective of the availability of such project. the result suggest that the impact of the workforce on the performance of the firms is both direct and indirect, confirming the work of hitt et al (2001). this is because our findings on the interaction of strategy with workforce characteristics to influence performance show that the two workforce characteristics which interacted with strategy to further influence performance were the number of other professionals and staff participation in decision-making. although coffey and langford (1998) found a significant potential for participation in the construction industry, it should be discouraged in firms with the harvester strategy. this is because the results suggest that staff participation in decision-making is detrimental to the performance of firms with the harvester strategy, however, in line with the findings of arthur (1992, 1994) and huselid (1995), it enhances the performance of firms with the selective, prestige and sustenance strategies. this probably suggests that the contributions of staff may be necessary when an architectural firm competes by specialization, prestige or simply industry tradition. however, such contributions may constitute a draw-back for firms where the main objective is to explore and pursue and a chance for staff contribution may slow the process down or abort the process completely. a high number of non-architecture professionals increased the performance of firms which competed using broad actions based on established industry tradition (sustenance strategy) but was detrimental to the performance of firms with the harvester, selective and prestige strategies. worthy of note is the fact that the effect of the influence of the interaction of business strategy with the workforce on performance of the firms was higher than the direct influence of business australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 36 strategy. this probably confirms the assertion by hitt et al (2001) that without considering the workforce in the implementation of strategy, the result may be failure. it is interesting to note that although information technology (it) has been identified as a resource in literature (bharadwaj, 2000); the use of it as a staff selection criterion (in this context autocad and it literacy) was not significantly related to the performance of the firms. in addition, flexibility in terms of the staff being allowed to express personal styles and initiatives was also not significantly related to the performance of the firms. it thus appears that skill flexibility, either in terms of the importance of it in the selection of staff or possession of non-architecture qualification by the principal did not contribute in any way to the performance of the firms. the staffing techniques and the means of compensation of staff did not influence the performance of the firms. this probably suggests that although the influence may be indirect, the context is not related to the business strategy of the firms. the findings confirm the conceptual model of the study. the conceptual model first suggested a direct influence of the workforce on the performance of the firms. this study found that the workforce directly influence 28% of the variance in performance of the firms. the conceptual model also suggested that business strategy may influence performance directly, and in addition interact with workforce to further influence performance. the study found that there was a direct influence of the business strategy is not so high (accounting for resulting in 1.4% of the variance in performance), when in interaction with workforce, the influence of workforce on performance was further increased by 9%. conclusion the study aimed at investigating the effect of workforce and strategy on performance of architectural firms. the results show that the workforce of architectural firms is indeed a resource explaining 28% of the variance in the profitability of the firms. the resource-based view suggest that human resources should be integrated into the formulation of strategy. the use of the resource-based view in examining the potential of the workforce of architectural firms in implementing the business strategy of the firms thus proved useful in this study. this is because the results show that the right workforce with the right workforce characteristics and human resource practice led to a further improvement of 9% in performance. this findings support recent arguments on the impact of workforce on performance. this study thus provides empirical support for the values of firm workforce resources and the use of the workforce in the implementation of business strategy. this is because, in line with the conceptual model, the findings of the study suggest that there is indeed a direct influence of the workforce on the performance of the firms and an additional impact on the performance of the firms from the interaction of the workforce with business strategy. one implication of these findings is that it adds consistent empirical support for the significant influence of the workforce as a resource on the performance of firms, suggesting that the resource-based view of human resources is credible. thus, architectural firms should view their workforce as a resource and an asset, which should be invested in. this is in view of their immense contribution to the firms’ profitability. the professional body also needs to set standards of experience required of aspiring principal partners to improve the outlook of the profession in terms of performance. in addition, the results suggest that the employment of nonarchitecture professionals may be absolutely unnecessary except when the firm is adopting a sustenance strategy. in terms of the management of the workforce, an implication of the findings is that architectural firms need to be more liberal in permitting staff participation in decision making if they are to be more profitable, except they are adopting the harvester strategy. australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 37 a major limitation in this study was the unavailability of data to measure profitability. however, since the study by wall et al, (2004) shows that the perception of managers were as valid as the objective measures, it is believed that the results of this study are also valid. future research may however consider more objective measures of profitability. there is need for further research to better understand the reasons for the outcomes. the study only examined crosssectional performance differences between architectural firms. to gain a clearer understanding, future research should consider longitudinal studies. since a firm is a complex of many strategies, there may be other strategies which moderate the relationship between workforce and performance. future studies may consider the influence of other strategies. the fit between the workforce characteristics, workforce management and performance may also be considered in further studies. in addition, other resources of the professional 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(2009) ‘identification of key competences of designbuilders i the construction market of the people’s republic of china (prc)’, construction management and economics, 27 (11), 1141-1152 youndt, mark a., snell, scott a., dean, james w. jr. and lepak, david p. (1996) ‘human resource management, manufacturing strategy, and firm performance’, the academy of management journal, 39 (4), 836-866 appendix 1: factors (workforce characteristics and human resource management) factors variables component loading architects and work structure existence of departments and work units -.612 total number of staff .877 number of architects .744 number of administrative staff .709 architects with ond/hnd .652 architects with barch/msc .689 architects who are partners .632 architects who are senior architects .508 architects who are junior architects .662 architects who are trainee architect .633 architects with other designation .572 number of male architects .705 number of female architects .612 number of male other professionals .601 number of female other professionals .660 number of male admin staff .702 number of female admin staff .553 number of non-architecture professionals number of quantity surveyors .715 number of builders .717 number of accountants .712 personnel with other qualification .536 staff participation in decision making degree of centralization .500 centralization of decision on managing projects .535 skill flexibility number of other staff .519 encouragement of staff expression of personal styles and initiatives -.611 other qualification(s) of principal .543 importance of autocad/it literacy in the selection of new staff .572 age and experience of principal architects with mnia/fnia -.540 age group of the principal partner -.504 number of years of registration of principal architect .565 australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 43 appendix 2: principal component loadings (workforce characteristics and human resource management) dimension 1 2 3 4 5 existence of departments and work units -.612 .004 .028 .016 -.126 total number of staff .877 -.065 .187 -.083 -.021 number of architects .744 -.313 .019 -.279 -.317 number of administrative staff .709 -.070 .146 -.285 -.225 architects with ond/hnd .652 .101 -.334 -.028 .203 architects with barch/msc .689 -.314 .081 .023 -.462 architects who are partners .632 -.031 -.032 -.004 -.169 architects who are senior architects .508 -.346 .099 -.295 -.218 architects who are junior architects .662 -.356 .067 -.161 -.097 architects who are trainee architect .633 .100 .008 .205 -.047 architects with other designation .572 -.197 .131 .296 .483 number of male architects .705 -.114 -.061 -.155 -.289 number of female architects .612 -.313 -.172 -.301 .035 number of male other professionals .601 .202 -.025 .217 .344 number of female other professionals .660 -.351 .199 .128 .306 number of male admin staff .702 .124 .039 .181 -.048 number of female admin staff .553 .018 .044 .192 -.142 number of quantity surveyors .294 .715 .431 -.207 -.107 number of builders .280 .717 .431 -.211 -.115 number of accountants .310 .712 .424 -.208 -.109 personnel with other qualification .215 .536 .304 -.088 .019 degree of centralization .448 .398 .500 -.181 -.102 centralization of decision on managing projects .350 .402 .535 -.212 -.059 range of number of other staff .416 .312 .366 .519 .133 encouragement of staff expression of personal styles and initiatives -.176 .131 -.290 -.611 -.243 other qualification(s) of principal .217 .095 -.007 .543 -.008 importance of autocad/it literacy in the selection of new staff .122 .023 .136 .572 .369 architects with mnia/fnia .435 .026 .026 .243 -.540 age group of the principal partner .116 -.239 .012 .485 -.504 number of years of registration of principal architect -.114 .330 -.141 -.281 .565 importance of teamwork and staff development .127 .383 -.415 -.060 .158 driving employees to achieve result -.007 .105 -.403 -.112 .301 gender equity in staff hiring -.045 .027 -.432 -.269 .010 gender equity in job allocation -.119 .105 -.365 .214 -.241 highest qualification of the principal architect in architecture .209 -.406 .237 .063 -.337 number of firms the principal have worked previously .026 .146 -.167 -.047 -.385 leadership style of principal -.235 -.001 .147 -.137 -.043 importance of design competence in the selection of new staff .181 .223 -.154 .031 .231 importance of knowledge of construction in the selection of new staff -.295 -.006 .420 .093 .286 importance of gender in the selection of new staff .347 -.165 .076 -.145 .383 importance of personality in the selection of new staff .269 -.374 .156 -.402 .175 importance of educational qualification in the selection of new staff .444 -.184 .019 .064 .336 australasian journal of construction economics and building oluwatayo, a a and amole, d (2011) ‘architectural firms: workforce, business strategy and performance’, australasian journal of construction economics and building, 11 (4) 21-44 44 dimension 1 2 3 4 5 importance of interpersonal/ managerial skills in the selection of new staff .368 -.233 .171 .115 .375 importance of other factors in the selection of new staff .023 .103 -.058 .027 .038 staff retention through improved salary -.013 .068 -.141 .106 -.079 staff retention through retention bonus -.072 .089 .085 .179 .085 staff retention through performance bonus -.177 -.095 .411 .106 -.099 staff retention through rewards and recognitions -.354 -.055 .168 .193 .145 staff retention staff development -.104 -.340 .154 .196 .028 staff retention through leadership development -.010 .006 .140 -.167 .338 staff retention through other means .032 -.046 -.053 -.108 -.126 staff organization for each project -.318 .097 -.075 -.305 -.155 specialization of public/clients relations task -.476 -.040 .208 .393 -.045 specialization of personnel management task -.235 -.204 -.092 .094 .212 specialization of working drawing task -.192 -.256 .304 .202 -.115 specialization of sourcing for jobs task -.249 -.053 .265 -.295 -.024 specialization of maintenance task -.498 .101 .239 -.044 -.040 specialization of accounts task -.475 .097 -.118 .181 -.115 specialization of transport task -.111 -.196 .205 -.104 -.106 specialization of training task .098 .061 .047 .235 -.150 specialization of design task -.305 -.140 .221 .328 -.105 specialization of modeling task .117 .042 -.043 .083 -.254 specialization of site meeting task -.449 .112 .390 .238 .074 specialization of welfare task -.256 -.139 .456 .043 .020 centralization of decision on how to get new jobs and clients .030 .182 -.416 .108 -.109 centralization of decision on collaborations with other firms .015 .272 .085 .370 -.058 centralization of decision on managing the non-design staff .284 .354 -.297 .183 .002 centralization of decision on fees to be charged for projects .442 -.250 .190 .203 .396 centralization of decision on design ideas to use for projects .190 .266 -.248 -.091 .105 number of professionals .320 .383 -.487 -.019 -.098 centralization of decision on salaries of staff .477 .312 -.281 .240 .091 number of urban planners .253 .368 -.148 .268 .027 number of architects with bsc .206 -.259 .036 -.320 .324 number of architects phd .336 -.394 .164 -.388 .297 number of architects mba .332 .054 -.281 -.040 -.090 years of experience before stating a firm -.009 .282 -.433 .122 -.126 years of experience of principal .038 -.317 .187 .291 -.458 number of engineers -.494 -.137 .472 -.372 -.002 international projects and cross-cultural adjustment of british expatriates in middle east: a qualitative investigation of influencing factors international projects and cross-cultural adjustment of british expatriates in middle east: a qualitative investigation of influencing factors ashwini konanahalli, lukumon oyedele, jason von meding, john spillane and ron coates (queen’s university belfast, united kingdom) abstract increased globalisation within the british aec (architectural, engineering and construction) sector has increased the need for companies to transfer staff to manage their overseas operations. to be able to perform abroad, expatriates must harmonise themselves to the conditions prevailing in the host country. these include getting accustomed to living, working and interacting with the host country nationals. the process is commonly referred to as ‘cross-cultural adjustment’. various factors influence the process of adjustment. in order to identify these issues, a qualitative study was undertaken, which mainly comprised of comprehensive literature review, individual interviews and focus group discussion with british expatriates working on international aec assignments in middle eastern countries. through interpretative approach, the current study aims to understand the concept of crosscultural adjustment of british expatriates based in middle east and their influencing factors. the findings suggest that success of expatriation does not entirely rest on an expatriate's ability but also on organisational support and assistance that expatriates receive prior to and during the assignment. organisational factors such as selection mechanisms, job design, training, logistical and social support, mentoring, etc., influence various facets of expatriate adjustment. striking cultural contrasts between british and arab culture both in work and non work situations also dictate the level of support required by the expatriate, suggesting that relocation to less developed, remote or politically unstable regions, demands additional support and consideration by the parent company. this study is relevant to the aec companies employing british expatriates, who need to be cognisant of the issues highlighted above to make rational and informed decisions when handling international assignments in the middle east. keywords: cross-cultural adjustment, international project management, middle east and north africa, organisational strategies, overseas aec assignments, work related factors introduction with the increase of business globalisation, international mobility is becoming a common experience for a growing number of employees sent on long term-assignments (hechanova et al., 2003). the international aec (architectural, engineering and construction) sector is no exception. the basic nature of the construction operations, along with the growing demand from emerging economies, has lead to many international aec firms expatriating constructional professionals, such as architects, consultants, managers, contractors, etc., across various units, to transfer technology (carrillo, 1994) and manage overseas operations. achieving success on these assignments is an essential issue for such companies, as it is indispensible for developmental, functional and reputational reasons (dowling et al., 1998; strohl and caliguiri, 1998; black et al., 1991; tung and miller, 1990). recent studies suggest that international organisations are increasingly struggling to manage their personnel on international assignments, particularly as it relates to assisting expatriates and their families to stay until completion of the assignment and then retaining australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 32 them for future postings (gmac, 2008). expatriation is very expensive due to associated high cost of sending and maintaining personnel overseas (hechanova et al., 2003). as a result, one of the major challenges faced by the international organisations is how to effectively use their expatriates to deliver their overseas assignments (chi and levitt, 2009). the expectation placed on an expatriate will be to perform the same set of functions that they will normally do on the domestic front but in a totally different and complex environment (yamazaki and kayes, 2005). however, the expatriate will be challenged with differences in cultural norms, regulations, routines, work cultures, institutional work practices, safety standards, etc., which can manifest themselves as added costs, delays and conflicts on these assignments (chua et al., 2003; miller & lessard, 2001 and orr, 2005). grove, (1990) and fish, (2005) appropriately suggest that expatriates need to possess the ability to deal effectively with frustration, stress, different political systems, interaction with strangers, intercultural and business dimensions. in all these aforementioned cases, cross-cultural adjustment of these personnel, posted on international assignments, therefore becomes an important issue. adjustment is defined as a state where variations or modifications become apparent in an individual to accommodate environmental demands (berry, 1992). an expatriate has to adjust to three specific aspects namely, general environment, interaction with host country nationals and work (black & stephens, 1989). cross-cultural adjustment is the primary outcome of the international assignment on the expatriate, it further influences the sense of achievement in terms of satisfaction, performance and assignment completion (sriramalu, et al., 2010). studies into international adjustment by black and his associates conceptualised it as a multidimensional concept suggesting that different antecedents may have different impacts on each of its facets (black, et al., 1991). adjustment is also one of the most frequently studied factors in assessing the success of an international assignment (aycan and kanungo, 1997, ones and viswesvaran, 1997). despite intensive studies on cross-cultural adjustment in business management sectors, similar research within the realm of international aec industry, appears to be lacking (except for puck, et al., 2008; zainol & abdul aziz, 2010), even though internationalisation is not a new concept to this field it has been in existence before the 20th century (pheng and leong, 2000) and that the british construction industry has the longest history in international construction operations (crosthwaithe, 1998). during the 1970's the booming oil price (ngowi, 2005) coupled with shortage of local skills, technology and resources, made way for intervention by international aec firms from us and european countries (loosemoore and muslmani, 1999). as a result, british based aec firms continue to have significant presence in these oil rich middle eastern regions. this paper is based on a literature review and the viewpoints of aec industry representatives. it seeks to understand the adjustment process of british expatriates working within international aec firms including architectural consultants, engineering consultants, contractors, project managers, etc. british expatriates (bes) in this context are defined as a british nationals sent by their parent companies to manage international assignments on projects for a certain time period lasting from several months to years (edstrom and galbraith, 1977). this study will only concentrate on exploring the impact of organisational, work and non-work parameters on cross-cultural adjustment. methodology this paper is specifically designed to explore a sub-set of variable of british expatriates’ cross-cultural adjustment in the middle-eastern region. of interest are middle east countries which are mostly of arab culture and seen as very different from western culture. these australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 33 countries include; algeria, bahrain, egypt, iran, iraq, israel, jordan, kuwait, lebanon, libya, morocco, oman, qatar, saudi arabia, syria, tunisia, united arab emirates, west bank, gaza and the yemen. to explore the phenomenon of adjustment in a sample of british expatriate's, this study adopted two approaches, namely,  literature review and,  qualitative research due to the broad scope of this topic, the literature review has been a critical aspect of the research. factors influencing cross-cultural adjustment have been sparsely explored in the international architectural, engineering and construction (aec) sector. to understand the work, non-work and organisational antecedents of adjustment, this research probed deep into the literature by reviewing it with reference to studies conducted in various sectors of business management, psychology and international human resource management. additionally, the researchers adopted a qualitative methodology to understand the concept of expatriate’s cross-cultural adjustment from the participant’s perspective, primarily to avoid losing social and institutional context during quantification of textual data (kaplan and maxwell, 1994). the researchers conducted a systematic enquiry, attempting to interpret and make sense of the phenomena and the meanings that individuals attribute to them (shank, 2002). a qualitative approach was considered appropriate for the following reasons; to examine complex issues of causality, process and context (dudwick, et al., 2006); to explore the main actor’s interpretation of events and to draw conclusions from them; and most importantly, to first identify the variables that might later be tested quantitatively (hoepfl, 1997). hence, qualitative research is considered to be apt as opposed to quantitative research. qualitative research methods include, interviewing, archival research and participant observation (myers and avison, 2002). this study adopted interviewing, since it aimed to gain a deeper understanding of middle eastern culture and societies. furthermore, the researchers used individual interviews and focus group discussions, the two most common methods to collect qualitative data (gill et al.,2008). other qualitative techniques like, archival research and participant observation were ruled out, as most expatriates were based overseas and there was no scope to observe them in action and no access to written records. literature review cross-cultural adjustment cross-cultural adjustment is referred to as the degree to which an expatriate is psychologically comfortable with various aspects of the foreign country (black, 1988). it involves uncertainty reduction by imitating or learning appropriate local behaviours and harmonising with the culture (peltokorpi and froese, 2009). an expatriate needs to adjust his/her behaviour to the norms and rules of the host nation. failure to adjust will result in early return prior to assignment completion (harzing, 1995), poor job performance and low levels of satisfaction (naumann, 1993). on the other hand, successful adjustment will result in integration of some elements of expatriate original culture with that of the host country (kim and ruben, 1988). as a result well adjusted expatriates are able to perform effectively. black and stephens, (1989); black, (1988) and black et al., (1991) identified three aspects of adjustment. each is briefly discussed below. australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 34 interaction adjustment this aspect deals with the comfort levels when dealing or interacting with host country nationals at work and in non-work situations (black and stephens 1989). it is also suggested that interaction is the most difficult of the three facets of adjustment. work adjustment this involves adapting oneself to the new job tasks, roles and environment. work adjustment is easier if there are similarities between the parent and the host subsidiary in terms of procedures, policies and task requirements (black and stephens 1989). general adjustment this second facet deals with overall adjustment to living in a foreign land and adjusting to its culture (black, 1988). it comprises factors such as housing conditions, healthcare, cost of living, etc. (black and stephens 1989). antecedents of cross-cultural adjustment recent studies on adjustment have conceptualised it as a multi-faceted phenomenon with three major dimensions (black 1988, black and gregersen, 1991, black et al., 1991, mcevoy and parker 1995) all of which have been empirically tested. adopting a multiple theoretical perspective black et al., (1991) have identified a host of factors that influence all three facets of adjustment and phased these factors into pre-assignment and in-country periods (refer to figure 1). since the aim of this study is to investigate organisational, non-work and work determinants of expatriate adjustment, the individual factors have not been discussed. anticipatory adjustment anticipatory adjustment is the input from domestic adjustment literature. according to black et al., (1991) adjustment will be a lot easier and quicker, if anticipatory adjustment has been worked out well. the two aspects to be dealt with during this period include expatriate selection and providing cross-cultural training. figure 1 frame-work for cross-cultural adjustment by black et al. (1991) training previous experience organization selection mechanisms & criteria accurate expectation anticipatory adjustment individual individual self-efficacy (1,2,3) relational skills (1,2,3) perception skills (1,2,3) job role clarity (1) role discretion (1) role novelty (1) role conflict (1) organizational culture organization culture novelty (1) social support (1) logistical help (2,3) organizational socialisation socialisation tactics socialisation content non work culture novelty (2,3) family spouse adjustment (1,2,3) mode of adjustment degree of adjustment 1-work adjustment 2interaction adjustment 3general adjustment anticipatory adjustment australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 35 organisational factors  expatriate selection during the anticipatory phase, when considering individuals for foreign assignments, the most important organisational factors to be considered are the criteria and the process of expatriate selection (black et al., 1991). this has been substantiated by researchers, who have long been advocating effective recruitment and selection systems for successful expat assignments (tung, 1981, 1982). in spite of this, to date, most organisations continue to rely on technical skills and domestic track record as the criteria for selection (morley and flynn, 2003; sparrow et al., 2004).  cross-cultural training cross-cultural training is an intervention to escalate an individual’s aptitude to deal with and perform in an unfamiliar environment (tung, 1981). studies by mendenhall and oddou, (1985); tung, (1981); mendenhall et al., (1987); black and mendenhall, (1990) suggest that comprehensive cross-cultural training is helpful in building an expatriate’s cross-cultural skills and competencies. trained expatriates are able to carry themselves confidently and work efficiently with less supervision (gutterridge et al., 1993) and have the potential to predict success on international projects (parkinson and morley, 2006). in-country adjustment the literature for integration of domestic and international adjustment with respect to incountry adjustment is more complicated than the anticipatory phase (black et al., 1991), the reason being that it requires both mode and degree of adjustment. in-country adjustment comprises of job, organisational culture and non-work factors.  job factors job factors are definite sets of tasks and duties performed by the expatriates (selmer and fenner, 2009). therefore they are categorised into two groups (black, 1988);  adjustment facilitating job factors  adjustment inhibiting job factors role clarity and role discretion are two job related factors that facilitate work adjustment (black et al., 1991). expatriates whose job roles, responsibilities and behaviours to be undertaken, are set up clearly by the organisation (andreason, 2003; bhaskar-shrinivas et al, 2005), experience less uncertainty associated with their work situation and in turn adjust to their work quickly (black 1988, nicholson, 1984, and pinder and schroeder 1987). similarly, flexibility in the working environment (role discretion) allows the expatriate to mould the job to his or her expectations. there are several job-related factors that could increase the uncertainties, unfamiliarity's, unpredictability or uncontrollability of the new role and consequently inhibit adjustment (black et al., 1991). novel work settings could vary from the home nation demanding new skill sets and behaviours, which means the expatriate has a tremendous amount of information to process like, legal, economic, political, taxation and also how to interact with locals (andreason, 2003). on the other hand, when an expatriate experiences conflict; ambiguity between the expectations held regarding job behaviours, duties, do's and don’ts, uncertainty levels are likely to increase and so impede adjustment. also, placing excessive demands on expatriates who assume new positions (brewster and harris, 1999) i.e. role overload is likely to produce similar consequences. australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 36  organizational factors organisational factors include organisation cultural novelty, social and logistical support provided by the organisation. black et al., (1991) propose organisational cultural novelty would be expected to increase the uncertainty associated with work environment (church, 1982; mendenhall & oddou, 1985 and stening, 1979). the greater the difference between the parent organisation and the host country subsidiary, the greater are the adjustment challenges (black et al., 1991). an expatriate’s relocation to an unfamiliar environment is a stressful event. organisational support on the logistic front is essential; it helps to reduce the amount of time they spend on these issues and facilitates adjustment to the new work set-up (aycan, 1997). it includes sorting out visas, work permits, housing, organising school for their children, medical insurance, etc. social support mainly assists in mobilising psychological resources and further provides feelings of reinforcement, recognition and affirmation (fontaine, 1986; rook, 1984). this support could stem from family, host national colleagues, compatriots, or in some instances expatriates from other countries. particularly on the work front, expatriates should be provided with clear information on the do's and the don'ts especially if the organisational culture novelty between the home and the host country subsidiary is high. studies suggest that social support has a positive impact on their ability to adapt to the new environment (coyle, 1992 and brewster and scullion, 1997).  non work factors factors listed under this section include culture novelty of the host country and familyspouse adjustment. cultural distance refers to the extent of cultural differences between the home and the host country (shenkar, 2001). it is also referred to as "cultural toughness" or "cultural novelty". church (1982), mendenhall & oddou (1985) and stening (1979) argue that cultural novelty of the host country increases uncertainty i.e. perceived discrepancies between the home and host countries increase the level of doubts and present the expatriates with adjustment difficulties. adjustment of the spouse and family are important because a child’s maladjustment to various aspects of the host nation adversely affects the sojourner’s own adjustment thereby affecting their work performance (earley and ang, 2003). prior research has substantiated that the inability of the spouses/family to adjust to living in the host country was one of the most frequently cited reasons for failure among american expatriates (black and stephens, 1989; harvey 1985 and tung 1981). ever changing work place demographics suggests that organisations need to take into consideration dual career couples when thinking of relocation (selmer and leung, 2003). therefore organisations should tune resources in this direction, as it enhances both the expatriate’s and his/her partner’s satisfaction with foreign assignment. other organisational issues free choice for accepting international assignments free choice refers to the degree to which an individual can choose to accept the assignment (cerdin & pargneux, 2009). it helps to judge whether the assignment fits well with their will, skills and knowledge (chenyi & baruch, 2010). expatriates lacking free choice or being pressurised by organisations to take up assignments against their will would not only face adjustment difficulties but also develop negative attitudes towards the job itself (black & stephens, 1989). studies by feldman, (1988); wanous, (1980); hall, (1976) have established free choice as a necessary factor influencing success involving international australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 37 transfers; kraimer and wayne (2004) found a positive relationship between free choice and adjustment. mentoring an additional aspect of social support will be the appointment of a mentor, an individual who provides assistance on learning and understanding the culture of the assigned country (volard et al., 1988). a mentor acts as the link between the head office and the expat, giving him/her information on the latest events and involving them in the decision making process (mccauhey and bruning, 2005). host nationals can also be mentors helping the expatriate gain concrete training in cultural behavior, introducing them to valued business contacts and provide assistance in interpreting situations (kraimer et al., 2001). mentoring helps to reduce any uncertainty associated with the new environment and make the expatriate feel more comfortable with their new work group and help them get more easily assimilated into the host culture (caligiuri and lazarova, 2002). hence, mentored expats will not only adjust to work quickly but also interact efficiently with locals. training host country nations when operating overseas, an expatriate will certainly have to deal with local staff. to maintain output quality, an effective interaction with local staff is key. vance and pederon (1993) support the idea that the host nationals also need to be trained for assignments with foreigners. they advocate training as an ethical imperative for global firms as it assists in reducing stress and increasing the effectiveness of the individual. such training will therefore facilitate greater work and interaction adjustment. in spite of this knowledge, expatriation research has not explored this dimension to its full detail (vance and ring, 1994). ongoing continuous support an organisation needs to make a conscious effort to maintain contact between the expatriate and their head office. ongoing assistance on technical or personal issues gives assurance to an employee that they are an integral part of the organisation, thus reducing anxiety and uncertainty associated with ‘out of sight, out of mind’ fears (tung, 1988) and accelerates adjustment (aycan, 1997). qualitative research data collection the subject of the study involved british nationals managing or having previously managed, their parent organisation's international architectural, engineering and construction (aec) operations in arab countries. employing a random sampling technique a list of international british companies operating in middle eastern countries was obtained. normally, researchers in the past have associated random sampling with quantitative research and non-random sampling with qualitative. as noted by onwuegbuzie and leech (2005) this represents a false dichotomy. it is suggested that both sampling techniques could be used either ways to increase options for researchers (onwuegbuzie and collins, 2007). telephone calls were made to british aec companies and hr managers were contacted to seek approval for participation. once approved, emails were sent out to the hr mangers reiterating the purpose and the confidentiality of the study. only eight companies operating in seven middle eastern countries agreed to participate and provided access to their expatriates. next, snowball sampling was used to secure additional participants. snow ball sampling is used to elicit knowledge, from extended associations, through previous acquaintances (babbie, 2008). this technique enables using recommendations to find more participants for the study. it is considered to be appropriate when targeting a special population (babbie, 2008), in this case british expatriates. respondents were contacted via e-mails and telephone calls. upon agreement, in-depth individual interviews and focus group discussions were conducted. australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 38 qualitative individual interviews qualitative interviews are useful for understanding the background data and the evolution of the relationship between actor and the situation (twum, 2010). to collect detailed information about an expatriate’s experience of living and working overseas from their own perspective, unstructured in depth interviews were considered to be apt. this meant that the interviews had very little structure or preconceived plan as to how to deal with the topic (hancock, 1998). during the unstructured interview the researchers asked open ended questions giving the respondent a chance to freely explain their opinion or experiences. interview code assignment duration in years industry experience job role during the assignment country of assignment profession ua-in1 open 15 project architect uae architectural consultants eg-in2 2 21 engineering consultant egypt engineering consultancy ua-in3 3 40 business development director uae architectural consultants ba-in4 open 30 regional director bahrain engineering consultancy ua-in5 2 12 project manager uae architectural consultants om-in6 2.5 15 health & safety manager oman contractor ku-in7 4 19 project architect kuwait architectural consultants ku-in8 2 9 quantity surveyor kuwait architectural consultants table 1 respondents profile for individual interviews overall eight individual interviews were carried out. two were conducted in person, whereas the remaining six interviews had to be conducted using voice over ip technology because most expatriates were based overseas on assignments. however, no differences in the quality of the data could be observed between these two interviews types. focus group discussions apart from carrying out individual interviews, three focus group discussions (each group comprising of four expatriates) were also included. focus group discussions involve individuals selected and assembled by the researcher to discuss and comment on the subject of the research from personal experience (powell et. al., 1996). based on the principle of data triangulation, the focus groups consisted of four expatriates from the same organisation. when individuals have specialized knowledge or experiences to discuss in the group, krueger (1994) has endorsed the use of very small focus groups which include three (morgan, 1997) or four participants. since it is difficult to exert control over larger groups, researchers have recommended the group size to be somewhere between four and six participants (greenbaum, 1988;vaughn et al., 1996). focus groups were specifically conducted to validate the factors identified from the interviews and enable deeper insights into the group's thinking (sommer and sommer, 2002). also, incorporating viewpoints of four different individuals basically helps to verify and increase validity of the data collected. for the focus groups, the option of tele-conferencing was used to interview a number of individuals at the same time. the proactive approach adopted by the researchers, not only http://jpepsy.oxfordjournals.org/content/27/1/47.full#ref-24 http://jpepsy.oxfordjournals.org/content/27/1/47.full#ref-60 australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 39 ensured that the interview was free flowing and in keeping with the topic of discussion, but also assisted in preventing individuals from dominating and ensured that all participants were involved and contributed equally. interview code assignment duration in years industry experience job role during the assignment country of assignment profession sa-fg1 3 6 quantity surveyor saudi arabia engineering consultancy sa-fg2 3 7 quantity surveyor saudi arabia engineering consultancy sa-fg3 3 25 plants & equipment manager saudi arabia engineering consultancy sa-fg4 3 10 planning manager saudi arabia engineering consultancy eg-fg1 open 42 regional director egypt contractor eg-fg2 3 12 project manager egypt contractor eg-fg3 3 25 health & safety manager egypt contractor eg-fg4 3 30 commercial director egypt contractor qa-fg1 open 35 country manager qatar project management qa-fg2 open 31 regional manager qatar project management qa-fg3 5 30 strategic planner qatar project management qa-fg4 5 9 quantity surveyor qatar project management table 1 respondents profile for focus group discussions according to fossey, et al., (2002) there is no fixed minimum number of participants recommended to conduct sound qualitative research, however sufficient in depth information needs to be gathered to fully describe the phenomena being studied. since this study aimed to capture a holistic view of expatriate adjustment, no initial estimate of interviews was considered by the researchers. but after having conducted a total of eight individual interviews and three focus group discussion, the study gathered a large amount of data, where it was possible to identify fully developed general patterns. it reached the point of ‘theoretical saturation’ where no new insights were being obtained (glaser and strauss 1999). most of the interviews and focus groups were audio recorded with prior permission. for the one's which permission couldn't be granted, field notes were taken by the researchers. these interviews and focus group discussions lasted somewhere between 1 to 2 hours. respondent profiling all the twenty respondents of this study were male. on average, the participants had work experience of 21 years within the industry. among the interviewed, for 15% of the participants it was their first overseas posting, 85% of them were currently working on their international assignment and 60% of respondents were married. both focus group discussions and individual interviews included participants from diverse backgrounds ranging from contractors, project management, architectural and engineering fields. australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 40 all the interviewees were coded. the first two letters in the code refer to the interviewee’s country of assignment ba-(bahrain), sa-(saudi arabia), eg-(egypt), qa-(qatar), ku(kuwait), om-(oman) and ua-(united arab emirates). the next two letters refer to the type of interview i.e. fg-(focus group), in-(individual interview) and the last number of the code helps to differentiate between each individual. the profiles and details of each interviewee are shown in table 1 and 2. results and findings of qualitative study qualitative data analysis is a systematic and transparent way of making sense and meaning of the data collected (punch 2005). each of the interviews was transcribed by carefully listening to audio recording and then translating it into text verbatim. bogdan & biklen, (1992) define qualitative data as “rough materials researchers collect from the world they are studying; they are the particulars that form the basis of analysis”. this study analysed the qualitative data using an interpretative approach, also known as a ‘descriptive approach’. it provides thorough descriptions and interpretations of social phenomena, including its meaning to those who experience it (tesch, 1991). this technique helps to structure data extracted from interviews in a rational way to determine factors, actions and reactions. it also presents a holistic view of data rather than a condensed view. the transcribed data from the individual interviews and focus group discussions were combined with the factors identified from the literature review. the findings of the qualitative study have been listed in table 3 and discussed in detail in the following section. a list of the findings was sent to each of the participants for approval and validation. organisational factors non work factors work factors expatriate selection (black et al., 1991; jassawalla et al.,2004; 25% interviews; 100% focus groups) cultural distance (black et al., 1991; ozorhon et al., 2008; 63% interviews; 67% focus groups) implementing requirements like quality, (ozorhon et al., 2007;50 % interviews; 100% focus groups) health & safety (ozorhon et al., 2007; mahalingam &levitt, 2005;25% interviews; 33% focus groups) free choice (black & stephens, 1989; feldman, 1988; wanous, 1980; hall, 1976; 38% interviews; 33% focus groups) political stability (ozorhon et al., 2007; zhi, 1995; wang et al., 1999; ling and hoang, 2010; ofori, 2003; han & diekmann 2001; 25% interviews; 33% focus groups) availability of resources (ozorhon et al., 2007; baloi and price; 2003; mahalingam &levitt, 2007;63% interviews; 67% focus groups) training host nationals (jassawalla et al.,2004;67% focus groups) climatic conditions (bing, et al., 1999; han, et al., 2007; 38% interviews; 67% focus groups) managing other expatriate groups (orrill, 2006; 50% interviews; 33% focus groups) cross-cultural training (black et al.,1991;tung,1981) presence of expatriate community (cohen, 1977; 38% interviews; 67% focus groups) competence of project parties (bing et al., 1999; ozorhon et al., 2007; 88% interviews; 67% focus groups) arranging pre-sojourn visits (jassawalla et al.,2004) family adjustment (black, 1988; 75% interviews; 67% focus groups) job commitment of locals (63% interviews; 100% focus groups) social and logistical support (black et al.,1991;pinder & schroeder,1987;tung 1988; torbiorn,1982; 88% interviews; 100% focus groups) client's understanding of his/her responsibilities (baloi & price, 2003; 38% interviews; 67% focus groups) australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 41 table 2 factors extracted from literature review, interviews and focus groups discussion upon completion of the qualtiative data analysis, this research proposes a framework for cross-cultural adjustment, which attempts to cluster factors along organisational, work and non-work issues and assess their impact on the three facets of adjustment. the discussion of the findings is presented by drawing on appropriate quotations from the interviews to clarify and illustrate issues. narrations or accounts are viewed as story-like constructs that contain individuals’ recollections of events (orbuch 1997). when using narrations, every attempt is made to protect the anonymity of the respondents and their organisation. the organisational factors non work factors work factors ongoing head office support (aycan, 1997;black et al.,1998 50% interviews; 67% focus groups) handling contract administration issues (hall,1996; 25% interviews; 67% focus groups) organisational culture novelty (church, 1982;mendenhall & oddou, 1985; stening,1979) complexity of the project assignment (ozorhon et al., 2007; han, et al., 2007; 75% interviews; 33% focus groups) mentoring (volard et al., 1988; downes et al. 2002; mayrhofer and scullion, 2002; 25% interviews) flexibility of the client ( ozorhon et al., 2007; 63% interviews; 67% focus groups) job role design (black et al., 1991; 25% interviews; 67% focus groups) client’s funding capacity (gunhan & arditi,2005;bing et al., 1999; han, et al., 2007; 50% interviews; 67% focus groups) appointing a local link to deal with client & understand local issues (chi & levitt, 2009; 38% interviews; 33% focus groups) introducing new methods, tools and techniques (25% interviews; 33% focus groups) relocation package (aycan, 1997; 88% interviews; 100% focus groups) dealing with client representatives (han, et al., 2007; 50% interviews; 67% focus groups) client’s reliability (baloi and price; 2003; 38% interviews; 33% focus groups) stakeholders influence on project assignments (bing, et al., 1999; han, et al., 2007; 38% interviews; 67% focus groups) local business culture and work practices (javernick-will and scott, 2010; 75% interviews; 100% focus groups) locals approach to risk management (baloi &price; 2003; 25% interviews; 33% focus groups) relationship between the project parties (bing et al., 1999 ; 50% interviews; 67% focus groups) locals english language skills (han, et al., 2007; bing, et al., 1999;38% interviews; 67% focus groups) local bureaucratic culture (ling & lim, 2006; 33% focus groups) strength of the legal system (shen, et al., 2001; ling and low, 2007; ling and hoang, 2010; hall 1996; 67% focus groups) australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 42 extracts are presented such that none of the above mentioned details are revealed. figure 2 represents the hypothetical framework. following is the discussion on the aforementioned sub-set variables; organisational support and expatriate adjustment organisational support policies and practices are activities, designed by the parent organisation, specifically intended to provide assistance to expatriates working overseas (galarza, 1999). construction is a highly cost competitive industry which is also reflected in the expatriate management strategies adopted by the aec firms. due to financial costs and other constraints associated with family relocation, organisations have a propensity to select expatriates who are single or newly married. as a result, expatriate selection is merely based on availability and convenience. most interviews suggested that previous international experience was one of the key criteria driving expatriate selection. eg-fg1 had this to say: generally we don’t bring in new people but sometimes we do. new people find it tougher than the one's that have experience. but when it comes to individuals with experience, you know they have managed to succeed before in those situations, you don’t think much to address this gap and prepare individuals for future overseas postings, some larger aec organisations run graduate programs, where junior staff work alongside senior expatriates on relatively short term assignments. another interesting observation made during interviews was the reason why some expatriates were accepting international assignments. slower economic activities and shrinking workloads in united kingdom, suggest that expatriates are either under pressure or are left with little choice but to accept the overseas postings, as more and more firms are targeting emerging markets or increasing their established presence in those regions. british expatriates highlighted attractive relocation packages as one of the potential reason behind accepting the assignment. the financial support included tax free salary, bonuses for completing the assignment, living allowances and even relaxation leaves. this study found significant difference in the amount of support provided by the aec organisations to the expatriates and their families. some organisations adopted a strong take-care policy for personnel management. support included paying utility bills, school fees, rents, setting up contracts for accommodation, medical insurance etc. in some countries they will offer cleaner services, cooks and even laundry facilities for single expats or front line supervisors. sa-fg3 who did not receive much support from his organisation expressed his disappointment over poor hr support: human resource support did not work very well on this assignment. initially salaries were not paid on time. also, work permit visas were not sorted even after eight months of living in the country. it is all down to poor management striking cultural differences between great britain and arab regions suggest that aec organisations could alleviate anxiety by preparing the expatriate and his/her family through cultural training. additional factors highlighted during the interviews, that need organisational consideration, include: clarity of job roles and responsibilities, placing excessive work demands and mentoring support especially for junior staff. as per the psychological contract theory, organisational support enhances commitment and it eases the stress and uncertainties experienced by the expatriate (munton and foster, 1993) whereas violation will result in dissatisfaction and retention problems (guzzo et al., 1994). thus, an organisation’s support will facilitate all the three aspects of adjustment. australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 43 factors particular to the aec industry the factors particular to the aec industry are further classified into work-related issues; safety standards; strength of the legal system and bureaucratic culture; job commitment, competence of local staff/workforce and client related issues. work related factors each country has its distinct way of handling aec operations, ranging from being either labour to capital intensive (cunliffe, 1980). western expatriates posted to work on such assignments need to comprehend that the design standards, systems, tools, techniques and labour skills in some cases can be distinctly different from their home country. knowledge of the working practises and the business culture of the host nation are important to deliver assignments within the specified parameters. this is specifically relevant to constructors, engineers and designers (javernick-will and scott, 2010). figure 2 framework for cross-cultural adjustment on international assignments (the numbers in the brackets indicate the numbered facet of adjustment to which the variable relates) organisational factors pre-assignment  expatriate selection (1,2,3)  free choice (1, 2, 3)  cross-cultural training (2,3)  pre-sojourn visit (1,2,3)  job role design (3)  relocation package (1,3) during assignment  training host nationals (2,3)  logistical & social support (1, 2, 3)  ongoing head office support (3)  mentoring (2, 3)  organisational culture novelty (3)  appointing a local link to deal with the client and understand local issues(3) work/project related factors (3)  availability of resources  implementing requirements like quality, health and safety  local business culture and work practices  stakeholders influence on project assignments  introducing new methods, tools, techniques etc.  handling contract administration issues  complexity of the project assignment  competence of the project parties  relationship between the project parties  local bureaucratic culture  strength of the legal system competence and commitment of locals  locals approach to risk management  managing other expatriate groups  job commitment of the locals  locals english language skills client related issues  client’s reliability  clients understanding of his/her responsibilities  flexibility of the client  client’s funding capacity  dealing with client representatives cross-cultural adjustment british expatriate posted by the organisation on international assignment 1general adjustment  general living conditions  housing  food  shopping  cost of living  entertainment & recreational opportunities  healthcare facilities 2interaction adjustment  socialising with hcn on day to day basis  interacting with hcn outside work  speaking with hcn 3work adjustment  specific job responsibilities  performance standards & expectation  supervisory responsibility non work factors  family adjustment (1, 3)  presence of expat community (1)  cultural distance (1,2,3)  political stability (1,2,3)  climatic conditions (1, 3) australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 44 for instance, construction projects in middle-eastern countries generally are heavily labour intensive and tend to have limited resources in terms of plant, technology and labour skills with the productivity of workforces varying greatly. labour skill levels and ability to deliver the finished product were considered to be a challenge and this was echoed in most interviews. other factors deducted from the interviews and focus groups were to do with the differences in work practices. for instance, in middle-eastern countries it is very common for projects to run beyond the anticipated time and cost parameters. this could be attributed to various reasons such as protracted planning and approval processes, contracts not being taken seriously, unsystematic contractor selection, incompetence of project parties, absence of risk management plans for the projects, interference from government and other project stakeholders, etc. a british project manager (ua-in5) exemplified his experience on contractor selection and their competence: contractors with 4 diggers and 20 men are given multi-million pound contracts to complete in three years. he knows he is going to fail before the start of the job. also, some contractors secure work outside their domain i.e. contractors good at laying water mains end up putting in sewer mains... without experience they struggle as a result of these factors it becomes essential to take into account the local conditions and working practices even before preparing the work programs, designs, specifications, etc. if these factors are not taken into account, they could adversely affect the delivery of project assignments. safety standards in united kingdom particular attention has been given to health and safety. this is now firmly based within the mainstream british construction industry, but international environments vary drastically on safety standards especially in the developing world. therefore an issue of great concern when performing overseas projects, for international british contractors, is one of safety standards (hall, 2000). om-in6 highlighted issues with safety standards: normal safety standards are difficult to apply sometimes. we made it a very strong rule to wear hard hats, high visibility jackets and protective clothing. otherwise they would not do it since health and safety continues to be a non-existent concept in some regions, enforcing and implementing these standards takes a lot of effort thereby resulting in considerable delays and additional costs (mahalingam and levitt, 2005). strength of the legal system and bureaucratic culture the environment of the host country has been considered as an element of risk for operating aec assignments. in particular, the legal system demands special attention because it dictates the management of claims, disputes, conflicts and any issues related to the contract (ozorhon et al., 2007). an observation by hall and jaggar (1996) suggests a scenario which has been echoed in most of the interviews. in the middle-east the application of the contract clauses could follow an erratic path. an expatriate consultant may find that, when the client fails to keep up with responsibilities, they would tend to put the contract to one side and try fixing a deal. on the other hand, if the fault lies with the consultant, the client would not hesitate to apply the law against him/her to its maximum advantage. some companies could also end up bargaining (an arabic practice) and perhaps providing concessions to avoid the application of some of the more onerous clauses. australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 45 another aspect of the host nation, highlighted during the interviews, was the bureaucratic culture within the middle east (i.e. constant interference by the project stakeholders at every project stage). job commitment and competence of local staff / workforce in most cases, it is the local workforce or local staff that actually executes the majority of construction/engineering operations. interestingly, projects in the middle east are characterised by participants from diverse cultural backgrounds. the majority of the workforce will come from countries such as, india, pakistan, bangladesh, the philippines, china and thailand (enshassi and bugess, 1991). so, apart from dealing with the locals, the british expatriates will also have to deal with other nationalities with divergent skills, customs and values. most expatriates are posted on international operations because there is a lack of expertise in that particular area. to deliver assignments in accordance with international best practice standards requires assistance and support from the local staff, for instance, in situations requiring them to employ new tools and techniques, work longer hours, or even adhere to standard working practices such as health and safety measures, or keeping up with a business culture. british expatriates being monochronic (i.e. highly structured and having an organised approach to life) have expressed frustration over locals’ flexible, relaxed and indirect approach (loosemore and muslmani, 1999). a regional director (ba-in4) expressed his opinion of some of his local staff: the locals are quite resourceful people, but they have their own ways that are difficult to understand. they do not come to work on time, it is very hard to understand, how can they come to work late daily and think that is not a problem? english language skills of the locals are advantageous as it eases communication and facilitates greater interaction between them and the expatriates. due to all these factors, the competence and commitment of local staff/workforce towards work becomes essential as it dictates the successful execution and completion of the assignment, which eventually decides how successful the expatriate has been. client related issues in some instances the expatriates have to deal with international clients who can be much more challenging than with uk clients, the fundamental reason being that the expatriate needs to take cultural differences into consideration. these cross-cultural differences often lead to misunderstandings, delays and even conflicts on projects as cited by muslmani and loosemore (1999): during the process of claim negotiations between the uk national and the arab clients, tensions could arise between the arab clients expecting their decisions to be accepted and uk expatriate accustomed to challenging and confrontational culture to be able to clearly understand the local client’s culture, intentions and expectations, british aec firms need to actively invest in bridging the gaps between the expatriate, who is in charge of the operation and the client. appointing intermediaries was one strategy used by some british companies, this link includes local bodies aware of the details and the gaps between the two distinct parties who are, at the same time, able to bridge the communication between the two (chi & levitt, 2009). other issues highlighted, with regard to clients, were their reliability, funding capacity, flexibility and ability to discharge their part of their responsibilities towards the assignment. australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 46 additionally, arab clients appoint a local consultant body between them and the international company, which suggests that expatriates/organisations have to deal with another clientele. all the factors discussed in this section, basically highlight the high job novelty experienced by the british expatriates, suggesting that they have to gain new skills and behaviours to perform overseas. they are specifically related to the aec projects, distinctive to this industry and potentially exert an influence on adjustment to work and interaction with locals. non work factors factors listed under this sub-section include: family adjustment, political stability and cultural distance between the home and host countries. cultural distance between uk and arab countries a study conducted by torbion (1982) suggested that expatriates from the western world struggled with assignments in india, the middle east, along with northern and east african countries. tough living conditions, coupled with poor amenities, harsh climate and divergent cultural differences meant these regions were seen as hardship postings. arab states, which are predominantly islamic, have several practices and codes of conduct that contrast with the west. western expatriates and their families in these locations have to observe caution, for instance alcohol cannot be consumed anywhere except for specially licensed places, there should be abstinence from public displays of affection and dressing should be modest; also homosexuality is completely forbidden. some british expatriates have expressed their initial cultural shock when they had to deal with a 100% male environment in their offices and the need to adhere to a dress code for men as well. also during the holy month of ramadan the local muslims observe fasting, so care should be taken to be respectful of these religious times and observances. ku-in7 had this to say: during ramadan the locals start off early and leave work early, we as expatriates work around these issues and incorporate them within our work routine and avoid scheduling meetings or discussions later in the day recent times have seen these oil regions grow dramatically with remarkable improvements to living, healthcare, educational and infrastructure facilities. as a result, a vast majority of the expatriates and their families have expressed their satisfaction with living and working conditions in the middle-east. also the presence of large expatriate communities (from all parts of world) was considered to be an added bonus as interaction with locals was limited. as a result, cultural distance potentially affects expats and his/her family's adjustment to the host country. political stability of the host country political instability in middle-eastern regions due to dictatorships has put serious constraints on the lifestyles of expatriates and their families. prior awareness of the social and political situations is necessary to be able to make accurate anticipatory adjustments and to develop a realistic picture of the host country. interviews with british expatriates in the middle east, suggest that the recent wave of protests which has erupted across middle eastern and north african states have considerably put a halt on daily business interactions and general lifestyles of expatriates and their families. in some instances the company had to close operations and request expatriates to return home until life in the region has returned to normalcy. therefore, various non-work factors discussed in this section will significantly affect an expatriate’s general, interaction and work adjustment. australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 47 conclusion the current study qualitatively explored the influence of organisational, work and non-work factors on the three facets of adjustment of british expatriate's posted on international assignments in the middle eastern regions. this study has been able to contribute to knowledge in two ways, firstly by exploring a sample of british expatriates within the aec sector, and secondly this study has produced a comprehensive framework for expatriate adjustment applicable to british construction professionals in these countries. most expatriates and organisations take cross-cultural adjustment for granted, the review however suggests that aec based assignments in middle east are composed of highly diverse teams with differing backgrounds, cultures, languages, etc., which creates numerous obstacles for british expatriates. great britain is a most individualistic country. in britain, individual initiative and achievement is stressed, competition is encouraged over cooperation, and individual decision making is valued (samovar and porter 2004). so, when british expatriates work on assignments in collectivistic middle eastern regions, cultural characteristics and practices of these societies present themselves as major hurdles. for instance, the review suggests that on the work front, most british expatriates could not understand the reasons why locals awarded contracts, promoted their relatives and members of their extended family. the literature review and exploratory interviews highlight cross-cultural adjustment as one of the biggest challenges facing british expatriates in these regions. in arab countries one comes across a culture that is vastly different to that of great britain. instances reveal that being unaware of the protocols in the arab world could have devastating consequences for the expatriate and his/her family. the interviews also established that the current political uprising in middle east has been a cause of great concern and has seriously affected their movement. due to its complexity, they need well-rounded support from their employer rather than just targeted support (takeuchi et al., 2009). on the work front, aec assignments in the middle east are deeply influenced by indigenous business and work practices of the host nation. for instance, striking contrasts exist between british and arab countries in terms of time keeping, negotiation styles, approaches to conflict, business culture, etc. since these differences in work culture become apparent in every aspect of the business, in-depth understanding of the local environment is crucial (kangari and lucas, 1997). british aec organisations could address the knowledge gaps and uncertainties associated with international assignments firstly, by employing a comprehensive selection procedure, going beyond technical skills and including factors such as intercultural skills and previous international experience. offering cultural training prior to departure is also very important. therefore, organisations should take up this initiative to invest resources and adopt a support policy not only for the expatriate but also for his/her family members. organisations that take up this initiative of identifying and developing their employees’ skills, are generally blessed with loyal and responsible employees (griffith, 1998; welch, 2003). this will empower the individual with a clear understanding of international assignment (mccauhey and bruning, 2005). since nothing much can be done to improve the conditions of the host nations, in such circumstances organisational human resource managers must be extra vigilant and offer enough support to the expatriate and his/her family. if the british aec sector is to reap the benefits of successful expatriation and its associated benefits, it needs to adopt a holistic approach by taking active interest in their staff working overseas. a survey by pricewatercoopers (2011) also reiterates that though many engineering and construction companies acknowledge the importance of international mobility and management of their talent, very few have developed a systematic approach to link the two aspects. as highlighted by hall, (1996) multi-national companies in sectors such as manufacturing, australasian journal of construction economics and building konanahalli a et al. (2012) ‘international projects and cross-cultural adjustments of british expatriates in middle east: a qualitative investigation of influencing factors’, australasian journal of construction economics and building, 12 (3) 31-54 48 information technology and the retail industry have well developed systems along with policy and procedures, inferences could be taken from these evolved sectors and tailored to suit the aec industry. limitations of the study the interpretation of the findings of this study should consider the following limitations. firstly, the data has been collected from british expatriates working in seven (qatar, egypt, saudi arabia, united arab emirates, kuwait, oman and bahrain) of the twenty middle eastern countries. there could be some constraints with regards to the generalizability of our findings for british expatriates working in other middle eastern countries. also, the data has been collected from expatriates living and working in only in large middle eastern cities (doha, riyadh, jeddah, cairo, kuwait city, manama, dubai, abu dhabi etc.). the reason for the selection of these locations is that most international a/e/c companies are located in these business cities. thus, expatriates in remote cities or underdeveloped middle eastern countries may have somewhat different perceptions from expatriates in big and developed cities or countries. therefore, the findings may not be generalizeable for the whole of middle east. the second potential limitation is the representation of the professional backgrounds of the participants, though every attempt was made by the researchers to ensure uniformity. most of the participants held managerial positions like; regional managers, country managers, project managers, h&s managers etc. this could be due to the fact that expatriates are sent abroad to fill in high level managerial jobs that demand managing the local work force (earley and ang, 2003). the third limitation of the study is related to the small sample size. even though there is a sizeable british population working in middle east, information on aec expatriates was hard to collect. also, a substantial portion of this population comprises of self initiated expatriates, who were beyond the scope of this study. nevertheless, the extensive interviews and focus group discussions did provide a snapshot of the realities of the challenges faced by british expatriates with regards to adjustment in both work and non work situations. references andreason, a w (2003) ‘expatriate adjustment to foreign assignments’, international journal of commerce and management, 13 (1), 42–60 aycan, z & kanungo, r n (1997) ‘current issues and future challenges in expatriate management’, in aycan, z. 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expatriate adaptation’, academy of management learning and education, 3 (4), 362-379 zhi, h (1995) ‘risk management for overseas construction projects’, international journal of project management, 13 (4), 231–237 issue1_2009.indb the australasian journal of construction economics and building [vol 9, no 1] 1 1 builders’ perceptions of lowest cost procurement and its impact on qualitymary hardie and swapan saha (school of engineering, university of western sydney, australia) abstract the concept of quality in relation to a product or service refers to the degree to which it meets the customer’s needs and expectations. dissatisfaction with the quality of building projects has been widely reported in recent times. there are indications that there may be some relationship between the procurement method used and customer satisfaction with the delivered product. in particular, traditional competitive bid contracting may have an adverse impact on quality in some circumstances. to shed some light on reported industry attitudes, a survey of construction professionals in the sydney metropolitan area was undertaken. the respondents demonstrate mixed views on the effectiveness of the competitive tender system on quality project outcomes. to some extent contractors’ attitudes may be determined by their preferred current mode of operation. however, some support is expressed for the contention that quality of outcome can be reduced by an overly cost driven contractor selection process. in particular, when economic pressures cause bidders to reduce the time allocated for the tender process, an inaccurate and unreliable bid may win. this makes it very diffi cult for the reliable contractor to remain profi table. a move to value-based rather than cost-based procurement may assist industry performance and customer satisfaction. keywords: procurement, quality, builders’ perceptions, tender process, sydney. introduction traditional contractor selection in the construction industry in australia and elsewhere has long been managed through the process of calling for competitive cost-based tenders as the principal means of allocating projects. this procurement method is sometimes described as ‘design-bid-build’. such bidding processes may also include estimated construction time as an additional selection component but, in general, they do not include an assessment of the contractor’s ability to deliver quality project outcomes (cartlidge, 2004; masterman, 2002; rowlinson and mcdermott, 1999). consequently, the lowest priced tenderer may not ultimately be able to deliver the best value for the project’s end users. the traditional system attempts to manage quality either by the exclusion of all but known or ‘invited’ tenderers or by independent supervision of the contractor’s work by an architect or other expert. there are potential diffi culties with both options. as several authors identify, in the former case of invited tenders or pre-qualifi cation, there is a risk of a ‘closed shop’ situation developing where new contractors are locked out of the process (fong and choi, 2000; mahdi et al., 2002; ng et al., 1999; palaneeswaran and kumaraswamy, 2001). in the latter case of architect supervision there may be either a lack of expertise in ‘buildability’ issues or insuffi cient resources and availability to make timely decisions on problems that arise on site (yates and battersby, 2003). as a result of these problems over several decades, the industry has seen a gradual increase in the use of other procurement methods such as design and construct, in-house development, partnering and relationship contracting (arditi and lee, 2003; bresnen and marshall, 2000; chan et al., 2003). nevertheless, the traditional competitive tender system has not disappeared. despite evidence of the system’s shortcomings, owners sometimes see competitive prices as their only signifi cant way of ensuring some market input into the procurement of an expensive asset. it is not possible to ‘comparison shop’ for new buildings in quite the same way as it is for real estate. competitive tendering gives the impression of fulfi lling this role although it may not necessarily always deliver a successful outcome. builders can favour competitive tendering because it allows them to specialise in the delivery of projects and avoid involvement in design iterations and project approval processes. whatever the procurement method the relationship between cost and value remains a problematic one. in general, the competitive bidding process emphasises cost at the expense of value and the result is a widely reported problem with delivering project quality in the traditional system (uher, 1999; walker and hampson, 2003; hampson, 2005). the purpose of this paper is to explore perceptions of lowest cost procurement and its impact on quality. a survey of construction professionals in the sydney metropolitan area is investigated to address this question and formulate recommendations. cost versus value in construction projects client satisfaction with the outcome of a building project is identifi ed as having three parameters that relate to the value triangle (see figure 1). these are: fi nal project cost compared to the budget; timely project delivery; and quality of the built project result. the quality parameter is particularly diffi cult to judge in construction because the customer’s decision to buy is based on the concept of a product rather than on the demonstrated fi nished product as is the case in most industries. some people have limited visual literacy and have diffi culty understanding the end result from design drawings. a client who has diffi culty visualising the completed project may cling to cost assessment as something that can be counted on. if cost overruns occur for whatever reason, the client’s satisfaction level is likely to rapidly decline, even if the cost increases are caused by the failure to accurately specify needs or to understand documentation. this problem particularly applies to inexperienced and ‘one-off’ clients. large repeat clients such as government and semigovernment bodies are less likely to suffer from such shortcomings (manley, 2006). the public sector in australia, however, represents less than a quarter of the non-residential construction industry and the private sector is varied and contains numerous very small players (abs, 2007). the infl uence of large repeat clients is therefore considerably less than in more centralised economies such as singapore or hong kong. the australasian journal of construction economics and building [vol 9, no 1] 2 of course, contractual arrangements can be used to manage potential price escalation during the project, but these arrangements sometimes result in protracted legal battles when a bid has been inadequately prepared or when unforeseen issues arise during the construction period for any reason. an inexperienced owner may not be aware of the potential pitfalls inherent in the complexity of construction project delivery. the lowest tender price from several contractor bids will loom large in the assessment of such an owner because it is easily ranked in a way that delivered quality is not. similarly, estimated construction time is easily ranked but the veracity of the estimate may be hard for an owner to judge. the competitive bidding process often places the prime contractor and the owner in adversarial positions, a situation which can lead to undesirable outcomes for project quality (langford et al., 2007). the result is that competitive bidding can lead to the selection of incompetent contractors, excessive variations to contracts, litigation and protracted disputes. it can also be one of the constraining factors for the application of quality management principles (abdul-aziz, 2002). experienced clients have in many parts of the world managed to use their market share and expertise to develop systems to overcome this problem by using performance-driven procurement methods (coffey, 2008). the issue remains a signifi cant one in the more diversifi ed commercial economies. the issue of the technical competence of construction clients to assess tenders was pointed out as a problem as far back as bowley’s seminal study of the uk construction industry in the 1960s (bowley, 1966). it has received further research attention in recent times (e.g. manley, 2006). while large government departments and large commercial clients may develop in-house expertise at assessing construction tenders over a series of similar projects, the one-off client has no opportunity to do this and is unlikely to be able to adequately compare tenders from contractors with differing levels of expertise and experience. if a contractor has made a mistake in preparing the estimate or has deliberately underpriced it in order to win a contract in the hope of future work, the inexperienced client will probably not detect the problem until it is too late to effectively make another contractor selection. identification of client needs a further issue with the process involved in design-bid-build procurement can be the problem of clearly identifying and quantifying the client’s needs (arditi and lee, 2003). in the traditional system the brief making process is carried out by the owner and the designer with little or no involvement from the builder. this is not a problem for many projects but can create diffi culty when the proposed building is unusual or bespoke and solutions are proposed that require new construction methods or practices. several researchers point out the critical need to get the briefi ng process right in order to deliver a good project result (london et al.,2005; yu et al., 2008; smith et al., 2008). the quantifi able aspects of formulating a brief include fl oor areas, spatial relationships, service requirements and performance standards. the qualitative aspects are even more problematic as they include concepts of image, aesthetics and human comfort expectations. there are few endeavours where a customer agrees to pay for something when they necessarily have limited knowledge of exactly how the fi nal product will turn out. this disparity between the customer’s identifi ed needs and the specifi c built solution provided is posited as one of the main sources of customer dissatisfaction with buildings. research identifi es a lack of customer focus in the construction industry (dulaimi, 2005). many building contractors see themselves as supplying a product according to predetermined specifi cations and costs and they put little effort into understanding what the customer actually wants or expects from their project. this matter is further complicated when the end users of the building are not the same as the owners or the customer/client who procures the building. builders who identify repeat business as an important source of ongoing prosperity, of course, recognise the importance of good client relationships and of ensuring that the end users fi nd the delivered product satisfactory. soetanto and proverbs (2002) note this in their study of contractors’ assessments of client performance. reputation and ‘word of mouth’ recommendations of former clients are a valuable marketing tool that can enable them to survive economic downturns and manage continuous work streams in a disjointed and project-based industry. figure 1: cost-time-quality: the value triangle quality cost time value the australasian journal of construction economics and building [vol 9, no 1] 3 some builders see the construction industry as a service based activity that responds to client demand rather than creating demand. this is not always so, as nam and tatum (1992) have shown that some builders are very successful at developing new technical solutions which lead the market to new performance levels rather than simply responding to what the customer asks for in a standard manner. this raises the issue of how the design-bidbuild procurement can incorporate innovation and new technical development. innovation innovation as defi ned by slaughter (1998) is the successful introduction of new products, processes or equipment. traditional procurement tends to leave the realm of innovation to the designer and require the builder to simply deliver what has been specifi ed within cost and time parameters. this denies the particular expertise of builders any signifi cant creative input in the project delivery process. there can be non-conforming tenders, of course, where the builder makes suggestions that impact on the designed solution but these tend to mean that the main benefi t of design-bidbuild is lost as a market price for the work may not be able to be established through price competition (sidwell et al., 2001). non-conforming tenders present a particular diffi culty for the inexperienced client to assess. like is not being compared with like and a judgement call has to be made on the issue of which prospective solution best suits the client’s needs. in general, procurement methods such as partnering and relationship contracting have proven to be better at allowing for the incorporation of innovative solutions than traditional competitive tender procurement (walker et al., 2003; walker and hampson, 2003; barlow and jashapara, 1998; kumaraswamy and dulaimi, 2001). buildability as previously mentioned, contractor input to design is largely missing from competitive tender procurement with a resulting lack of focus on the buildability of the project design (akintoye, 2000). architects and building designers have variable levels of training in the technical aspects of construction. their focus can be exclusively on the fi nished product with little attention to the sometimes larger issues involved in physical project delivery. this lack of understanding can impact on cost. in addition, problems with the initial design and the documentation presented for a tender can exacerbate the situation (cox et al., 1999). comprehensive documentation is diffi cult to produce for a construction project as there are often many unknowns at the commencement of a project. consequently quality of documentation has been identifi ed as an issue for the industry as a whole and increasingly there are multiple iterations of project documents even in traditional tender bid projects. with the complexity of building projects increasing in terms of services, communications and transport interfaces, it is all the more critical that the particular expertise of builders is allowed to have input into the formative phase of a project. traditional procurement tends to work against this end and the result may be a large amount of rework on site and attendant costs relating to delays, wasted labour and materials (love et al., 1999). adversariality the fi nal issue of signifi cance with regard to traditional procurement is that it tends to lead to an adversarial relationship between the client and the builder. the client is seeking the cheapest price and the builder is trying to maximise profi ts. this can lead to the ‘variation’ game, where any discrepancies, errors or omissions in the documentation are used to increase return to the builder at the owner’s expense. partnering and alliancing procurement systems seek to solve this problem by sharing both the pain and the gain in project delivery and thereby eliminating adversarial contests between the parties and substituting a ‘best for project’ criterion for resolving disagreements. this may well present a useful future path for the industry but at the moment, at least in australia, such ‘relationship contracts’ are largely the province of big companies and government organisation procurement and have not greatly impacted on procurement at the smaller commercial and residential project level. research significance hall and pearl (2002) identify signifi cant variations in the perceptions about time, cost and quality on building projects. such perceptions can have impact on project operations particularly by supporting resistance to change. consequently, it was decided to fi nd out if builders in the local area of the sydney metropolitan region share the misgivings of academic researchers about the functioning of the competitive tender system of construction procurement. while a study of perceptions has its limitations, it may nevertheless be enlightening in terms of the factors that constrain effective change. there are commercial, social and environmental reasons for this study. if a relationship exists between procurement method and project quality, it is benefi cial for construction companies to know which method of project delivery supports greater quality, in order to ensure maximum positive effect on reputation and repeat business. this information is also important for property investors as the quality of the built property on the market impacts on their investments and returns. the issue is important on a social level as everyone uses the built environment and its quality impacts on the lives of all users. it is also signifi cant for the environment as construction has a major impact on resource and energy usage, and waste generation and each of these has a direct impact on the natural environment. the research questions to be addressed in this study are whether or not builders have a sense of dissatisfaction with traditional competitive tender procurement and whether or not they believe that procurement systems impact on the quality of their delivered product. methodology a survey was created to test reactions to these questions. initially a pilot survey was developed and was used to canvass three different categories of construction professionals: builders, property developers, and construction managers. eighteen surveys were sent out evenly distributed between the three different types of construction professionals. twelve responses were received. six of these responses were from builders, fi ve responses were from property developers and one only response came from a construction manager. the pilot survey was used to give an estimate of the interest level and a guide to the adequacy of the sampling frame chosen. as a result of the pilot survey, it was decided to only survey builders and developer/builders. project managers may be at arm’s length from the procurement issues under consideration and therefore be less likely to respond to surveys on the topic. the fi nal survey was modifi ed slightly as a result of feedback from the pilot survey respondents. fifty fi nal the australasian journal of construction economics and building [vol 9, no 1] 4 surveys were sent out, with twenty-fi ve going to builders, and twenty fi ve going to property developer/builders. participants were identifi ed via their reputation as established participants in the building industry in sydney. they do not represent a randomised sample but rather a purposive selection of participants known to be engaged with the issues under consideration. as such it is not claimed that the responses represent a rigorous statistical opinion poll of industry attitudes but rather an impression of a range of attitudes from a snapshot of industry participants at a particular time in a particular place. all the survey participants were the principal of their construction or development company. they ranged between 30 and 60 years of age and they all held either university or technical college qualifi cations in construction. twenty-eight completed surveys were received for a response rate of 55%. twenty-one of the respondents classifi ed themselves as ‘builders’ and seven classifi ed themselves as ‘property developer/builders’. some respondents came from the commercial building sector, some from residential construction and some operated in both sectors. a large majority (22 respondents or 80%) had been in business for more than ten years. 75% of survey respondents reported that competitive bidding was the main source of work for their organisation. the survey results are reported in table 1. question response which of the following aspects of a project is most important to your organisation when constructing a project? a) total cost incurred, b) time it takes to build; or c) quality of the project. a) 100% b) 0% c) 0% does your organisation mainly award sub-contracts based on price alone? yes 0% no 100% has your organisation ever awarded a sub-contract to the lowest bidder that resulted in an unsatisfactory quality of work? yes 35% no 65% how do you think shortening a construction schedule in order to lower the cost of the project impacts the overall quality of the project? circle your answer: a) no impact b) small impact c) large impact a) 50% b) 25% c) 25% when pricing a project, does your organisation attempt to lower its bid in order to win the tender? yes 25% no 75% if yes. has your organisation ever lowered the bid significantly resulting in a less than satisfactory profit return? yes 0% no 100% in your opinion, how does awarding a job to the lowest bidder, as opposed to the more reliable bidder for subcontracts, impact the quality of the end project? circle your answer: a) no impact b) small impact c) large impact a) 0% b) 25% c) 75% in your opinion, do you think that lowering the cost also lowers the quality of the project? yes 100% no 0% which of the following do you believe general contractors strive to achieve most when undertaking a construction project? circle your answer: a) quality of the product b) profit a) 100% b) 0% which of the following do you believe general contractors normally achieve when a project is finished? circle one answer: a) a quality project b) a quality project with a satisfactory profit c) neither a) 25% b) 75% c) 0% has your organisation ever completed a project and come out with unsatisfactory quality according to the client? yes 25% no 75% do you believe that the traditional competitive bidding tender procurement method has its problems? yes 25% no 75% which organisation do you think would strive to achieve higher quality in a project? a) general contractor under competitive bidding procurement method; or b) general contractor under an alternative procurement method, which ends with the general contractor owning the building that they have to sell. a) 75% b) 25% table 1: responses to questionnaire the australasian journal of construction economics and building [vol 9, no 1] 5 discussion all respondents report that the quality of the building project is the most important aspect for their organisation when constructing a building project. no respondents rate time or cost as more important than quality. this is at least partly explained by the phenomenon of ‘survey compliance’, in that it would have been clear to the participants that this was both the acceptable and the desired response to the survey. although assurance was given that survey participants would not be identifi ed in any way, it is still likely that respondents would have consideration for the appearance that their response gives of the company and the industry. similarly, on the question of whether their organisation awards sub-contracts on the basis of price alone, all respondents answered ‘no’. clearly there is some recognition that cost is not appropriate or suffi cient as the sole criterion for determining competence to perform building tasks. this may be stating the obvious but in recent years the philosophy of economic rationalism has led some procurers to rely almost completely on cost as the determining factor for contractor selection for building projects. on the question of whether their organisation had ever awarded a sub-contract to the lowest bidder resulting in unsatisfactory work, thirty-fi ve percent replied ‘yes’ and sixty-fi ve percent replied ‘no’. in hindsight it would have been advisable to follow this question with one on whether the organisation had ever awarded a sub-contract to a bidder who was not the lowest price bidder and still had unsatisfactory work resulting. this would have been stronger evidence for the lowest cost bid being closely related to unsatisfactory results. as it is we can only say that for a signifi cant percentage of survey respondents the choice of lowest price bidder sometimes results in unsatisfactory work. there is a mixed response to the question of whether shortening of the construction schedule in order to lower costs has an impact on the quality of the delivered project. fifty percent say there is no impact. twenty-fi ve percent say that there is a small impact and twenty-fi ve percent say there is a large impact on quality. given the caveat that some respondents may have been answering with a view to presenting themselves and their industry in the best light, it is interesting that a quarter of respondents state that shortening the time schedule would have a large impact on the quality of the result. it is evident that the value triangle presented earlier is intrinsically understood to impact on project satisfaction rates. nevertheless the reported mean assessment of the impact of shortening the schedule lay between ‘no impact’ and ‘small impact’. developer/builders in the sample rate the likelihood of impact slightly higher than builders did but this is not statistically signifi cant. a larger survey is needed to confi rm whether or not this difference is signifi cant. respondents with long experience in the industry (over twenty years) were considerably more likely to indicate that the shortening of the schedule would result in lowering of quality. no signifi cant difference was observed between those respondents who mainly undertake competitive bidding and those who mainly initiate their own projects. survey respondents were asked whether their organisation ever lowers its bid in order to win a tender. seventy-fi ve percent of respondents answered ’no’. it may be that some respondents interpreted this question as dealing with unethical collusion or improper negotiation of tender prices. of course, all estimators will try to get the lowest possible effective price when preparing a tender. the question is unclear about the point in the process where price lowering would take place. all the respondents who replied in the affi rmative to this question also said that the lowering of their tender price did not have any impact on the profi tability of the project. this suggests that they apply their own standards and priorities to the negotiation of fi nal prices in tenders. the impact of awarding a tender to the lowest price compared to a more reliable sub-contractor is the subject of the next question. no respondents thought that this would have ‘no impact’. twentyfi ve percent say it has a ‘small impact’ and seventy-fi ve percent say that the impact is ‘large’. the use of the word ‘reliable’ seems to be of signifi cance here. although several builders feel they could lower their own prices without impact, they are wary of sub-contractors whose pricing might not necessarily be ‘reliable’. there is an acknowledgment of the perils of lowest cost tendering as inexperience, dishonesty or incompetence may lead to subcontractors overreaching and submitting unachievable prices. this is reinforced by the 100% affi rmative response to the question of whether cost reduction results in decreased quality of projects. three quarters of respondents rate profi t as the principal goal that they are aiming to achieve in a building project, while one quarter put quality fi rst. a slightly different emphasis is evident in response to the next question on what is generally achieved at the end of a building project with 100% of answers saying that both a quality product and a satisfactory profi t would be achieved. one quarter of respondents admit having had a project where the quality of the end product was unsatisfactory to the client. this rate is considerably lower than the rate of client dissatisfaction measured elsewhere (dulaimi, 2005). a larger study may be needed to shed light on this discrepancy. similarly 75% of respondents declare that they see no problem with traditional competitive tendering. this contrasts with widespread reports of unsatisfactory results from the system. when asked directly whether higher quality could be achieved via competitive tendering or through another procurement method, the 75% who work mainly in competitive tendering list that option and the 25% who operate under other systems chose the ‘other procurement method’ response. this simply indicates that the contractors surveyed choose to operate in a system that suits them and does not give any objective assessment of how procurement affects project quality. conclusion although the literature of construction research provides ample information on the shortcomings of competitive tendering as a procurement system, the perceptions of practitioners who operate within the system may be much more mixed (zaghloul and hartman, 2006). the builders and developer/builders surveyed for this study are surprisingly supportive of the system as it exists. while this may be partly due to the ‘inertia of current practice’, it may also be partly due to the fact that competitive tendering still answers the needs of some parts of the industry. it can continue to supply a constant stream of work for the effective operator while giving the owner some reassurance that a market tested price is being paid. nevertheless there is a continuing likelihood in economic downturns that some contractors will win tenders based solely on price and prove incapable of delivering a quality outcome. it is likely that in much of industry a truly open call for tenders is rarely made. effectively there is always a level of vetting or pre-qualifi cation to ensure the worst potential problems with the bidding system are avoided. this may not be done formally but rather through a greater reliance on informally invited rather than open tenders. competitive tendering is likely to remain a part of the the australasian journal of construction economics and building [vol 9, no 1] 6 suite of procurement methods used for building projects despite the growth in the various forms of design-build and/or relationship contracting. the impact of using cost as the only parameter for contractor selection, however, needs to be modifi ed by inclusion of the other considerations which affect satisfaction with the end project. quality of the delivered end product is not entirely dependent on cost but neither is it desirable to leave cost out of the assessment equation. the value triangle has three corners and each must be addressed in some way in the evaluation of potential contractors for building projects. acknowledgements the authors wish to acknowledge the assistance of professor alan jeary and construction student lee salvaggio in the preparation of this research. references abdul-aziz, a.-r. 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(2006) ‘construction contracts: the cost of mistrust’, international journal of project management, 21(6), 419-424. the australasian journal of construction economics and building [vol 9, no 1] 8 [blank] authors instructions for papers to be published in the proceedings of the changing roles 2009f investigating informality in construction: philosophy, paradigm and practice thayaparan gajendran and graham brewer, (school of architecture and built environment university of newcastle, australia) goran runeson, (school of the built environment, university of technology sydney, australia) andrew dainty, (department of civil and building engineering, loughborough university, uk) abstract the complex interrelationships commonly enacted as a consequence of project team activity take a number of different forms, including those formally dictated by contract conditions. however it is becoming increasingly apparent that project performance is affected by informal relationships, though their investigation is notoriously difficult. this paper proposes that these difficulties arise partly from the nature of the informalities themselves, but also as a consequence of the philosophical position taken by researchers and their consequent methodological/paradigmatic posture, and its impact upon those being studied. it consequently proposes a subjectivist investigative framework that accommodates multiple philosophical points of departure, matching them to a range of alternative methodologies, and indicates the desirability of blending to reflect the peculiarities of each context under investigation. the framework also accommodates the practicalities of putting complex methodologies into action. the paper concludes that this framework presents opportunities to conduct rigorous in-situ investigations of informality at work, leading to authentic and deep insights that would otherwise remain unseen keywords: informality, methodology, method, construction introduction construction project organisations are characterised by complexity, interconnections and uncertainty. the connectivity and interdependency between multiple sub-systems – organisational, technical, or social – together with their positioning as part of uncertain and dynamic socio-cultural-political environments, poses considerable difficulties in understanding and predicting the overall behaviour of a construction project organisation (geraldi 2008). indeed, many recent studies have adopted complexity frameworks (bresnen, goussevskaia, and swan 2005; marrewijk et al. 2008; baccarini 1996; remington, zolin and turner 2009) and qualitative research methodologies (denizen and lincoln 2005) as a way to better conceptualise and understand projects as complex, socially constructed realities (cooke-davis et al 2007; small and walker 2010). such approaches can develop significant insights into influential project behaviours including issues relating to knowledge sharing, communication, and relationship building. however, such studies can be challenged when confronted with the complexity of informalities in these construction project environments. the key element of ‗informality‘ refers to the informal, casual or unofficial activities that occur in business firms, industries, societies and the economy as a whole. the conceptualisation of ‗informality‘ is discipline specific, and in construction management, informality is implicit in a number of research areas e.g. communication (gorse and emmitt 2007), safety practices (lingard and rowlinson 2005), gender/ethnicity based research (byrne, clarke, and meer 2005; pink et al. 2010), procurement/recruitment practices (bresnen et al. 1986), knowledge management etc (senaratne and sexton 2008; bresnen et al. 2003). moreover, some informality in australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 85 projects may be invisible or implicit, and can produce irreconcilable paradoxes that evade and challenge identification and inquiry (see small and walker 2010; bourne & walker 2005; alderman & ivory 2007; bresnen 2009). it is suggested in this paper that studies into informality could build on recent qualitative and complexity approaches and aid in better understanding project organisations. in general, there has been a recent, burgeoning interest in ‗informality‘ research in the construction management discipline (chan and räisänen 2009). the need for such a research focus arises from the recognition of inadequacies in current approaches to studying construction organisations (dainity 2008) and gaps in developing meaningful understanding or solutions to many of the complex issues facing construction projects (berggern and soderlund 2008; moldoveanu 2004). in this paper, the concepts and practices of ‗informality‘ are reviewed from economics, urban studies and organisational theory domains to develop a layered and contextual understanding of informality. the conceptualisation is notably influenced by both economic and sociological perspectives, and subjected to alternative philosophical paradigms. as o‘leary (2004) suggests ―without an appreciation of how attributes, positions of power and privilege, and worldviews conspire to create subjectivities, researchers can easily fall into the trap of judging the reality of others in relation to their own reality‖ (p. 47). this implies that examining informality from two different worldviews may lead to two different, but equally relevant and meaningful outcomes. deeper the sociological perspective assumed by a research, greater the need for the researchers to evaluate their philosophical predispositions/biases in constructing the research strategy. such an approach provides a much-needed subjective relevance, while maintaining high levels of dependability, authenticity, transferability and auditability (o'leary 2004). the choice of an appropriate research paradigm in designing a strategy/method to study ‗informality‘ is critical to producing meaningful outcomes. however, it is equally important to accommodate the practicality of the research design. indeed, explicit accounts of how to research informality in construction are limited (see chan and räisänen 2009, rooke, koskela and kangioglou 2009). aligning the conceptual research design to the operational research design is a frequent challenge faced by researchers (see gorse and emmitt 2007, 2009; pink et al. 2010). in some instances, the execution of the most appropriate conceptual research design may prove impractical or impossible. such practical challenges can arise from the unwillingness of subjects to cooperate in the study (due to commercial sensitivity, discomfort of participants with in-depth study and profiling), and challenges posed by the national/institutional ethical protocols (prohibiting research based on concerns of privacy, risk, benevolence etc) (australian government 2007). this paper builds on the extensive intellectual debates that have taken place about the choice, relevance, understanding and adequacy of research methodologies when studying construction phenomena (see rooke & kagilogou 2007; dainty 2008; rooke, koskela and kagilogou 2009). much of this debate is central to designing methodologies to study informality from a social perspective. this paper explores three interrelated aspects critical for designing research approaches to study ‗informality‘. they are: (a) a conceptual understanding of ‗informality‘ in project organisations; (b) the worldviews underpinning the ontological and epistemological positions relating to the concept of ‗informality‘; and, (c) the practical design of appropriate research methods to explore informality within various worldviews. these three aspects are reviewed in the context of selected studies that examine informalities in construction. it concludes by providing an overarching framework to identify appropriate research methods to study informality in construction. in doing so, it consciously avoids rigidly prescribing the ‗best‘ method for studying informality issues as a way of challenging misleading and naïve approaches—instead offering multiple combinations of research approaches and methods that provide both rigour and flexibility. australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 86 concept of ‘informality’: a review ‗informality‘ can be understood and defined from a variety of perspectives. by reviewing definitions and attributes of informality from other disciplines, this paper develops a rigorous conceptual basis for informality as part of the construction domain. the aim is neither to unearth the ‗roots‘ of informality research, nor to give an in-depth account of informality research in other disciplines. rather, the aim of the paper it is to generate a broader perspective of informality in order to identify the alternative paradigms/worldviews that underpin it. this then provides an opportunity to develop research approaches that can unearth informalities and identify resulting paradoxes in the construction environment. to this end, three perspectives on informality are reviewed here: urban informality, economic informality, and organisational informality. the study of ‗urban informality’ is about examining social actors and forms of social organisation in urban areas (alsayyad 2004). urban informality is ―a way of life [and] may be approached from three interrelated perspectives: the physical structure, comprising a population base; a system of social organization, involving a characteristic social structure and related patterns of social relationships; and a set of attitudes and ideas of individuals or groups engaged in or operating under forms of collective behaviour and/or social control‖ (alsayyad 2004, p.8). the research on urban informality largely focuses on developing an understanding about the functions and structure of informal groups/enterprises. however, some studies examine the nature and characteristics of informalities. alsayyad (2004), for example, suggests that urban informality can be theorised as a marginal activity that is: (i) a temporary manifestation occurring as a transient feature within an organisation; or, (ii) closely connected to the formal structure and is an essential and permanent component or way of life. thus the research focus is more about understanding the meanings of informalities, and how these meanings can create paradoxical situations (meyerson 1991). studies on ‘economic informality’ focus particularly on illegal economic activity (parry et el. 2007). these types of illegal activities take place ‗below the radar‘ of government and can take many forms including the activities of unregistered small firms, street labour or large registered firms employing workers without written contracts (oviedo, thomas, and karakurum-ö zdemir 2009). economic informality research has focused on: (i) identifying and measuring informal economic activities; (ii) the impact of the informal sector on an industry and nation e.g. labour market, unemployment, productivity, gdp etc; and, (iii) strategies for managing or controlling informal sectors e.g. regulation, legislation etc (oviedo, thomas, and karakurum-ö zdemir 2009; parry et el. 2007). here the focus is more on causal impacts of informality on economic outcomes and the effectiveness of regulation to deal with informality. it is important to be precise as to what kind of economic informality is studied (e.g. unregistered firms, unprotected workers, or the self-employed) so that appropriate approaches can be devised to study the problem (see lewis and hosein 2006; wells 2001, 2007). the conceptualisation of ‗organisational informality’ is largely underpinned by a sociological perspective. morand (1995) notes that the term is ―often used as conventional descriptors of social behaviour and social situations in organisation… [and] researchers generally have avoided rigorous attempts at construct definition and validation‖ (p. 833). he describes the terms ‗informal‘ and ‗informality‘ as referring ―to social situations or gatherings that are generally characterized by behavioural spontaneity, casualness, and interpersonal familiarity‖. the distinction between informal and formal aspects of organisations translates into the interpretation of artefacts such as dress codes, jokes, behaviour in meetings etc. however, morand‘s (1995) articulation of informality relates to interactional behaviours between actors in social construction and production; and the subsequent categorising of organisations (e.g. organic, inorganic, bureaucratic etc.) and their traits (e.g. innovative, agile etc). australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 87 more recently, organisational research has been active in highlighting the affects of new modes of communication, expanding divisions of labour, and increasing shifts towards nonhierarchical and self-coordinated organisations. these trends are together creating transient organisational boundaries and complex organisational set-ups. informality in these newly devised contexts is viewed as a positive contributor to creativity and innovation. it plays a crucial role in developing links and trust among business partners operating in turbulent and uncertain business environments. informalities can operate as flexible control mechanisms and fast solutions, in cases where formal mechanisms are impossible to manage or enforce. in contrast, informality in these contexts can also be seen as a threat to accountability and protocol, and even social justice (e.g. aiding discrimination). for example, misztal (2000) suggests that the creation of the asian economic crisis could be attributed to the failure of ‗informal connections‘ reflected in practices of nepotism for instance, which led to a lack of accountability and transparency in organisations. misztal (2000) subsequently argues that informality is best understood when explicitly compared with formality and suggests that maintaining a delicate balance between formality and informality is critical for order and control in new modes of organisations. this reinforces the interactional nature of informality as proposed by morand (1995). in construction projects, complexity, chaos and paradox, at least in part, can be attributed to the changing nature of organisations and the increasing emergence of informality as part of these contexts. the loosely coupled nature of construction project organisations (dubois and gadde, 2002) is conducive to a range of informalities in the practices and processes of construction. chan and raisanen (2009) suggest that any of the informality issues examined within a construction organisation are related to its practices, structures/systems, or social groupings (e.g. networks/clans of actors) in the context of a phenomenon (e.g. knowledge generation, safety management, competitiveness, learning process etc). informality issues can be related to interpersonal relations, informal leadership, behavioural control and informal communication (hodgetts & hegar 2008). activities associated with interpersonal relationships could include informal advice, trust, or communication. informal leadership is associated with the development of power within non-formal structures: this may best be described as gate keeping or perimeter guarding. behavioural control is a form of manipulation of members of an informal group using a variety of control strategies including establishing in-groups, coercion or persuasion. taxonomies of informality research in construction in this paper, it is argued that informality research can be conceptualised through four aspects, and that these aspects influence the design of the research approach/methodological paradigms, and vice versa. in addition, the role of the researcher is also noted, acknowledging the influence the researcher has on the execution of the study. the conceptual framework (see figure 1), along with the interconnected methodological framework (see figure 2) is described below, together with the role of the researcher. subsequently, the frameworks are used to review how existing studies of informality are approached and framed. this will assist in identifying research approaches in studying construction informality and possible, more appropriate alternatives. conceptual underpinnings this conceptualisation is intended to serve as a guide in the selection of research strategies for informality studies. it identifies four related aspects that underpin taxonomies of informality research: the informality domain, research issue, legality/ethics of the issue, and informality visibility (figure 1). australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 88 figure 1 a framework for conceptualising informality in construction informality domain refers to the discipline-based attributes influencing the core conceptualisation of informality research, which are broadly divided into economic and sociological domains. as the areas of research in construction management are diverse, different discipline-based assumptions and training can influence the treatment and approach of studies and assessments (rooke & kagioglou 2007; runeson and skitmore 2008). for example, an economic view of informality is often focused on identifying and quantifying illegal economic activities and devising regulations and strategies to manage them. the sociological view is focused on ‗structural and interactional‘ issues of socially constructed realities. across both approaches, ethical and moral aspects are central to the conceptualisation and operationalisation of informalities research (denzion and lincoln 2005). the research issues are influenced by the attributes of the ‘informality domain’ (as identified in figure 2). in the context of this paper, four general research issues are identified: (i) assessing actors‘ interpretations of informal interactional orders; (ii) developing meanings of informality issues and their associated characteristics via observed behaviours (e.g. bodily postures, conversational interruptions, phonological slurring, etc), or deciphering unobservable deep beliefs (values, assumptions etc); (iii) assessing the impact of informality on organisational effectiveness; and, (iv) understanding informality in terms of enhancing organisational life (not directly associated with improvements in organisational effectiveness). each of the issues can be used to frame research into informality aspects e.g. interpersonal relations, informal leadership, behavioural control and informal communication etc, could be researched via one or mix of the four-research issue. the level of visibility of an informality issue is dependent on how it is conceptualised. for example, interpersonal relations in an organisation can be studied via more visible rituals australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 89 depicted by artifacts (e.g. jokes, form of language), or via less visible trust and advice networks. the visibility of the issues has a significant influence on the methodological approach. legality/illegality of the aspect under study has a significant influence on the operational design and choice of research method. almost all universities are bound by research ethics protocols that aim to minimise the risks associated with research design and maximise the welfare of the participants (see australian government 2007). research projects studying illegal issues (even in the likelihood of inadvertent identification) are imposed with additional statutory obligations. the minimal obligations attached to anonymous illegal studies could attract researchers to engage with methods that offer anonymity. research projects studying unethical and immoral informal activities (i.e. not explicitly illegal) are not subjected to these additional statutory obligations. however, it can be argued that these studies should nevertheless be treated with sensitivity, and the findings should not be exploited. ethics is not solely about ‗procedural ethics‘ that seeks compliance with established protocols (see guillemin and gillam, 2004; brydon_miller 2008; o‘leary 2004). all research is value-ridden (as opposed to value-free), which makes it is essential that researchers understand the value system and its impact on their own research position and approach (corbin and struss 2008; christians 2005). it is important to note that the interactions between these five aspects are not linear. conceptualising informality as a research problem is a highly complex process involving numerous aspects under consideration simultaneously (e.g. disciplines, assumptions, research issues). moreover, this process is closely connected with methodological approaches to studying informality, as revealed in the following and interrelated methodological framework. research approaches and processes figure 2 identifies four processes in the methodological design of research: 1selecting a methodology: paradigms/ worldviews, 2selecting a methodology: research strategy, 3 selecting a research method: data collection process and 4selecting a research method: techniques two key terminologies – methodology and method – are used in figure 2 to describe the methodological practices in informality research. strauss and corbin (1998) describe methodology is ―[a] way of thinking about and studying social reality‖ and method as ―[a] set of procedures and techniques for gathering and analysing data‖ (p3). morse and richards (2002) use the term ‗research strategy‘ in lieu of methodology and describe research strategy as ―a way of approaching data with a combination of techniques that are ideally consistent with the method the researcher has chosen to use. … [t]he term method … refers to a more or less consistent and coherent way of thinking about and making [collecting] data, way of interpreting and analysing data, and way of judging the resulting theoretical outcome‖ (p 10). the term ‗technique‘ to refers to a way of attempting or completing research tasks (e.g. data coding). although techniques themselves do not indicate which method is employed in the research, the ways in which the techniques are applied could indicate likely research methods to be used. the first two processes are related to the choice of a methodology, worldview(s), and research strategy(ies) that accommodates that worldview. the last two processes are related to the choice of methods that focus on data collection and analysis techniques. despite the numerous combinations of possible research practices for informality research, some combinations may not be philosophically aligned. in this paper, the aim is to provide a framework for research that would encourage alignment between worldview and methods. australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 90 process 1: selecting a methodology: paradigms/ worldviews process 2: selecting a methodology: research strategy process 3: selecting a research method data collection process 4: selecting a research method techniques/analysis positivism post-positivism constructivism interpretivism critical theory hermeneutics emancipation critical realism pragmatism (as proposed by creswell and clerk 2007) case study ethnography action research grounded theory phenomenology ethnomethodology discourse analysis semiotics surveys (open ended close ended; postal email-online etc) observation interviews (face to face-telephone etc) focus groups diaries artefacts, documents, and records visual (video) methods descriptive statistics inferential statistics: paramedic and nonparametric statistical techniques coding: (open codes, axial codes, selective codes, memos, diagrams etc) conversation analysis thematic analysis figure 2 a framework of possible research methodologies for informality research synthesis based on strauss and corbin (1998); scale (1999); denzin & linclon (2005); guba and lincoln (2005), clerk and creswell (2007); corbin and strauss (2008); bernard and ryan (2010) selecting a methodology which aligns with the paradigm (process 1) and strateg(ies) (process 2) interacts with the conceptualisation of informality issues (i.e. the domain and issues). the worldview or paradigm affiliation (process 1) of a researcher is intrinsic to the way a research issue is conceptualised (morgan and smircich 1980). as indicated earlier, this means conceptualisation of research issues occurs in multiple and interactive layers. varieties of post-positivist or constructivist philosophies ―enable researchers to deal with complex layered and often unobservable strata of reality that impact upon our action and thinking‖ (joseph and roberts 2004, p1). one of the eight worldviews proposed in the process 1 in figure 1 could conceptually underpin informality research. the subtlety of the paradigm variations demand deep engagement with the literature to perceive the differences. moreover, it is instructive to map the development of philosophical alternatives beyond the dominance of social constructivism and interpretivism. the tensions between emerging constructivist/interpretivist/critical theorist philosophies is evident in literature (joseph and roberts, 2004). in essence, during process 2, researchers conceptualise their research issues with a worldview they uphold (if they are fundamentalists) or the worldview they want to adopt (if they are pragmatists). researchers need to carefully evaluate and respond to critiques of the chosen worldview and why it will deliver meaningful outcomes. as an example researchers‘ deep assumption about the nature of informality, whether it is a temporary or permanent phenomena, could influence research conceptualisation and paradigm position. researchers, assuming informality as a permanent aspect, may not seek to identify strategies to eradicate informality. they rather conceptualise their research with an interpretative, hermeneutic-emancipatory tradition that enables them to understand the meaning and/or transform the socially constructed realities by liberating the members from australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 91 their traditionally held beliefs (alvesson and willmott 1992; alvesson 2002). assumptions of the temporary nature of informality could lead to a technical and rational approach to eradicate informality underpinned by post-positivist tradition [refer figure 2]. however, keeping pace with the rapidly emerging paradigm variations in the qualitative methodologies (the ‗isms‘ revolution) is challenging (denizen and lincoln 2005). most evolving paradigms are arguably variations to existing post-positivist paradigms, accommodating deviations in ideology or research process (joesph, and roberts 2004). the evolution of alternative paradigms can be observed as staying true to the cause of the fundamentals of post-positivism: that is to acknowledging multiple worldviews (denizin and lincoln 2005). the evolution of paradigms constantly challenges the prevailing worldviews (constructed by the ontological and epistemological positions) that may stand in the way of developing a clear understanding of a problem (o‘leary 2004; bryman 2008). process 2 is about identifying a research strategy that complements the choice of worldview(s). a research project designed to study informality could combine multiple strategies. as an example, ‗ethnography‘ is complementary to ‗case studies‘ and ‗grounded theory‘ (see barrett and sutrisna 2009). in the case of a construction project, the nature of the project and identification of the boundaries (defining the social units of which it is comprised) are best investigated using case studies. the case study is an overarching research strategy rather than simply a data collection method or a research design concept (yin 1994). as stake (1995, p. 2) states: ―the case study methodology/strategy allows any selected method to ―study a case analytically or holistically, entirely by repeated measure [positivist] or hermeneutically, organically or culturally and by mixed methods…‖ (stake 2005, p. 443). therefore, the case study could be designed in combination with phenomenology, ethnomethodology, discourse analysis and semiotics. the methodological position will influence the selection of the appropriate methods for data collection (process 3) (and vice versa). in theory, the choice of a data collection method should be predominantly underpinned by the methodology. however, in practice, numerous other considerations, such as ethical protocols or the cooperation of participants tend to act as constraints on the choice of data collection methods. although methods supporting a positivist paradigm are reduced to surveys and published numerical data, a trend has developed for the use of quantitative methods to analyse the results arising from nonpositivist methods such as ‗key word searches‘ as part of context analysis (bernard and ryan 2010). almost all non-positivist methodologies could use interviews and focus groups as data collection methods. in addition, ethnographic studies could use observations and any relevant artefacts/documents as data. patterns of informal behaviour can also be studied with visual (video) methods and use of diaries. the selection of research analysis? techniques (process 4) is also related to the selection of methods and methodology. analysis techniques range from quantitative (e.g. inferential and descriptive statistics) to qualitative techniques (e.g. coding and thematic analysis). although coding techniques are used in quantitative analysis they are also commonly understood as a key part of a qualitative approach. strauss and corbin (1998) have provided an extensive discussion on coding process (e.g. open codes, axial codes, selective codes, memos, diagrams etc. conversion analysis technique is central to discourse analysis. thematic analysis identifies themes emerging from data and is a technique that could be applicable to most qualitative approaches (see bernard and ryan (2010) for guiding the operationalisation of these methods). the researcher being the ‘research instrument’ designing an appropriate research approach is only part of good and meaningful research. this establishes the ideology underpinning the research and the processes that are followed in the design and execution of the research. however, the fundamental concern is how the australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 92 researcher will execute the methodology? who is the instrument, in arriving at a meaningful outcome? in contrast to quantitative research, where researchers rely upon validated statistical instruments, qualitative research assumes that researchers themselves are the instruments. corbin and strauss (2008) argue that good qualitative research emanates form the researchers who share the characteristics of having a humanistic bent, curiosity, creativity and imagination. however, the key characteristic that distinguishes good qualitative researchers is the ability of the researchers to deal with risk and to manage ambiguity. moreover, researchers who develop trust and confidence in the self as the research instrument (as opposed to established tools and techniques) generally maintain high-quality and ethical research practices. designing quality research then, involves the selection of appropriate research practices that maintain the adequacy of the project and that deliver meaningful outcomes, as purposively directed by the researcher (see dainty, 2008 on the principles of methodological plurality). a selected review of informality research this section reviews methodologies used in studying informalities in construction, based on selected published work in the area. this review includes papers in which informality is dealt with implicitly and/or explicitly, and is divided between those papers that take an economic perspective on informality and those that assume a sociological approach in examining informality. it should be noted that the selected studies are not a complete representation of informality studies in construction. however, this review can inform a range of research approaches that can be discussed in the context of figures 1 & 2. this can assist in developing an understanding of the taxonomies of methodological approach that can be used for studying different informality issues. review of informality studies from the economic perspective a study by lewis and hosein (2006) focused on estimating the size of the informal (hidden) construction labour force in trinidad and tobago (t&t). that is, identifying the nature of illegal labour and quantifying the extent of informal (illegal) labour employed in construction projects/sectors in a particular region. lewis and hosein (2006) rationalised the methodological approach using anecdotal evidence and citing the difficulty in obtaining reliable statistical data on illegal sectors or activities within the construction industry. as a result, the study used published statistics from a number of sources to then estimate the extent of informal construction labour in t&t. the research thus drew on publicly available and published documents and identified some of the ethical challenges in collecting primary data to identify and quantify the hidden sector. the paper by wells (2001) focused on revealing the informal sector in the context of capital formation in less developed economies. in this paper, the illegality of the informal sector is not overtly discussed. like the previous study, the paper is based on observations and/or discussions with participants and published data. it is difficult to gauge the assumptions about the temporary/permanent nature of the informality in this type of study. the author explicitly mentioning not to interpret the findings of the study along the racial context, highlights the ethical issues confronting the researchers beyond reporting on their study. oviedo, thomas, and karakurum-ö zdemir (2009) identify a number of other methods that could be used to study economic informality. the approaches are classified as direct (micro) methods and indirect methods (macro) methods. the micro methods could employ voluntary surveys (nugent, and sukiasyan 2009.), interviews and tax audits (oviedo, thomas, and karakurum-ö zdemir 2009). use of the survey method, specifically anonymous surveys, to collect primary data is relatively less challenging to gaining ethical approval than some comparable methods. the anonymity of personnel associated with any illegal activities minimises the risk to, and responsibilities of, the researchers and institutions conducting the study. the interview method could pose challenges if actors involved in the illegal informal australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 93 sector are identified, as ethical protocols would require that all illegal activity is reported to the relevant authorities. with tax audits, the collection of private and identifiable data could also prove ethically challenging. moreover, any identification of informality associated with tax evasion could be treated as a criminal activity—again, researchers are required to notify such activity to appropriate authorities. however, tax-based analysis can be conducted using secondary published data, if available. these methods include studying the discrepancy between aggregate and income expenditure, or the discrepancy between total labour force and formal employment and physical input of resources (e.g. use of electricity or water consumption). in essence, economic informality studies are dominated by positivist methods, although there is room for the use of post-positivist methods. review of informality studies from the sociological perspective ethnography is a common approach to exploring informality from a sociological perspective. this approach is used as a means for exploring cultural aspects of human organisation (geertz 1975; morse & richards 2002; schein 2004), and can be adopted to make sense of partly visible emergent informalities. for example, baarts (2009) used ethnography to study collective individualism as an informal emergent social process relating to construction site safety practices (i.e. research issue 2, figure 1). ethnography can unearth hidden informal practices as part of the culture of an organisation. in this study, the researcher become part of the cultural group, conducting observations during the normal course of work. the researcher questioned and evaluated the ethical concerns and personal prejudices in an explicit manner in the conceptualisation and operationalisation of the research study. the descriptions made during the site observations and data from semi-structured interviews were used to create meaning and develop an understanding of the informal social process. pink et al. (2010) discuss the opportunities offered by ethnographic approaches in developing better understandings of social phenomena. this study, through the ethnographic process, developed an understanding of invisible routes of communication in construction sites employing migrant workers (e.g. research issue 4, figure 1). the use of photographic and video-based data in addition to conventional ethnographic data is also adopted. pink et al. (2010 p. 649) indicate the ―essential criteria [of their study] is that the researcher retains the reflexive awareness of how her or his work is informed by theory and a self-consciously considers how theory and practice remain in dialogue though the ethnographic process‖. the focus on developing meaning from social practices to understand organisational life fits with the hermeneutic-emancipatory paradigm. the above two studies analysed both visible (using observations) and hidden aspects (using in-depth discussions) of informalities. however, they did not report any ethical challenges in executing the research design. gores and emmitt (2007, 2009) examined the informal aspects of the communication process during construction progress meetings (e.g. research issue 1, figure 1). the study involved the analysis of observable/visible physical behaviours and linguistic interactions during site meetings across 10 projects. this approach was used to unearth the ‗not so‘ visible socio-emotional interactions influencing informal relationships among the team members. they used observation methods and ‗interaction analysis process‘ approach (a qualitative approach to generate quantitative data) to analyse the communication process. the difficulties faced with executing the conceptual research design in practice are highlighted. a study by styhre, josephson and knauseder (2004) implicitly deals with informalities associated with the learning capabilities of organisation networks (e.g. research issue 2, figure 1). they employed case study and action research strategies using individual interviews, group interviews and published documents as data to identify informal networks. australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 94 bresnen (2009) employed an inductive approach to study emergent practices of partnering through a practice-based approach. the study used interviews, documents and observations to grasp the emergent nature of partnering practice (e.g. research issue 2, figure 1). furthermore, the paper discusses alternative methodologies and methods for generating knowledge, reinforcing the need for multiple lenses to study informalities. barrett and sutrisna (2009) have advocated the use multiple approaches within the context of a case study strategy for generating meaning from social phenomena (e.g. research issue 3, figure 1). however, caution in the abstraction process is urged to maintain the relevant meanings of events, and to not confuse the meanings by removing the context. their study on understanding process in construction projects was conceived within the critical realism paradigm, using case study and grounded theory strategies. the critical realism paradigm enables them to assume both objective and subjective realities of constructs associated with their study. they used condition consequence matrices and cognitive maps to show relationships between concepts and to identify some causal relationships. discussion the above review highlights the diverse, but effective methodologies and methods employed in studying informality and emergence in construction. the studies on economic informalities, due to difficulties in gathering reliable primary data, have largely used anecdotal evidence and existing published data in identifying and quantifying informalities. studies from a sociological perspective employ multiple strategies including case study, ethnography, action research, and grounded theory, using different types of data gathering techniques, including observations, interviews, published documents etc. it can be inferred that all the above studies, except gorse and emmitt (2007, 2009), used qualitative methodology as part of a non-positivist tradition. although not explicitly stated, all of the sociological studies fall into constructivism, interpretativism, and hermeneutic-emancipation paradigms, except barrett and sutrisna (2009) who assumed a critical realism framework. from the literature, there clearly remains limited use of discourse analysis (kao, green, and larsen 2009) and ethnomethodology strategies (hugill 2001, c.f. gorse and emmitt 2009; rooke, koskela, and kagioglou, 2009) to study informality. discourse analysis, phenomenology and ethnomethodology are focused on understanding realities based on the use of language in written or oral form. these strategies are closely aligned to the interpretativist paradigm. discourse analysis can help to reveal the types of informal structures of the language used by different project team members (e.g. architect, contractor, engineer). phenomenology and ethnomethodology are focused on ―micro-social interactionsthat is interaction on a small scale, between individuals or within small groups‖ (seale, 1999 p. 30) can also provide different lenses to study informality as a social construct. the discourse analysis, phenomenology and ethnomethodology in the context of constructivism, interpretativism and hermeneutic emancipation paradigms can provide a sound base to develop an in-depth understanding of informalities through the use of language. this enables transformation of, or liberation from, the traditionally held beliefs and practices underpinning informality in construction (alvesson and willmott 1992). the use of semiotics could deal with analysis of structures, generative mechanisms and practices beyond language. this can provide an alternative to critical theorists who reject the use of discourse strategies to explain causality, keeping in line with the hermeneutic emancipation tradition. therefore, semiotic strategies, conceived within the critical realism paradigm could offer a better research approach to study informality enabling causal analysis while maintaining some the rich attributes of non-positivist paradigms (fairclough, jessop and sayer, 2004). australasian journal of construction economics and building gajendran, t (2011) ‘investigating informality in construction: philosophy, paradigm and practice’, australasian journal of construction economics and building, 11 (2) 84-98 95 conclusions informality is a significant part of the practices and processes of construction project organisations. accordingly, informality needs to form part of research conducted on the construction sector. however, informality can be a difficult subject to research due to its often intangible and invisible nature. in this paper, a number of approaches, methodologies and methods are put forward as part of a guiding framework for research in this area. it is argued that a carefully developed research project can aid in understanding and uncovering informality in construction projects and, in turn, can help identify potentially problematic paradoxes that often emerge from these informalities. to this end, the paper proposes interrelated conceptual and methodological frameworks for research on informality. indeed, it is proposed that the methodological process involves identifying paradigm(s) within which the research is conceptualised, which then influences the strategies and research methods adopted for collecting and analysing data—and vice versa. first, four key dimensions were identified as vital when conceptualising ‗informality‘ research: the discipline context (economics or sociology), nature of the research issues, ethical/legal dimensions and visibility of the informality, with the significant connections between the conceptual and operational aspects of the research acknowledged. second, the methodological framework presents four processes associated to research design: 1selecting a methodology: paradigms/ worldviews, 2selecting a methodology: research strategy, 3selecting a research method: data collection process and 4selecting a research method: techniques. it is argued that both frameworks are equally important and iterative in nature. practical (ethical and operational) considerations of conceptual research design are paramount for developing meaningful outcomes. finally, these frameworks were used to investigate existing literature on this subject, as a way of identifying advantages, disadvantages and gaps in the research. it is evident (within the limitations of this brief review) that the case study strategy, ethnography and action research, are commonly and effectively used to study informality from a sociological perspective. it is proposed that critical realism could prove to be a worthwhile paradigm for studying informality in construction, because of its ability to connect. furthermore, it is argued that alternative methodological approaches, such as ethno-methodology, phenomenology and semiotics could add richness to informality studies. this paper deliberately avoids prescribing the ‗best‘ approach to studying informality issues. from the frameworks developed and the review of existing literature, it is argued that a prescriptive approach in studies of informality would be ineffective in coping with the complex social phenomenon of informality. instead, a flexible and guiding framework is proposed to help researchers develop appropriate and well-considered frameworks that produce meaningful outcomes for understanding and identifying informality in the construction sector. references alderman, n. and ivory, c. 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(1994) case study research: design and methods, thousand oaks, california, sage p.a. bowen, k.a. hall, p.j. edwards, r.g. pearl, and k.s. cattell 48 the australian journal of construction economics and building vol.2 no.2 perceptions of time, cost and quality management on building projects professor p.a. bowen and associate professor k.s. cattel, university of cape town k.a. hall, the university of new south wales associate professor p.j. edwards, royal melbourne institute of technology professor r.g. pearl, university of natal introduction the clients of the construction industry are primarily concerned with quality, time and cost and yet the majority of construction projects are procured on the basis of only two of these parameters, namely time and cost (bennett and grice, 1990). this is understandable since the majority of project management control systems highlight time and cost, and overlook the relative importance of quality (hughes and williams, 1991). it is argued by herbsman and ellis (1991) that the major failings in traditional approaches to project delivery have been in extensive delays in the planned schedules, cost overruns, serious problems in quality, and an increase in the number of claims and litigation associated with construction projects. in order to plan and manage a successful project, the three parameters of time, cost and quality should be considered. hughes and williams (1991), in arguing for the consideration of these three factors in attaining the client’s objectives, propose that these factors are the three points of a triangle and that neglecting one factor will have a corresponding detrimental effect upon the other two. in support of this, lansley (1993) argued strongly for the importance of studying the behavioural aspects of management in attempting to address the problems facing the construction industry, i.e., that it is the issue of the ‘human factor’ involved in construction projects that needs to be addressed. rwelamila and hall (1995) further argue that little evidence exists of successful projects where these three factors have been balanced and there is a need to embrace time, cost and quality management as a human activity system. the purpose of this paper is to explore how time, cost and quality management on building projects is perceived by those involved in project teams. conclusions are drawn and recommendations are made with respect to the perception of time, cost and quality management associated with building projects. time, cost and quality (tcq) management in the attainment of client objectives the concept of managing construction projects is deeply embedded in the traditional building procurement system. ireland (1983) argues that time, cost and quality are the principal feasible objectives of the client in any construction project. although it is claimed that time, cost and quality are incorporated in the management of construction projects, research has shown that in fact a time-cost bias exists. time timely completion of a construction project is frequently seen as a major criterion of project success by clients, contractors and consultants alike. newcombe et al. (1990) note that there has been universal criticism of the failure of the construction industry to deliver projects in a timely way. nedo (1983) states that a disciplined management effort is needed to complete a construction project on time, and that this concerted management effort will help to control both costs and quality. this is tantamount to saying that the client’s objectives can be achieved through a management effort that recognises the interdependence of time, cost and quality. cost clients have been increasingly concerned with the overall profitability of projects and the accountability of projects generally. cost overruns, in association with project delays, perceptions of time, cost and quality management on building projects the australian journal of construction economics and building vol.2 no.2 49 are frequently identified as one of the principal factors leading to the high cost of construction (charles and andrew, 1990). research to date has tended to focus on the technical aspects of managing costs on construction projects in the attainment of client objectives. there is little evidence in the published literature of a concern for the organisational, social and political problems that are inherent in the management of construction costs and the ability of the project team to meet the client’s needs in terms of cost. quality to the client, quality may be defined as one of the components that contributes to “value for money” (flanagan and tate, 1997). vincent and joel (1995) define total quality management as: “…the integration of all functions and processes within an organisation in order to achieve continuous improvement of the quality of goods and services. the goal is customer satisfaction.” furthermore, in order to achieve successful project quality management three separate drivers to quality management must be managed, namely: integration of the project team so as to have a single objective and a common culture a customer focus for the team thereby facilitating the provision of products and services that will meet the clients needs a process of continuous improvement in the management of the construction project. when these three components are successfully integrated, the project will begin to realise significant, measurable and observable improvements in the attainment of the clients’ objectives. we argue that an efficient way to address these shortfalls is to recognise the ‘human’ factor within the management of time, cost and quality. an analysis of the perceptions held by clients, contractors and building professionals, concerning client objectives relating to time, cost and quality management will allow this proposition to be explored. this is done through an opinion survey. the survey the focus of the study the effective management of project time, cost and quality (tcq) is intrinsically important to the attainment of client objectives. in order to examine this causal link, the opinions of clients, architects, quantity surveyors, project managers, consulting engineers and general contractors in south africa were obtained by means a national questionnaire survey. the questions sought to establish their perceptions concerning client objectives and the project time, cost and quality associated with building procurement systems in south africa. methodology a stratified mail questionnaire opinion survey was conducted in south africa. survey participants comprised clients, architects, quantity surveyors, consulting structural engineers, project managers, and general contractors. questionnaires were sent to practices and organisations rather than to individuals, using the membership directories of the south african property owners' association, the south african institute of architects, the association of south african quantity surveyors, the institute of consulting engineers, the institute of project managers, and the master builders' associations. in total 180 questionnaires were distributed, comprising 30 from each sub-group. one hundred and forty-three replies were received (79.4%), comprising 10 clients (33%), 24 architects (80%), 30 quantity surveyors (100%), 30 engineers (100%), 25 project managers (83%) and 24 general contractors (80%). the questions for each of the six groups of participants were designed to facilitate an inter-group comparison. in the discussion of the results, percentages given in tables refer to the proportion of respondents offering that perception. the intention of the survey was to reveal areas of concern for the industry within the process of project time, cost and quality management rather than to provide hard evidence of inter-group differences between members of the design team. clients, as a group, are likely to be less homogeneous than the other groups of participants. the majority of client respondents to the survey described themselves as being experienced in property development, with 80% claiming to have continuous or frequent involvement in property development (50% p.a. bowen, k.a. hall, p.j. edwards, r.g. pearl, and k.s. cattell 50 the australian journal of construction economics and building vol.2 no.2 claimed a continuous involvement). most clients (90%) reported being primarily involved in the commercial and industrial sectors of property development, with the majority (67%) being involved in the commercial sector. average annual turnover varied considerably, but 89% of respondents claimed an annual turnover in excess of zar 10m (1 au$ = zar 5.50). the majority of client respondents thus constitute organisations wielding considerable financial influence in the property development market in south africa, and have a frequent, if not continuous, involvement in property development. in this context, the client group exhibited reasonable homogeneity, but it should be noted that the views of small, one-off clients are almost certainly underrepresented in this survey, as the data collection method would have limited their ability to participate. survey results for the purposes of this study, various procurement systems have been grouped together into three generic types, namely: conventional (traditional, negotiated, costplus); design and build (design and build, package deal, turnkey, develop and construct); and management-orientated (management contracting, construction management, design and manage) (masterman, 1992). the conventional method of building procurement is reported by nearly 70% of respondent clients in south africa to be the most widely utilised procurement system. the management-orientated (21%) and design and build (9%) systems enjoy considerably less usage. the results are discussed question by question and compare the participating groups' opinions about each issue. question 1: please indicate whether clients are realistic with respect to expectations of time, cost and quality at the outset of the project. (answer choice = all/most/some/ none of the time) the responses show that clients’ and consultants’ opinions are far from uniform. clients are relatively sanguine about their tcq expectations, with a large majority believing each of these to be realistic. the most pessimistic view of the reality of clients’ tcq expectations is held by architects, with only clients’ quality expectations receiving a majority affirmative response. this is probably attributable to the control over quality which architects perceive themselves to hold as principal agents for the client under conventional traditional procurement systems, as compared to the management of time and cost, for which they would assign responsibility to contractors and quantity surveyors, respectively. a similar response pattern is detectable with engineers and, given their principal role in engineering projects, a similar explanation may hold for their views. apart from the client group, quantity surveyors hold the next most optimistic view, a clear majority believing that clients have realistic expectations about time, cost and quality from the outset of a project. the quantity surveyors’ views are closely matched by those of project managers. the views of engineers are probably influenced by the nature of engineering projects, where quality is usually highly specified at the outset, but time and cost are far more uncertain (e.g., the use of schedule of rates and cost-plus forms of contract for engineering projects). given that engineering projects often comprise far fewer components than building projects, and that many engineering projects are commissioned by public sector agencies with substantial experience, this may explain why engineers are more optimistic about realistic client expectations of quality. contractors are surprisingly optimistic about the reality of client expectations for project time and quality. an explanation for this view of project time is not readily forthcoming, given that, for most conventional procurement systems, the contract period is not part of the contractor’s bid but is stipulated in advance by the client. similarly, the defects liability period stipulated in most conventional procurement systems suggest that clients’ expectations of quality are considerably less than realistic. contractors’ pessimistic view of the reality of client cost expectations is probably explained by their (the contractors) having to seek work in a highly competitive market. responses for the project time objective exhibit the greatest variability. given clients’ practical inability to model time performance reliability, their highly optimistic view of the reality of their own expectations for this factor, at the outset of a project, deserves more thorough research attention. perceptions of time, cost and quality management on building projects 51 the australian journal of construction economics and building vol.2 no.2 table 1: perceived extent to which clients are realistic, all or most of the time, with respect to their expectations of project time, cost and quality at the outset of the project % of respondent groups all clients architects quantity surveyors engineers project managers contractors project parameter (%) (%) (%) (%) (%) (%) (%) time 57 90 33 67 47 60 63 cost 57 70 44 83 41 72 46 quality 74 80 65 83 59 84 79 question 2: please rank the following factors in terms of their importance to building clients. (answer choice: 1 = most important; 3 = least important) all respondents to this question ranked project cost as the most important project parameter to building clients. the interesting finding from the responses to this question is that, contrary to the views of other project team participants, clients rate project quality as more important than project time performance. the converse was true for the other respondents. this suggests that clients may well be prepared to sacrifice construction time for improved quality. question 3: to what extent is an attempt made by the procurement team to match client needs with the characteristics of different procurement systems? (answer choice:(always/sometimes/never) clearly, clients have a false illusion about the extent to which consultants and contractors will match procurement systems to clients’ needs. table 2 below indicates that while the majority of clients (67%) believe that the procurement team does match their needs to the appropriate procurement system, the perception is not supported by the procurement team themselves. the majority of the building professionals surveyed clearly believed that they did not usually attempt to match their clients’ needs to an appropriate procurement system. it is possible that they did not see any need to do so, given the overwhelming prevalence of the traditional systems. the danger here is not only that consultants are not properly advising their clients in this regard (and thus clients may not be getting the procurement system which best matches their needs), but also (and more importantly) that clients are erroneously believing that they are actually receiving such advice from the procurement team. question 4: what proportion of building projects are completed within the client’s agreed budget for the project? (answer choice = all/most/some/none of the projects) the response data is shown in table 3. clients clearly appreciate the greater cost certainty attributable to design and build procurement systems. architects, however, see less potential in management-oriented systems or antipathy towards procurement systems which appear to diminish architects’ traditional leadership roles in projects. quantity surveyors appear optimistic about the capacity of all three procurement systems to maintain project cost budgets. engineers, on the other hand, are relatively pessimistic about this for design and build and management-oriented procurement systems. project managers show increasing confidence the capacity of alternative procurement systems to maintain project cost budgets, as their own level of involvement increases. contractors are highly confident of their own ability to meet client cost limits for projects under design and build and management-oriented procurement, but are less optimistic about these limits being maintained on conventional traditionallyprocured projects. question 5: to what extent do clients make changes to the original brief (in respect to time, cost and quality) after the start of the project? (answer choice = always/sometimes/never) eighty percent of client respondents believed that they never make changes to the original brief after the start of the project. this apparent high regard for their ability to stick to the original brief is clearly not shared by their consultants, who believe that changes do occur at least sometimes p.a. bowen, k.a. hall, p.j. edwards, r.g. pearl, and k.s. cattell 52 the australian journal of construction economics and building vol.2 no.2 table 2: perceptions of the extent to which the procurement team always and sometimes attempt to match client needs with the characteristics of different procurement systems during the election of a procurement system % of respondents groups all clients architects quantity surveyors engineers project managers contractors (%) (%) (%) (%) (%) (%) (%) extent of the match 43 67 48 43 37 44 25 table 3: perceptions of whether all or most building projects are completed within the client’s agreed budget (building cost) for the project % of respondent groups all clients architects quantity surveyors engineers project managers contractors procurement method (%) (%) (%) (%) (%) (%) (%) conventional 78 78 75 83 83 75 69 design and build 77 83 71 76 58 89 94 managementorientated 75 67 54 77 59 95 89 table 4: perceived extent to which inadequate briefing of the procurement team by the client is always responsible for client dissatisfaction with the resultant building in terms of time, cost and quality % of respondent groups all clients architects quantity surveyors engineers project managers contractors project parameter (%) (%) (%) (%) (%) (%) (%) time 24 30 22 23 13 20 42 cost 29 56 35 23 30 21 29 quality 26 33 22 30 35 12 25 architects = 58%; quantitysurveyors = 67%; engineers = 70%; project managers = 60%). nor are clients’ views shared by contractors, with 71% believing that changes always or sometimes took place. this finding suggests that there is a serious gap between the perceptions of clients and the other members of the project procurement team about what constitutes a variation to the original brief, and that consultants in particular may not be successfully communicating the full implications of project variations to their clients. question 6: does the procurement team utilise a formal brief-elicitation procedure for determining client requirements in respect of the project? (answer choice = always/sometimes/never) surprisingly, the responses to this question were considerably worse than expected. only 44% of clients believe that the procurement team utilises formal briefelicitation procedures. similarly, 57% of architects and 37% of quantity surveyors believe that formal brief-elicitation procedures are utilised for conventionally procured projects. a lack of understanding on the part of the procurement team about what constitutes a formal brief-elicitation process may explain the responses to this question. architects and quantity surveyors might have been expected to display far more confidence in formal brief-elicitation procedures for conventionally-procured projects. question 7: in your experience, is inadequate briefing of the procurement team by the client responsible for client dissatisfaction with the building in terms of time, cost and quality? (answer choice = always/ sometimes/never) the results to this question tend to contradict those obtained in question 6. if the responses to question 6 are reliable, then far higher percentages could have been experceptions of time, cost and quality management on building projects the australian journal of construction economics and building vol.2 no.2 53 pected for the ‘always’ response to this question. the logic for this is that, if formal brief-elicitation procedures are not always used, then inadequate briefing is likely to occur and hence there will be higher levels of client dissatisfaction with the finished building in terms of time, cost and quality. the mismatch of responses to questions 6 and 7 could be explained by theorising that an adequate project brief may not always be attainable at the outset, and that it often “grows” with the project development. question 8: at the outset of the project, do clients know what their needs are with respect to the following factors? (answer choice = always/sometimes/never) table 5 shows that all respondent groups (including clients) have little faith in clients’ ability to know exactly what they want at the outset of a project, particularly with respect to time schedules, quality requirements and methods of procuring the building. this lends support to the proposition theorised above. only client respondents believe that they knew at the outset what level of functional performance they expect from the completed building. other respondents were far more pessimistic about clients knowing this. this points to the possibility of a communication failure occurring between clients and their professional advisors. question 9: what proportion of clients use their own resources to monitor and control construction time, cost and quality? (answer choice =all/most/some/none) for the purposes of this question, ‘control’ refers to the effective management of project time, cost and quality factors. from table 6 it is clear that consultants and contractors hold a pessimistic view of clients’ capacity to monitor and control the tcq performance of projects. the majority of clients (80%), however, believe that they have the resources available in order to adequately monitor and control project cost. it should be incumbent upon consultants to ensure that the accuracy and reliability of their clients’ cost monitoring and control resources at least matches their own. table 5: perceived extent to which clients always know their requirements at the outset of the project % of respondent groups all clients architects quantity surveyors engineers project managers contractors client requirement (%) (%) (%) (%) (%) (%) (%) budget limit 58 80 35 70 67 60 44 functionality of building 29 60 26 27 23 33 25 time schedules 35 40 39 40 17 52 29 quality requirements 23 50 18 20 17 28 21 procurement method 10 30 0 13 10 4 13 required return on investment 58 70 52 60 66 58 48 table 6: perceptions of whether all or most clients use their own resources to monitor and control construction time, cost and quality % of respondents clients architects quantity surveyors engineers project managers contractors project parameter (%) (%) (%) (%) (%) (%) time 40 30 37 13 20 21 cost 80 35 43 23 33 50 quality 40 9 37 10 20 29 p.a. bowen, k.a. hall, p.j. edwards, r.g. pearl, and k.s. cattell 54 the australian journal of construction economics and building vol.2 no.2 table 7: perceptions about whether client objectives with respect to time, cost and quality (as laid down in the brief) are always achieved on building projects (c = conventional; d = design and build; m = management oriented) % of respondent groups clients architects quantity surveyors engineers project managers contractors project parameter c d m c d m c d m c d m c d m c d m time 22 40 0 21 13 31 24 50 35 7 17 4 46 52 73 18 41 47 cost 33 40 20 22 27 27 25 32 8 4 29 4 46 52 59 10 59 41 quality 11 20 0 32 14 27 50 5 8 25 13 13 64 38 62 43 35 35 table 8: perceptions about whether clients are satisfied with the time, cost and quality management of their building projects using the listed procurement systems (c = conventional; d = design and build; m = management oriented) % of respondent groups clients architects quantity surveyors engineers project managers contractors project parameter c d m c d m c d m c d m c d m c d m time 100 100 100 91 73 80 41 95 91 97 81 92 81 90 86 75 93 94 cost 78 60 60 96 80 80 62 74 74 93 69 88 81 84 91 75 80 94 quality 67 40 40 96 47 87 77 42 91 93 50 70 96 79 91 80 67 81 question 10: to what extent are clients’ objectives with respect to time, cost and quality (as laid down in the brief) achieved on building projects? (answer choice: aways/sometimes/never) project managers and contractors are the only respondent groups to exhibit at least one majority positive response in each of their procurement system/tcq matrices. the majority of project managers believe that client time, cost and quality objectives are always achieved under managementoriented procurement systems. a smaller majority believe that time and cost objectives (but not quality) are always achieved under design-build systems, while a larger majority believe that only quality objectives are always achieved under conventional procurement systems. it seems likely that the project managers’ responses are conditioned by the role they see themselves playing in achieving client tcq objectives. contractor respondents are most confident about their ability to always meet client cost objectives under design-build procurement systems; which might be expected, given the nature of these systems, but they are pessimistic in every other respect for all procurement systems. quantity surveyor respondents are evenly split about whether design-build systems can always deliver client time objectives; and are similarly split about whether conventional systems can always achieve client quality objectives. all other respondent groups are generally pessimistic about the capacity of any procurement system to always achieve any of the client’s tcq objectives. question 11: in general, how satisfied are clients with the time, cost and quality management of their projects under the listed procurement systems? (answer choice: satisfied/dissatisfied) according to the client respondents, the conventional systems of building procurement yield the greatest level of client satisfaction with respect to time, cost and quality management on building projects. clients appear to be indifferent between design and build and management-orientated systems. within the client group responses relating to the conventional system, it is noteworthy that satisfaction with time management ranks the highest, followed by cost management. indeed, clients appear dissatisfied with quality management under design and build and management-orientated systems. other respondent groups generally rate client satisfaction with time, cost and quality management on building projects as being higher (under all three procurement systems) than do the client respondents. two points are noteworthy. the first point relates to quality management, where architects, perceptions of time, cost and quality management on building projects the australian journal of construction economics and building vol.2 no.2 55 quantity surveyors and engineers point to disturbing levels of client satisfaction in this regard. clearly room for improvement exists on the part of the procurement team. the second point refers to the response of quantity surveyors regarding cost management under conventional procurement systems. only 62% of quantity surveyors claim that clients are always satisfied in this regard— the very function this group of professional consultants is charged with managing. conclusions this paper has reported on the findings of a south african national questionnaire survey of the opinions project team participants hold about the relationship between time, cost and quality management and the attainment of client objectives. clients’, contractors’ and consultants’ opinions with respect to client expectations of time, cost and quality at the outset of the project are not uniform. clients believe their time, cost and quality expectations to be realistic, whereas contractors and consultants do not believe that this is generally so. clients rate project quality as more important than project time performance, whereas contractors and consultants believe that clients actually hold a converse view. contractors and clients place great confidence in the time performance of design and build procurement systems but have slightly less confidence in the conventional and management-oriented procurement systems. lower levels of confidence were evidenced with respect to the cost performance of projects under all the various procurement systems. clients believe that variations only sometimes occur after the start of the project. there is a large discrepancy between the perceptions of clients and other members of the project procurement team about what constitutes a variation to the original brief. all members of the project procurement team showed little faith in the clients’ ability to know exactly what they wanted at the outset of the project. clients, contractors and building professionals believe that the choice of building procurement system has little influence on the level of subsequent cost variations to the contract. clients believe that they have the resources to monitor and control project cost. contractors and building professionals did not believe that this is so. client induced changes are seen by contractors and building professionals to contribute the most to project time over-runs. quantity surveyors see the potential for effective time management increasing in the construction phase of the project delivery process, whereas project managers believe that the briefing stage offers the highest potential for the effective management of time. the conventional systems of building procurement yield the greatest level of client satisfaction with respect to time, cost and quality management on building projects. high levels of satisfaction were noted for time management. clients are more likely to be dissatisfied with project quality management under design and build and management-orientated procurement systems. the purpose of the research was to explore the proposition that a recognition of the ‘human’ factor, i.e., perceptions within the project team of the management of time, cost and quality, would assist attempts to address the perceived shortcomings of tcq management. the findings of this survey indicate that misperceptions do exist among project team members regarding the time, cost and quality management associated with building projects and potentially have an impact on the ability of the project team to achieve client objectives. while the findings of the research do not warrant any change in practice at this stage, the research itself has aided in gaining a richer understanding of the complexities of ‘human’ issues inherent in the management of time, cost and quality. more importantly, it points the way forward for further research into the ‘human’ aspect of how project teams can be more effectively managed in order to achieve client objectives, thereby providing a catalyst for change in practice. acknowledgements the authors wish to acknowledge, with thanks, the financial support of the foundation for research development (f.r.d.) and the centre for science development (c.s.d). in addition, thanks are also extended to lara opperman for her work on the data coding and bmdp programming, and to pauline makonese for formulating the tables. this paper extends the procurement systems research being undertaken at the university of cape town. p.a. bowen, k.a. hall, p.j. edwards, r.g. pearl, and k.s. cattell 56 the australian journal of construction economics and building vol.2 no.2 references bennett, j. and grice, t. (1990) procurement systems for building. in: brandon, p. (ed) quantity surveying techniques: new directions, blackwell scientific publications, oxford. charles, t.j. and andrew, m.a. (1990) predictors of cost-overrun rates. journal of construction engineering and management, asce, 116, 548–552. flanagan, r. and tate, b. (1997) cost control in building design. blackwell science, oxford. herbsman, z. and ellis, r.d. (1991) the cost/time/quality integrated bidding system—an innovation in contract administration. in: bezelega, a. and brandon, p. (eds) management, quality and economics in building. e. & f.n. spon ltd., london. hughes, t. and williams, t. (1991) quality assurance. bsp professional books, oxford. ireland, v. (1983) the role of managerial actions in the cost time and quality performance of high rise commercial building projects. unpublished phd thesis, university of sydney, sydney. lansley, p. (1993) towards improved managerial effectiveness. in: proceedings of the cib w-65 international symposium on organisation and management of construction, 671–679. trinidad. masterman, j.w.e. (1992) an introduction to building procurement systems. e & fn spon, london. national economic development office (n.e.d.o.) (1983) faster building for industry. her majesty’s stationery office, london. newcombe, r., langford, d. and fellows, r. (1990) construction management 2. mitchell, london. rwelamila, p.d. and hall, k.a. (1995) total systems intervention: an integrated approach to time, cost and quality management. construction management and economics, 13, 235–241. vincent, k.o. and joel, e.r. (1995) principles of total quality. kogan page, london. ajceb_vol2_no2_28-11-02_part54 ajceb_vol2_no2_28-11-02_part55 ajceb_vol2_no2_28-11-02_part56 ajceb_vol2_no2_28-11-02_part57 ajceb_vol2_no2_28-11-02_part58 ajceb_vol2_no2_28-11-02_part59 ajceb_vol2_no2_28-11-02_part60 ajceb_vol2_no2_28-11-02_part61 ajceb_vol2_no2_28-11-02_part62 microsoft word the australian journal of construction economics and building [vol8, no1].doc comparing contractors’ decision to bid in different market environments bee-lan oo and derek s drew (department of building and real estate, hong kong polytechnic university, kowloon, hong kong) and hing-po lo (department of management sciences, hong kong city university, kowloon, hong kong) abstract the competitive situations within the australia, hong kong and singapore construction market environments are compared by observing the contractors’ decision to bid behaviour according to two extreme market conditions (i.e. booming and recession) and different number of bidders scenarios (ranging from 4 to 30). data were collected via a designed experiment so as to make direct comparisons possible. this study provides evidence that contractors’ decision to bid behaviour varies in different market environments. inline with decreasing probability of winning, the ‘bid’ responses of the three groups of contractors decrease as the number of bidders increases. however, all australian respondents declined to bid when the number of bidders exceeded 10, even in recession. this is in stark contrast to hong kong and singapore where about 30% of respondents were willing to bid in competitions containing 30 bidders, even in boom periods. in addition, the ‘bid’ responses of australia were higher in booming than in recession times when the number of bidders, n ≤ 4. the hong kong construction market environment was found to be the most competitive with considerably higher proportions of ‘bid’ responses; this was followed by the singapore and australia, respectively. keywords: bidding, decision to bid, australia, hong kong, singapore introduction contractors adopt various strategic approaches in their decision to bid to enhance chances of winning work. they do not always bid for every job that comes along but to select from a continually changing array of potential projects (odusote and fellows 1992). male (1991) suggests that contractors define a strategic domain at the corporate strategy level with the domain establishing the market dimensions within which contractors plan to operate and compete for work. contractors then make decisions on which contracts to bid for at business strategy level. the strategic domain within which contractors compete for work can be defined by different parameters including the degree of complexity and size of project, the types of contractual arrangement and geographical area (hillebrandt 2000). the environment, however, has an especially dominant influence on the construction market and, hence, on the contractors’ competitive strategies (pries and janszen 1995). they equated ‘environment’ with the ‘governmental regulations’ that form the centre forces in influencing the construction market. the government acts as the industry regulator (e.g. environmental, financial and technical regulations) and balances the construction demand and supply via building approval quotas, business licensing conditions and procurement methods. consequently, the governmental regulations exert varying degrees of influence on competition in the industry that can be represented along the continuum of high-low. in australia, for example, the competitive situation within the construction industry is highly regulated. the australian government have published sets of codes of practice together with implementation guidelines dealing with tendering issues both at the national and state or territory levels (e.g. the new south wales government code of practice for procurement). whilst at the low end, bidding competition flourishes in the free market environment in hong kong with little intervention from the government on any trades. contrary to hong kong, it appears that the singapore government intervention on competition may fall somewhere along the high-low continuum since the government resumes a more active role in shaping the competition in the construction industry (ofori and chan 2001). one of the major issues a contractor faces when bidding is how to approach the competitive situation, which may be subjected to varying degrees of government intervention on competition. dyer et al. (1989) suggest that success in bidding competition is in part a function of knowledge about a particular market environment. this paper compares the competitive situations within the australia (aus), hong kong (hk) and singapore (sin) construction market environments. the focus is on comparing contractors’ decision to bid behaviour according to different market conditions and number of bidders. the specific objectives are to: (i) compare the contractors’ willingness to bid in situations of varying competition intensity (number of bidders) at the times of two extreme market conditions, i.e. boom times with low need for work, and recession times with high need for work; and (ii) compare the corresponding ‘bid’ responses among the three groups of contractors. decision to bid, market conditions and number of bidders one of the major issues a contractor faces in bidding is deciding whether or not to compete. bid/no-bid decision (also known as project selection) is a vital and recurring strategic decision for construction firms given that a significant portion of industry workload is let by competitive bidding. thorpe and mccaffer (1991) highlight that contractors strive to balance market opportunities and risk in their decision to bid. they go on to point out that contractors will try to avoid contract that is too large for their size, beyond their experience range and normal geographical area of operation, and the contract is likely to stretch their available resources including cash. skitmore (1989) classified the contractors’ project selection objectives into three main headings, namely monetary, non-monetary and market-related objectives. the monetary objectives are concerned with the desired changes in levels of monetary resources, i.e. in terms of profit or profitability. also, the identified non-monetary objectives include: to keep the resources occupied, to serve the client well, to maintain and improve quality and services; and finally, market-related objectives are: to increase market share, to stay in existing markets and to penetrate new markets. according to econ (2004), two important factors take place in a bidding competition are market conditions and number of bidders. these two factors have also been identified as important in separate surveys, undertaken by ahmad and minkarah (1988), shash (1993) and fayek et al. (1998). the prevailing market conditions oscillate between periods of economic boom and recession. thorpe and mccaffer (1991) regard market conditions as a subjective term which on a macro-industry level includes such factors as the total construction order for all type of works and construction price levels whilst on a microcompany level includes competitor activity and construction opportunities in local, national and international markets. de neufville et al. (1977) found that market conditions strongly affect contractors’ bidding behaviour and provide evidence of a relationship between the market conditions and intensity of competition (i.e. number of competing bidders). the authors found that less bids were recorded in what they refer to as ‘good’ years whereas competition becomes fierce in ‘bad’ years when fewer projects are available. the number of bidders is the key variable in probabilistic approach for construction pricing as defined by friedman’s (1956) tendering theory. akintoye and skitmore (1992) suggest that the number of competing bidders reflects the capacity of the industry in terms of ‘active’ market players capable to undertake a project, and thus provides a measure of degree of competition in the industry. de neufville and king (1991) highlight that contractors are reluctant to bid in competition consisting large number of bidders as probability of winning decreases, this will also increases contractors’ overheads and ultimately costs the owners more. highly correlated with the number of bidders are the bidding costs. there has been much debate on the ideal number of bidders given its direct bearing on bidding costs (e.g. flanagan and norman 1985, wilson et al. 1987, de neufville and king 1991). ngai et al. (2002) suggest that clients should vary the minimum number of bidders in any new bidding situation with prevailing market conditions in order to obtain the most competitive bids in the most cost-efficient way. runeson (2000), on the other hand, argues that the question whether the number of bidders is independent of market conditions or is it a function of market conditions may not be so important since empirical studies have shown quite conclusively that contractors’ bidding behaviour is significantly affected by number of bidders (e.g. carr 1983, king and mercer 1990, skitmore 2002). industry structures aus, hk and sin were chosen for comparison in this study mainly on the basis that they have a commonwealth background, and that the construction industries are based on british model. the traditional procurement of designbid-construct predominates in the industries in which competitive bidding is used extensively as mechanism for job distribution. the construction industry structures of aus, hk and sin share the dominant structural characteristics of the construction industry wherein: (i) there are large number of small firms and comparatively few large companies in the industry; (ii) competitive subcontracting is wellestablished and used extensively in project delivery; and (iii) the government being the dominant client act as the industry regulator. at the end of june 2003, there were 339,982 construction businesses operating in aus, but only 1,354 of the construction firms earning a$10 million or more that made up 42.1% of the total turnover of the industry (australian bureau of statistics 2004). given its large geographical area, the vast majority of construction firms in aus are state-based, and often only in one region within that state (underhill 2003). on the other hand, the size and variety of construction projects in sin and hk are constrained by the city states’ small physical size. the hk census and statistics department (2004) estimated that the total number of construction-related establishments in hk approaching 20,000 in 2002, whereas there are 60 firms eligible to public contracts above hk$ 50 million (environment, transport and works bureau 2005). in sin, there are 5,327 construction-related firms as listed in the singapore building construction authority’s (bca) contractors registry (2005). of these, only 40 firms from both the building and civil engineering sectors are of unlimited tendering limits. these figures on number and size of firms serve as an indicator of the degree of competition within the industries. competing in australia, hong kong and singapore in comparing the three countries/territories, aus has a prosperous western-style capitalist economy. the australian government is committed to ensuring that the industry continues to strive to attain its maximum potential in ways that are productive, flexible and fair (department of employment and workplace relations 2006). the commitment of australian government is well reflected in the publication of codes of practice and implementation guidelines for the industry, both at the national and state or territory levels. in july 2005, the announcement on further extension to the application of the industry codes and guidelines with mandatory effect to all entities tendering for or expressing interest in construction projects directly or indirectly funded (including privately funded australianbased construction projects) by the australian government (department of employment and workplace relations 2006), perhaps is the most significant shift towards highly regulated australian construction industry. with this in mind, the influence of the australian government on the industry is strong (department of industry, science and resources 1999), which shapes the risks and the nature of competition that the construction firms experience. it is worth noting that the implementation guidelines advocate for embracing ethical principles in competitive behaviour towards reduced cost and continuous improvement in bidding process (australian procurement and construction council 1999). pre-qualification is practised for majority of the public sector work (davis langdon and seah 200). wilson et al. (1987) found that there were 4.81 bidders per project in average for open bidding of number of bidders ranging from one to maximum of seventeen bidders per project, and only 5% of the 286 project data sample attracted more than ten bids. hk operates a laissez faire economy with a clear political, legal and ethical business environment that is favoured by foreign firms (lasserre and probert 1998), not to mention the government has not placed any legal or institutional restrictions on the entry of foreign contractors. the government intervention in economic matters based on the laissez faire economic policy is mostly confined to regulating against force and fraud among market participants. large numbers of contractors are often encouraged to bid in hk. for example, a recent public sector data set from year 1990 to 1996 identified that the number of bidders per project ranging from 3 to 33 with an average of 14 bidders (ngai et al. 2002). the local construction market is thus highly competitive in which lowest bids tend to succeed, although price is not the only criterion for contractor selection. the sin construction industry is well managed with large number of foreign contractors active in the market. a number of methods of competition have been employed by the foreign contractors in sin including joint venture with local firms and provision of finance, new technologies and designs for projects (ofori 1996). in contrast to the hk government, the sin government resumes a more active role in shaping the operating environment and so the degree of competition in the construction industry (ofori and chan 2001). they found that the local large construction firms have placed high emphasis on the government helps towards their growth. it is worth noting that most of the local construction firms are owned by chinese singaporeans and have a chinese-oriented business structure (ang and ofori 2001). above all else, the local construction market is highly competitive with long tenderer list in bidding competition. oo and drew (2005) identified that the number of bidders per project ranges from 6 to 31 with an average of 15.7 bidders based on 46 public sector contracts from year 2002 to 2004. the intensity of competition in sin construction market is beyond doubt and well demonstrated in which 28 bidders have bid for a design and build project, consisting both local and foreign contractors (the straits times 2004). the review suggests that government intervention on competition within the industry varies widely from country to country. it is beyond the scope of this paper to cover different sets of procurement procedures and rules; rather, we focus on the competitive situations within the three construction market environments that are subjected to varying degrees of government intervention by observing the contractors’ decision to bid behaviour. bidding experiment method given the overall aim of comparing contractors’ decision to bid behaviour in aus, hk and sin, it was decided to develop a controlled design research game, i.e. a bidding experiment that permits the following: (i) direct comparisons among the three construction market environments; (ii) stricter control and active manipulation of variables; and (iii) examination of the effect of number of bidders on contractors’ decision to bid, as bid/no-bid decisions for several possible number of bidders scenarios are unobtainable in ‘real world’, where contractors only submit one-off bid in bidding for a project. the bidding experiment method adopted was developed from dyer’s (1987) experimental design in which the author studied the effect of number of bidders on seller’s revenue by asking the experiment subjects to bid in two hypothetical scenarios of three and six bidders, respectively. in this case, the experimental approach increases the assurance that any changes in the outcome of decision to bid are a consequence of the interventions, i.e. changes in market conditions and number of bidders. in addition, the bidding experiment was complemented by follow-up interviews designed to avoid any significant omissions or misunderstandings of the bidding process, and to disclose contractors’ rationale in their decision to bid that would not otherwise have been revealed. it is worth noting that experimental approach has been used in construction bidding research as early as 1970 by hackemer (1970) and most recently by drew and skitmore (2006). indeed, meikle (1990) pointed out that several international comparisons of construction costs and prices are moving towards the adoption of experimental approach by engaging experts in each country. the experiment subjects are (i) group c contractors listed in the hk environment, transport and works bureau’s (etwb) list of approved contractors for public works (2005), and (ii) group a1, a2 and b1 contractors listed in the sin bca contractors registry (2005). a desk study on past tender reports revealed that these groups of contractors are ‘active’ market players. all construction firms on both the etwb and bca lists were contacted and no conscious effort was made to exclude the listed foreign contractors. the aus respondents, on the other hand, were recruited via personal contacts considering the large number of firms in the industry as highlighted earlier. indeed, fayek et al. (1998) used the same sampling approach in his australian-based survey on tendering practices. senior management of the construction firms with experience in bidding were invited to participate via email in the bidding experiment by (i) acting as senior managers of their construction firms, and (ii) bidding for a total of twenty projects. these were arranged in two rounds according to two extreme market conditions scenarios, i.e. (i) boom times with low need for work, and (ii) recession times with high need for work. this was done to obtain a distinctive comparison of results and to reflect the industry norm in which prevailing market conditions is seen as the proxy variable for the contractors’ need for work (de neufville et al. 1977). the twenty projects, based on past tender reports, are lump sum procurement of conventional projects. apart from key information, such as project type, client and location, respondents were also given an identical cost estimate derived from the lowest bid prices in past tender reports and they were required to decide which jobs to bid for. changes were made to the experimental instrument as necessary to reflect the local bidding practices, for example, the term ‘conversion and extension’ was referred to upgrading and maintenance jobs for hk, whereas the term ‘addition and alteration’ and ‘alteration’ were used for sin and aus, respectively. considering the possible number of bidders scenario, the estimated number of bidders for the aus case increasing in the level of 2, 4, 6, 8, 10, 15 and 20 as compared to n = 4 to 30 for hk and sin (i.e. 4, 6, 8, 10, 14, 18, 24 and 30). this was done to reflect the local competitive situation as the maximum number of bids received was 17 for aus (wilson et al. 1987), 33 for hk (ngai et al. 2002) and 31 for sin (oo and drew 2005). in addition, these intervals enable a close examination of bidding patterns when there is less number of bidders, and to reduce the repetitive nature of the experiment since divergence in bidding decisions is expected to be less noticeable if there are too many bidders (wilson et al. 1987). respondents were asked to bid up to the bidding scenarios of n bidders that they wish to bid. experiment limitations setting up a bidding experiment which is an exact replica of the commercial construction industry is extremely difficult, if not impossible to do, since there are so many possible factors affecting decision to bid (e.g. egemen and mohamed (2007) identified 83 decision to bid factors). the focus has therefore been on two important factors in a bidding competition, i.e. market conditions and number of bidders. other factors in the experiment are held constant (i.e. project duration, location, contract type, client type) in establishing a setting that the subjects are familiar with, thus allowing their experience to manifest itself effectively. the experiment also does not consider the direct effect of bidding decisions on future events since the 20 projects were released at once. no feedback information is given to the respondents at the end of each round as both round of the experiments are independent, being based on different market conditions scenarios. it is felt that inclusion of 20 projects is necessary to generate a reasonable data set and to reflect that contractors are selective in their decision to bid given that bid enquiries are received continuously. it is also recognized that the subjects tend to be more risk seeking in an experimental setting, although it is believed that industry practitioners who are willing to spend times on non-rewarding academic studies (in this case two rounds of experiment) will respond genuinely since many stated they would do so. sample profile a total of 60 construction professionals participated in the bidding experiment for two rounds. of these, 11 were from aus, 18 from hk and 31 from sin. the overall response rates for hk and sin are 30.0% and 30.7%, respectively. for the aus respondents, the response rate is 64.7% based on a total of the 17 invitations sent through personal contacts. nine of the aus respondents were from new south wales, two from melbourne and one from perth. a majority of them are chief or senior estimators of large construction firms with 8 to 30 years of experience in the industry. while for the hk and sin respondents, around 90% of them are from senior management level including director, managing director, estimating and contracts manager who have background experience in bidding. also, the hk and sin respondents have an average of 21 and 20 years of experience in the industry respectively, and around 70% of them involved in 80 to 100% of their organization bidding exercise. comparing contractors’ willingness to bid table 1 shows the percentages of the aus, hk and sin respondents opted to bid according to market conditions and number of bidders. although the experiment design for the aus respondents was based on n = 2 to 20, it can be seen that all aus respondents declined to bid when the number of bidders exceeded 10, even in recession. the increase in number of respondents opted to bid when n = 10 in recession can be explained because fewer jobs are available in recession. the aus respondents pointed out that number of bidders and bidding costs are their main concerns in bid/no-bid decision. it is worth noting that number of bidders was identified as being the most important factor affecting contractors’ bid/no-bid decision in new south wales, australia (bajaj et al. 1997). in contrast to severe competition in early 1980s (wilson et al. 1987), the findings seems to indicate that the aus contractors’ competitive behaviour embraces the ethical principles that aim to reduce cost and continuous improvement on bidding process advocated by the australian procurement and construction council (1999). a stark contrast to the aus respondents, at least 30% of the hk and sin respondents opted to bid in competition consisting 30 bidders, even in boom periods. for the hk case, it can be clearly seen that 50% of the respondents were willing to bid in competition of 30 bidders in recession times, and those responded to the follow-up interviews agreed that more bidding attempts will at least increase the hit rate in surviving during hard times. dyer and kagel (1996) refer this phenomenon as simple survivorship pressure that applied to both the new market entrants as well as experienced contractors. on the other hand, 33% of the hk respondents who still submitting bids in boom times when number of bidders is considered large highlighted that this was done to fulfil other pricing objectives, for example, to maintain the relationship with client and to get a feel for the market. indeed, the interviewees expressed that they are ‘numb’ to the intense competition in the hk construction market and perceive there is little point to consider number of bidders in their bidding decisions. considering the sin cases, those declined to bid agreed that it is a waste of resources to bid when number of bidders becomes unreasonably large. they complained that bid prices are always on the low side if there are too many bidders, particularly in recession, and someone who makes a big mistake in pricing will win the job. this group of contractors urged a paradigm shift in the local contracting practice concerning extensive use of competitive tendering involving too many companies, and clients’ focus on the lowest price in awarding contracts. it is worth nothing that sin contractors have made the similar recommendation in an earlier study by dulaimi et al. (2001). comparing the proportions of ‘bid’ responses the total number of ‘bid’ responses received from the aus, hk and sin respondents were 1045, 3141 and 3560, respectively as shown in table 2. the corresponding average number of times each respondent bid within each group was 95, 175 and 115. each respondent from hk on average bid approximately twice as much as aus respondent. a chi-square test shows that there is a significant difference in the bid/no-bid responses for the three groups of respondents (χ2 = 604.91; df = 2; p = 0.001). the phi measure shows a low to moderate association between the bid/no-bid responses and country/territory (φ = 0.18; p = 0.001). these results are not surprising given that contractors operating in different construction market environments are unlikely to be similar in their decision to bid behaviour. the more relevant question concerns the proportional differences in ‘bid’ responses among the groups. table 3 shows the proportional differences of ‘bid’ responses at 95% confidence interval and the sample odds ratio through paired-group comparisons. it can be seen that the lower and upper bounds of the confidence intervals for both the aus vs. hk and aus vs. sin comparisons are negative, suggesting that the no. of bidders, n % of respondents opted to bid boom recession aus hk sin aus hk sin 2 100 100 4 100 100 100 100 100 100 6 91 100 100 91 100 100 8 55 83 94 55 100 100 10 27 67 90 45 83 90 14 50 71 72 87 18 39 42 61 65 24 33 29 50 39 30 33 29 50 35 table 1: respondents opted to bid according to market conditions and number of bidders decision to bid country/ territory bid no-bid total aus 1045 (33.9) 2035 (66.1) 3080 hk 3141 (54.5) 2619 (45.5) 5760 sin 3560 (35.9) 6360 (64.1) 9920 note: % of total in parentheses table 2: bid / no bid responses according to country / territory probability of a ‘bid’ decision for aus is lower than the hk and sin respondents. further evidence can be found in the sample odds ratio wherein there were 43 ‘bid’ responses from the aus respondents for every 100 ‘bid’ responses from the hk respondents. the estimated odds of a ‘bid’ response are 2.32 (i.e. 1/0.43) times higher for the hk than the aus respondents. interestingly, the difference in proportions of ‘bid’ responses between aus and sin is less than 0.04 (i.e. -0.0387, 0.0004), even with about 30% of the sin respondents opted to bid up to n = 30 as discussed earlier. this seemingly small difference can be partly explained because the singapore respondents are very selective in their decision to bid for competition consisting large number of bidders, and thus fewer bids were submitted. as described earlier, they are concerns about the bidding costs and project profitability; perhaps they will only bid for projects fall within their organization strategic domain. the estimated odds of a ‘bid’ response are only 1.08 (i.e. 1/0.92) times higher for the sin than the aus respondents. considering the paired-comparison between hk and sin, the positive confidence intervals (i.e. 0.17, 0.20) suggest that the probability of a ‘bid’ decision for hk is 17 to 20% higher than the sin respondents. although the hk and sin respondents’ willingness to bid appears to be quite similar, the estimated odds of a ‘bid’ response for hk are 2.14 times higher than the sin respondents. this paired-group analysis suggests that the construction market environment in hk is the most competitive among the three as reflected in its considerably higher estimated odds of a ‘bid’ response as compared to the sin and aus respondents. figure 1 shows the breakdown of proportions of ‘bid’ responses according to country/ territory, market conditions and number of bidders. inline with decreasing probability of winning, it can be seen that all aus, hk and sin respondents’ proportions of ‘bid’ responses decrease as the number of bidders increases. however, the aus case was something of a surprise in which higher proportions of ‘bid’ responses were recorded in booming than in the recession scenario when n = 2 to 4. this is contrary to the general belief that contractors bid more in recession when fewer jobs are available. it can also be clearly seen that there are rapid drops in proportions of ‘bid’ responses for the aus case when n > 4, taking 100 opportunities to bid, only three bids were recorded when n = 10 in boom periods. as revealed in the discussions, some of the aus respondents noted that they are keener in competition of less bidders, n = 2 to 4 given the higher probability of winning. both hk and sin respondents generally bid more in recession when competition becomes fierce. these phenomenons are similar to that of de neufville et al. (1977). however, the hk proportions of ‘bid’ responses for both the booming and recession scenarios are considerably higher than sin, providing further evidence on the intense competition in hk construction market environment. it can be seen that the hk proportions of ‘bid’ responses are identical when n = 4 to 6 for the booming and scenarios. in other words, the probability of a ‘bid’ decision is not likely to change if n ≤ 6 in boom periods in which we expect approximately 75 attempts out of 100 bidding opportunities. this extends to n ≤ 8 for recession when competition becomes fierce with bidding attempts increased to 85 out of 100 bidding opportunities. the same phenomenon of constant proportions of ‘bid’ responses can also be seen in sin case where the probability of a ‘bid’ decision is not likely to change if n ≤ 6 in both the booming and recession scenarios (i.e. approximately 55 attempts out of 100 bidding opportunities). the high responsiveness towards bidding opportunities among the hk and sin respondents can partly be explained because the relatively small construction markets in these two city states due to geographical size limitations may not able to support the growth of the existing number of firms. 95% ci for true difference in proportions of bid sample odds ratio lower bound upper bound -0.2271 -0.1849 0.43 -0.0387 -0.0004 0.92 0.1705 0.2024 2.14 table 3: differences in proportions of 'bid' responses and the sample odds ration through paired-group comparisons interestingly, the hk respondents’ proportions of ‘bid’ responses in boom times are still higher than the proportions of bid in recession of aus and sin for majority of the number of bidders’ scenarios. it would seem that the bidding competition within the hk construction market environment akin to ‘lottery’ game given the high proportions of ‘bid’ responses. a chancy process which requires the contractors to bid for many jobs that come along. in short, ‘if you aren’t in you can’t win’. in conjunction with the paired-group analysis, the evidence is suggestive that the construction market environment in hk is the most competitive; this is followed by the sin and aus, respectively. this ranking appears to indicate that the lesser the government intervention on bidding competition, the greater will be the intensity of competition and vice versa. other competitive situations would have to be analysed, and subjected to statistical test, before we could confidently generalize this observation. conclusions this paper sets out to explore the aus, hk and sin contractors’ bid/no-bid decision in response to different intensity of competition according to two extreme market conditions scenarios, i.e. (i) boom times with low need for work, and (ii) recession times with high need for work. data were collected via a designed experiment so as to make direct comparisons possible. the experimental results show that all aus, hk and sin respondents adhere to the decreasing probability of winning wherein the proportions of ‘bid’ responses decrease as the number of bidders increases. contrary to general belief, it was found that the aus proportions of ‘bid’ responses were higher in booming than in recession when n = 2 to 4, indicating that some aus respondents were keener in competition of not more than four bidders notwithstanding the prevailing market conditions. in addition, all aus respondents’ declined to bid when number of bidders exceeded 10, which is in stark contrast to hk and sin where most respondents, at least 30% of them, opted to bid in competition of 30 bidders, even in boom periods. a chi-square test shows that the bid/no-bid responses were significantly different among these three groups of contractors operating in different market environments. the evidence is suggestive that the construction market environment in hk is the most competitive with considerably higher proportions of ‘bid’ responses; this is followed by the sin and aus, respectively. this ranking tends to suggest that the lesser the government intervention on bidding competition, the greater will be the intensity of competition and vice versa. in addition, it would seem that the bidding competition within the hk construction market environment akin to ‘lottery’ game given the high proportions of ‘bid’ responses. a chancy process which requires the contractors to bid for many jobs that come along. in short, ‘if you aren’t in you can’t win’. clearly, it is difficulty to capture all aspects of the complexities involved in contractors’ decision to bid behaviour, in this case the   0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 2 6 10 14 18 22 26 30 no. of bi dders, n pr op or ti on s of b id hk, booming sin, booming hk, recession sin, recessionaus, recession aus, booming figure 1: sample proportions of 'bid' responses according to country / territory, market conditions and number of bidders focus is on market conditions and number of bidders, for contractors operating in different construction market environments. other factors are possible in similar study to reveal further aspects and with different degrees of emphases. a suggestion for further research is to focus on the extent to which culture (e.g. chinese vs. western) affects contractors’ competitive behaviour. acknowledgements this research is supported by the research grant council, university grants committee of hong kong, through grant cityu 1129/02e. the authors are indebted to anonymous respondents in the bidding experiment for their invaluable responses that formed the basis for empirical analysis in this study. thanks also go to the national university singapore for provision of study facilities to carry out data collection in singapore. references ahmad, i. and minkarah, i. 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(1987). competitive tendering: the ideal number of tenders. in managing construction worldwide (edited by p. r. lansley and p. a. marlow), p. 175-186. e. & f. n. spon, london. introduction towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia – plus addendum jeremy coggins, (university of south australia) robert fenwick elliott, (barrister and solicitor of the supreme court of south australia, partner of fenwick elliott grace, adelaide) matthew bell, (melbourne law school, the university of melbourne) abstract this article considers the success of the two distinct construction industry payment legislative models operating in australia – “east coast” and “west coast” – in achieving their objective of improving cash flow throughout the construction industry. success parameters are identified by the authors – namely: the levels of justice afforded by the legislation, the administrative and legal burden generated by the legislation, and the impact of the legislation on the relationships between the contracting parties – which are used as a basis to discuss and compare the performances of the east and west coast models. it is concluded that the west coast model provides a more just dispute resolution process, generates less administrative and legal burden, and is more conducive towards establishing positive relationships between contracting parties. however, it is recognised that there is a need for more data to be gathered from construction industry stakeholders before any firm recommendations can start to be made as to the most appropriate conceptual framework and detail for a harmonised approach. introduction over the past decade construction industry payments legislation (the „legislation‟) has been progressively passed on a jurisdiction-by-jurisdiction basis throughout australia. 1 the first jurisdiction to pass such legislation was nsw. the nsw act, based upon the adjudication provisions within the housing grants, construction and regeneration act 1996 formed the model upon which most other australian jurisdictions, to varying degrees, based their legislation, culminating in the tasmanian act which received royal assent on 17 december 2009. 2 the current state of construction industry payment legislation throughout australia, however, is somewhat fragmented, and there have been calls from several commentators for a harmonised national approach (bailey 2009, zhang 2009, bell & vella 2010). this paper initially examines the division and inconsistencies which exist in the australian construction industry payment legislation. a set of success parameters, derived from dispute resolution 1 the relevant legislation, in order of commencement, is: building and construction industry security of payment act 1999 (nsw) – the „nsw act‟, building and construction industry security of payment act 2002 (victoria) – the „victorian act‟, building and construction industry payments act 2004 (qld) – the „qld act‟, construction contracts (security of payments) act 2004 (nt) – the „nt act‟, construction contracts act 2004 (wa) – the „wa act‟, building and construction industry security of payment act 2009 (tas) – the „tasmanian act‟, building and construction industry security of payment act 2009 (act) – the „act act‟, building and construction industry security of payment act 2009 (sa) – the „sa act‟. the acts commenced operation on the following dates: 26 march 2000 (nsw), 31 january 2003 (vic), 1 october 2004 (qld), 1 january 2005 (wa), 1 july 2005 (nt), 17 december 2009 (tas). note that the act act comes into force on 1 july 2010, and the sa act comes into force on a date which, as at early august 2010, was yet to be proclaimed. 2 although the tasmanian act commenced operation before the act and sa acts, it was actually the last act to be passed by parliament in australia. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 15 literature, is then proposed as a basis for a subsequent review, comparison and assessment of the key provisions, and performance, of construction industry payment legislation in australia to date. these parameters include the justice afforded, and the administrative and legal burdens generated, by the legislation. one destination, eight different paths the common objective of the raft of legislation, apparent from the second reading speeches for each of the acts, 3 is to facilitate the flow of cash in a swift manner down the hierarchical contractual chain on construction projects. thus, the legislation is aimed at “improving payment outcomes for all parties operating in the building and construction industry”. 4 the east coast-west coast divide the wa and nt legislative models significantly differ from the other australian acts in both their underlying conceptual frameworks and in the detail of the drafting which is laid upon them. this has led to the wa and nt acts, which bear more resemblance to construction industry payments legislation proposed by the cole commission report (2003: volume 8, appendix 1) and more in harmony with the legislation passed in the uk and nz, being distinguished from the other australian acts. accordingly, the wa and nt acts have been collectively labelled as the “west coast” model‟ legislation as opposed to the “east coast” model tag given to the other australian acts which more closely resemble the nsw act. 5 all the acts comprise common constituent elements including the type of work and contracts covered, the mechanisms for enforcing regular payments and the process for undertaking and enforcing adjudication of disputes arising under the acts (bell & vella 2010: 575) however, within these common constituent elements, key differences exist between the east and west coast models. these are broadly summarised as follows:  the east coast model acts provide a detailed statutory payments regime, overriding any inconsistent contractual provisions, which parties undertaking “construction work” or “related goods and services” may choose to engage by submitting a payment claim under the act at regular intervals and have it responded to within a certain timeframe. conversely, the west coast model acts largely preserve (rather than override) the parties‟ contractual interim payment regimes.  the east coast model acts only allow for payment claims to be made up the “contractual stream” (typically by a subcontractor against its head contractor, or head contractor against its principal). conversely, the west coast model allows for payment claims both up and down the “contractual stream”.  whilst both models allow for a statutory adjudication scheme to determine, in the interim, 6 disputed payment claims, they differ with respect to adjudicator appointment, submissions which may be considered by an adjudicator, and the approach which an adjudicator is to adopt in order to arrive at his or her 3 act (hargreaves j, 15 october 2009); nsw (iemma m, 29 june 1999); nt (toyne p, 14 october 2004); queensland (r e schwarten, 18 march 2004); sa (kenyon t, 5 march 2009); tasmania (singh l m, 4 november 2009); victoria (thomson m r, 21 march 2002); wa (mactiernan a j, 3 march 2004). 4 r e schwarten mp, in delivering the second reading speech for the queensland bill similarly broad aspirations are expressed in the second reading speeches for each of the other acts (cited above). 5 davenport (2010: 36) has recently described the categories as, respectively, “the uk model” (west coast) and “the australian model” (east coast). 6 subject to final determination in arbitration or litigation. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 16 determination. in all of these respects the east coast acts are more restrictive (coggins 2009), disallowing mutual agreement of an adjudicator, consideration of reasons for withholding payment which have not been duly submitted in accordance with the statutory payment scheme, and discouraging an evaluative approach to adjudicators‟ determinations. the devil in the detail whilst the conceptual divisions between the east and west coast acts are readily-apparent, there are many detailed aspects in which the acts – even those within the same “model” grouping – diverge. these differences are often not revealed without a word-by-word comparison, yet they can make for significant differences in the practical effect of the legislation in different parts of australia. indeed, once these disparities are appreciated, industry stakeholders – whether subcontractors challenging a payment schedule outside of their home state or general counsel of national contractors charged with drafting appropriate contractual provisions – may be forgiven for regarding the law as a multi-headed hydra rather than a guardian angel. some of these differences are fairly well known, such as the way in which victoria differs from the other “east coast” jurisdictions in relation to matters which can be included in a payment claim under the act (and therefore subject to the act‟s default provisions for payment and adjudication) this is discussed in o'reilly and stankiewicz (2006), ridley (2006), warren & thwaites (2007), redenbach (2007: 102-4). others are less obvious – for example, the implications of the “counting of days” provisions in the acts. in the nt, tasmania, victoria and wa time continues to run for these purposes through the days between christmas and the new year which are not public holidays but comprise the traditional industry shutdown, whereas the act, nsw, queensland and sa acts expressly exclude this period. 7 the differences are exemplified by the provisions dealing with the types of arrangements to which the various acts apply. the starting point for such analysis under the acts is the definition of “construction work” (or, in tasmania, “building and construction work”). this is fundamental under each of the relevant acts because it is contracts for such work, or for “related goods and services”, which are “construction contracts” to which the act applies. 8 the definition of “construction work” in s 5 of the nsw act has its origins in section 105 of the uk act. it reads as follows: 5 definition of “construction work” (1) in this act, construction work means any of the following work: (a) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming, or to form, part of land (whether permanent or not), (b) the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, power-lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage or coast protection, 7 see the definition of “business day” (or, in the nt, “working day”) in each act other than the wa act. the wa act uses the term “day” (rather than “business day”), so for the purpose of counting days it is assumed that every day is counted. 8 see act act: dictionary and ss 7-9; nsw act ss 4-7; nt act ss 5-7 and 9; queensland act ss 3 and 10-11 and sch 2; sa ss 4-7; tasmanian act ss 4-7; victorian act ss 4-7; wa act ss 3-5 and 7. general commentary on these definitions (albeit written prior to the passage of all of the acts) is provided in, eg, jacobs (2010: 42-4 & 489; davenport (2004: 27-29). australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 17 (c) the installation in any building, structure or works of fittings forming, or to form, part of land, including heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems, (d) the external or internal cleaning of buildings, structures and works, so far as it is carried out in the course of their construction, alteration, repair, restoration, maintenance or extension, (e) any operation which forms an integral part of, or is preparatory to or is for rendering complete, work of the kind referred to in paragraph (a), (b) or (c), including: (i) site clearance, earth-moving, excavation, tunnelling and boring, and (ii) the laying of foundations, and (iii) the erection, maintenance or dismantling of scaffolding, and (iv) the prefabrication of components to form part of any building, structure or works, whether carried out on-site or off-site, and (v) site restoration, landscaping and the provision of roadways and other access works, (f) the painting or decorating of the internal or external surfaces of any building, structure or works, (g) any other work of a kind prescribed by the regulations for the purposes of this subsection. (2) despite subsection (1), construction work does not include any of the following work: (a) the drilling for, or extraction of, oil or natural gas, (b) the extraction (whether by underground or surface working) of minerals, including tunnelling or boring, or constructing underground works, for that purpose, (c) any other work of a kind prescribed by the regulations for the purposes of this subsection. turning to the other east coast acts, most follow the nsw definition closely:  the act provision (s 7) is substantially identical to the nsw provision but has been reformatted;  the queensland provision (s 10) is identical to the nsw save for some minor wording and syntax changes and the express inclusion (via a new sub-section (1)(g)) of the testing of soils and road making materials;  the south australian provision (s 5) likewise makes minor wording changes but its only substantive amendment is expressly to include fencing in sub-section (1)(e); and  the victorian provision (s 5) is identical to the nsw. however, the tasmanian provision (s 5) has been reformatted and re-worded significantly. it incorporates most of the elements of the other east coast provisions but with many alterations in terminology (for example, “docks and harbours” has been replaced by “marine infrastructure” and “power lines” has been replaced by “energy infrastructure”). moreover, a number of matters have been expressly included within the ambit of the tasmanian act; for example, structures supporting agricultural, horticultural or forestry products (section 5(1)(a)(vi)), or allowing access to certain types of activities (section 5(1)(a)(vii)). matters which have been added to those covered by the “fittings” (here, “systems or services”) provision (sub-section (1)(c)) include passenger and goods lifts (section 5(1)(c)(iii)) and plumbing installations (section 5(1)(c)(iii)). on the other hand, drainage, sanitation and water supply have disappeared from that list of examples. the gulf, noted above, between the east and west coast acts in underlying intent and drafting scheme is reflected in the definition of “construction work” in the wa and nt acts. whilst there is much that is compatible in the ultimate effect of the provisions, there are also australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 18 significant differences. moreover, a detailed comparison of the acts is necessary in order to ascertain whether a particular activity falls within or outside the scope of the act. 9 turning first to the types of work which – 10 subject to the exclusions noted below – 11 fall within the definition, the west coast acts are, in fact, wider in ambit than those of the east coast. this is due, primarily, to the express mention of:  work relating to reclaiming, draining, or preventing the subsidence, movement or erosion of, land; 12 and  off-shore construction of civil works and buildings (whereas, under the east coast acts, works need to be “forming, or to form, part of the land”). 13 having said that, there are also significant differences between the west and east coast acts in respect of activities which are excluded. these are perhaps best understood by using s 5 of the nsw act (set out above) as a base: 14  the drilling and extraction exclusion in respect of oil and natural gas extends, under the nt and wa acts, to drilling for the purposes of discovery of such materials; 15  in respect of the minerals exclusion, the nsw act refers to their “extraction (whether by underground or surface working)… including tunnelling or boring, or constructing underground works, for that purpose”, 16 whereas the nt and wa acts: o exclude “constructing a shaft, pit or quarry, or drilling, for the purposes of discovering or extracting any mineral bearing or other substance”; 17 o do not expressly exclude the process of extraction of minerals; and o also do not expressly exclude tunnelling or boring – indeed, these are expressly mentioned in the inclusions sub-section; 18  the wa act (but not the nt act) 19 excludes both suband above-surface plant, through its broadly-framed reference to “constructing any plant for the purposes of extracting or processing oil, natural gas or any derivative of natural gas, or any mineral bearing or other substance”; 20 9 whilst this paper does not purport to provide such an analysis, it is noted, for example, that the west coast acts use a separate definition of “civil works” (nt act s 4; wa s 4(1)) to provide an expanded listing of the infrastructure works referred to in sub-s (1)(b) of the east coast acts. 10 nt act s 6(1); wa act s 4(2). 11 nt act s 6(2); wa act s 4(3). 12 nt act s 6(1)(a); wa act s 4(2)(a). having said that, the reference to “coast protection” in sub-s (1)(b) of the east coast acts may be expected to cover certain of these activities. 13 nt act s 6(1)(c); wa act s 4(2)(c). the east coast wording is in sub-s (1)(b). 14 it should be noted, generally, that each of these exclusions (other than that in respect of watercraft – see n 24 below) is subject to the relevant work being on a site in the nt or wa (as applicable) whereas there is no such territorial restriction in the east coast acts. 15 nsw act s 5(2)(a); nt act s 6(2)(a); wa act s 4(3)(a). 16 nsw act s 5(2)(b). 17 nt act s 6(2)(b); wa act s 4(3)(b). no express guidance is given as to the ambit of “other substance”. 18 nt act s 6(1)(f)(i); wa act s 4(2)(f)(i). it may, however, be expected that tunnelling and boring will usually fall outside the ambit of “construction work” either through the “constructing…” exclusion referred to in the first subpoint above or because mining is not an activity referred to in the inclusions sub-section; 19 the difference is acknowledged in the second reading speech for the nt act (toyne, n 5 above) but no commentary is provided upon it. however, by adopting the wa act drafting scheme but leaving out its paragraph (c), the nt act does not incorporate the exclusion of underground works which is found in paragraph (b) of the east coast act exclusions. moreover, though s 6(2)(d) allows for other work to be excluded by regulation, there is no such provision in the construction contracts (security of payments) regulations 2005, the only regulations which (as of april 2010) have been made under the nt act. thus, whether such is the intent or not, the northern territory is the only place in australia where the construction of underground works is covered by the security of payment act. 20 wa act s 4(3)(c). australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 19  the nt and wa acts have carried through the uk act exclusion in relation to wholly artistic works, albeit in modified terms; 21 and  the nt and wa acts specifically exclude “constructing the whole or any part of watercraft”. 22 does inconsistency hamper economic efficiency? the “construction work” analysis in the previous section is but one example of how the various australian acts‟ approaches are far from consistent. it also demonstrates that ascertaining such a basic matter as whether a particular activity is covered by the scheme demands a painstaking and time-consuming legal analysis. such inconsistency and lack of accessibility seems, at the very least, to run counter to the desire to achieve for the industry “a fast, cheap, non-legalistic way of resolving payment for work done or material or services supplied”. 23 the inefficiencies inherent in such a situation are readily apparent. it has been observed, for example, that detailed regimes for inclusions and exclusions from the legislative scheme tend to lead to uncertainty and court intervention (constable 2006). 24 in the early years of the uk act‟s operation, for instance, there were many attempts to run the “fallacious” argument that, wherever a power generation plant was included within a construction project, the entirety of the project was excluded from the ambit of the act by dint of the “power generation” carve-out in s 105(2)(c)(i) (coulson 2007:35). 25 more fundamentally, any such scheme of inclusions and exclusions – and, especially, one which applies in markedly inconsistent ways across the nation – exposes the issue of whether the legislation does, in fact, represent a worthy reform for the industry. for his honour judge humphrey lloyd (as he then was), commenting upon the uk act in 2001, the related underlying questions included: if adjudication is such a good idea, why does it not apply to all sectors of the construction industry?... if it is a good idea but it is not needed in the well-managed and harmonious parts of the industry then why go to the trouble of such convoluted exceptions – if there will be no need to have recourse to adjudication then there need be no exemptions. will those working there have anything to worry about? if they are concerned then what troubles them? is reform in fact needed? (lloyd 2001: 450) 26 these are issues which go to the heart of the legislation both as enacted and as it may be reformed. debate upon these questions is, however, hampered by there being little explicit guidance provided by the legislatures as to why the inclusions and exclusions are defined as they are. in the british context, judge coulson has noted that there was significant criticism within the uk parliament of the uk act‟s scheme of exclusions – one mp proposed, for example, that “[t]here is no more reason to exclude the process industries than to exempt drivers who have never had an accident from obeying the highway code”. 27 21 nt act s 6(2)(c); wa act s 4(3)(d). 22 nt act s 6(3); wa act s 4(4). 23 victorian building commission introduction to the victorian act, at www.buildingcommission.com.au. 24 commenting upon the debates within the british parliament in relation to the listing of included and excluded contracts, his honour judge peter coulson qc (coulson 2007: 27) noted that “[i]t is difficult not to feel instinctive sympathy with those who pointed out… that these definitions were likely to lead to just the sort of disputes that the act itself was designed to avoid.” 25 his honour summarises these cases at pp 35-6 and their resolution of the issue by reference to identification of the “primary activity” within the site. 26 see, similarly, coulson 2007: 9-10. 27 peter thurnham, mp (house of commons, 8 july 1996), cited at coulson 2007: 10-11. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 20 despite such misgivings, the lengthy list of included and excluded “construction operations” was carried through into the uk act (and, as noted above, has formed the basis for the various australian acts‟ approaches). likewise, the second reading speeches for the wa and nt acts provide no guidance as to why, for example, the exclusions from the ambit of “construction work” are substantially different from those of the nsw act which preceded them. doubtless there are reasons which the relevant parliaments found compelling as to the extent to which legislative intervention is needed, especially within the wa process plant, mining and oil and gas industries. however, without explicit guidance as to the policy intent, the reform process as carried into law in each state and territory is left open to the criticism that it simply reflects the inevitable tendency, identified by davenport (2006: 21), for a “competition between various vested interests”. 28 towards harmonisation few in the industry would seriously advocate that the present, disjointed situation ought to continue; rather, there have been increasing calls – echoing those of the cole royal commission (cole 2003) nearly a decade ago – to forge a uniform national approach to security of payment regulation (bailey 2009, zhang 2009, bell & vella 2010). marcus jacobs qc (jacobs 2007: 16), for example, has observed that: [i]t must be a matter of considerable confusion to practitioners advising clients who have projects in more than one state/ territory where there is so little uniformity in the comparative legislation…. the sooner there is uniform legislation in a relatively small country such as australia, the better for the construction industry. the key question at this stage is how such an approach might be achieved, especially given the lack of consensus as reflected in both the statutes and their interpretation by the courts. it is suggested that one approach or step towards achieving harmonisation and consensus is to review and assess the performance of the existing legislative schemes to date, such that the most successful legislative aspects may be identified for adoption into a unified model. however, such an approach is not straightforward as the identification of parameters of success vis à vis the operation of the legislation is likely to be contentious and, of itself, would require general consensus for such an approach to be effective. nevertheless, in order to initiate debate as to the performance of existing legislative schemes in the interests of identifying the most desirable characteristics for a harmonised model, the remainder of this article aims to review, compare and assess the provisions and performance of the two australian legislative models – east coast and west coast – against key parameters of success identified by the authors. such an approach will assist in revealing observed strengths and weaknesses in the enacted legislative models, with a view to informing an approach to national harmonisation. further, observations with respect to provisions of construction industry payments legislation enacted outside of australia 29 will be 28 reflecting this, of the eight second reading speeches referred to in n 5 above, six noted expressly that industry groups (whether stateor nationally-based) offered views which led to the relevant act being put forward, but only one – that of tasmania – referred to the desire to align conditions with those in other jurisdictions. having said that, “benefit[ting] building and construction firms with national or interstate operations by improving consistency between payment regimes across all three jurisdictions” was mentioned in the second reading speech for the 2006 bill amending the victorian act (m r thomson mp, 15 june 2006). 29 the uk act, construction contracts act 2002 (nz) – the „nz act‟, and building and construction industry security of payment act 2004 (singapore) – the „singapore act‟. moreover, there are moves afoot in ireland and malaysia to introduce legislation similar to the uk act: respectively, the construction contracts bill 2010 was presented to the seanad é ireann on 12 may 2010 and a preliminary draft of the malaysian construction industry payment and adjudication act was published in 2009 and is available at www.cidb.gov.my. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 21 made where such reference may contribute towards optimal harmonisation of the legislation in australia. key success parameters to date, performance of existing construction industry payments legislation in australia has been monitored in the form of quantitative statistical data collated by the relevant administering government departments, or agencies, in each jurisdiction. 30 this statistical data collates such information as number of adjudication applications made and total values of adjudicated payment claims and determinations each year. the data shows that, to varying degrees in each jurisdiction, the legislation is achieving its objective of improving cash flow within the construction industry as the number and total value of payment claims determined in adjudication has increased annually. this increase has been particularly marked in nsw and queensland where, by 2008/09, the number of annual adjudication applications in each jurisdiction had reached approximately 1000, and total value of payment claims in adjudication approximately $200 million. 31 in wa there were 105 adjudication applications 32 made in 2008/09 and a total value of payment claims in adjudication of approximately $36 million (construction contracts registrar 2009). the significant take-up rates of statutory adjudication in nsw and queensland have led to observations that the payments legislation in these jurisdictions has been effective in resolving disputes of all sizes. 33 accordingly, riddell (2009: 1) observed that: the security of payment legislation, particularly in new south wales and in queensland, appear to have been remarkably successful in achieving its object of ensuring that a person who undertakes construction work or provides related goods and services is entitled to receive and is able to recover progress payments. whilst such data indicates a significant uptake of statutory adjudication and resultant flow of cash in the construction industry over the relatively short time the legislation has been enacted, it is contended that to draw any conclusions as to overall longer term legislative success based solely upon such data would be imprudent and misleading. it is proposed that such longer term success is predicated upon continued satisfaction of all stakeholders in the construction industry with the legislation‟s payment and adjudication schemes. therefore, it is argued that there are several other parameters which must be considered in assessing the success of the legislation in meeting its objective of achieving sustained improvement of cash flow throughout the construction industry. these parameters include the levels of justice afforded by the statutory scheme, the consequential costs of the legislative scheme to the construction industry both in terms of administrative and legal burden generated, and the impact of the legislation (positive or negative) on the relationships between the contracting parties. 34 30 nsw procurement division, department of services, technology and administration; building commission victoria; building and construction industry payments agency (qld); building management & works division, department of treasury and finance (wa); and, department of justice (nt). 31 more accurately, as reported by building & construction industry payments agency (2009) and nsw procurement (2009): 940 adjudication applications in nsw during the 2008 calendar year and 999 adjudication applications in queensland during the 2008/09 financial year; and, $187,034,897 claimed in adjudication in nsw during the 2008 calendar year and $234,564,850 claimed in adjudication in queensland during the 2008/09 financial year. 32 however, it must be remembered that the population of wa is only 2.56 million compared with 4.45 million in queensland and 7.17 million in nsw (population data sourced from australian bureau of statistics (abs), australian demographic statistics, september quarter 2009 available on abs website <http//:www.abs.gov.au>). 33 see building & construction industry payments agency 2009: 6; and, nsw procurement 2009: 4. 34 it is notable that the uk legislation followed the report of sir michael latham (latham 1993). that report emphasised the importance of dispute resolution systems on the crucial ingredient of trust within the construction process. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 22 these parameters encapsulate three of the criteria identified by ury, brett & goldberg (1988: 11) in their seminal textbook on dispute resolution, used for comparing the different approaches to resolution of disputes: transaction costs, 35 satisfaction with outcomes (of which justice in outcome and process is a key component), and recurrence of disputes. ury, brett & goldberg (1988: 12) noted that these criteria are interrelated in that dissatisfaction with outcomes contributes to recurrence of disputes, 36 which in turn increases transaction costs. accordingly, therefore, it is suggested that an unsustainable dispute resolution process is characterised by stakeholder dissatisfaction with outcomes, a relatively high proportion of recurring disputes and relatively high transaction costs. conversely, a sustainable dispute resolution process is characterised by stakeholder satisfaction with outcomes, a relatively low proportion of recurring disputes and low transaction costs. in particular, a dispute resolution process that enables a high degree of trust between contracting parties will encourage an effective and efficient industry, and vice-versa. justice in dispute resolution a linchpin of all the legislation is the interim resolution of payment claim disputes via a mandatory adjudication scheme. this scheme represents a dispute resolution method or process which, in the context of construction payment claims disputes, may be considered as an integral component of an overall dispute resolution system – this system being a multistepped series of dispute resolution methods which may typically involve negotiation, adjudication, arbitration and/or litigation. much has been written in the field of dispute system design with respect to the significance of justice in the evaluation of dispute resolution systems. an initial overview of key points arising from this literature provides a useful basis to inform a subsequent analysis of justice afforded by each the statutory adjudication schemes under the east and west coast models. many varieties of justice have been identified in connection with dispute resolution (see, for example: bingham 2008). of these, substantive and, in particular, procedural justice are most often cited as impacting upon satisfaction with dispute resolution systems. according to ury, brett & goldberg (1988: 12): satisfaction [with a dispute resolution process] may also depend on whether the disputant believes that the resolution is fair. even if an agreement does not wholly fulfil her interests, a disputant may draw some satisfaction from the resolution‟s fairness. substantive, or distributive, justice essentially refers to the fairness of the outcome produced by a decision process. procedural justice refers to the justice of the processes or methods used to arrive at distributive justice. procedural justice recognises that a disputant‟s satisfaction with a method or system of dispute resolution is a function of process rather than outcome. several authors have identified procedural justice as integral to satisfaction with a dispute resolution process (ury, brett & goldberg 1988: 12; constantino & sickles merchant 1996: 173; susskind & cruikshank 1987: 24). further, the perception of a fair process has been acknowledged to be as important as the reality of impartiality (bingham 1997: 215). there is some consensus that if disputants believe that the dispute resolution process has been fair they may be more willing to accept decisions (tyler 2000 as seen in van veen, kreutzwiser & de loë 2003), 35 defined by ury, brett & goldberg (1988: 11) as “the time, money, and emotional energy expended in disputing, the resources consumed and destroyed, and the opportunities lost. 36 in the case of statutory adjudication, recurrence of disputes may take the form of an application to the courts to have the adjudicator‟s determination rendered void, or the referral of an adjudicated payment dispute to a final dispute resolution process such as arbitration or litigation. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 23 and that a sense or perception of procedural justice may be as, or more, important than the outcome (ury, brett & goldberg 1988: 12; lind, ea, & tyler, tr 1988: 85 & 95). de cremer and van knippenberg (2003: 8) suggest that procedural justice becomes especially important to disputants when outcomes are unfavourable to them. with respect to evaluating procedural fairness of dispute resolution processes, the following questions have been raised as pertinent:  were all the groups who wanted to participate given an adequate chance to do so? (susskind & cruikshank 1987: 24)  was everyone given an opportunity to express his or her views? (susskind & cruikshank 1987: 24; and ury, brett & goldberg 1988: 12 & 33)  how much were the disputants able to participate in shaping the settlement? (ury, brett & goldberg 1988: 12 & 34)  did the disputants believe that the third party, if there was one, acted fairly? (ury, brett & goldberg 1988: 12 & 37) a consideration of justice in the east and west coast legislation key differences exist between the east and west coast models with respect to the payment and adjudication schemes provided. these differences impact upon the measures of procedural and substantive justice afforded by each model. payment systems the east coast model operates a “dual payment” system for progress payment claims, creating a statutory payment system which runs alongside any contractual regime. 37 in order to engage the statutory payment system, a claimant must endorse its payment claim as being made under the act 38 and serve it upon the respondent. 39 the west coast model does not operate a dual payment system, but rather payment claims referred to in the act are those made under the contractual regime. thus, a claimant under the east coast model may only avail itself of the act‟s dispute resolution processes if it endorses its progress payment as being made under the act. this endorsement requirement is a potential barrier to procedural justice in the east coast model, as a contractor or supplier may deliberately refrain from endorsing its payment claim through fear of negative repercussions 40 in its relationship with the principal. this effectively denies such a contractor or supplier access to the dispute resolution process available under the act. indeed, a 2007 survey carried out by brand & uher (2010: 17), which sought to assess the performance of the nsw act by surveying the members of two peak trade associations operating in nsw, found that around half of the sampled contractor and subcontractor firms felt that endorsement of payment claims negatively affects to some degree the working relationship between the parties to a payment claim. 41 conversely, under the west coast model, there is no such scope for a party to be deterred from accessing the act‟s dispute resolution process as statutory adjudication is available merely on the basis of a dispute having arisen on a contractual payment claim. 42 37 beckhaus v brewarrina council [2002] nswsc 960 per macready aj at [60]. such a dual payment system was described as a “dual railroad track system” by macready aj in transgrid v siemens & anor [2004] nswsc 87 at [56]. 38 see s 13(2)(c) of the nsw act. 39 see s 13(1) of the nsw act. 40 such as, in its most extreme form, being “blacklisted” by the principal with respect to being offered work on future contracts. 41 nevertheless, the same survey showed that about two-thirds of respondent firms either “always” or “usually” endorse payment claims as being made under the act – brand & uher 2010: 16. 42 under the west coast model, either party may apply for adjudication of a payment dispute within 28 days after the dispute arises (see s 26(1) of the wa act). a payment dispute arises if by the time when the amount claimed australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 24 scope of payment claims the east coast model provides for recovery of progress payments only and, therefore, its dispute resolution processes may only be used by a contractor or supplier to recover payment from a principal, i.e., “upstream” claims. herein lies another potential barrier to procedural justice in the east coast model, as the judiciary has allowed claimants to recover amounts for delay damages in adjudicated payment claims under the act. 43 this, as davenport (2007: 14) puts it, creates an “imbalance” as only one party is allowed to apply for adjudication of payment disputes regarding damages. as claims for damages falling within the scope of the contract have the potential to be made by either contractual party, 44 it would appear to be blatantly unfair to allow only one party the right to refer such claims to the act‟s dispute resolution processes. no such injustice exists in the west coast model. the scope of the west coast model is wider, providing the right for either party to make an adjudication application in relation to any payment disputes falling within the scope of the building contract, including debts and damages claims (see s 25 of the wa act). right to defend a payment claim under the east coast model‟s statutory payment regime, a respondent has up to 10 business days 45 after the payment claim is served to serve a payment schedule indicating the amount of the payment it proposes to make. if the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less with reasons for withholding payment (see s 14(3) of the nsw act). if the respondent either schedules an amount less than the payment claim or fails to pay the whole or part of the scheduled amount by the due date, the claimant may make an adjudication application under the act (s 17(1)) in the case where a claimant disputes a lesser amount that has been scheduled and paid, the claimant must serve an adjudication application on an authorised nominating authority (ana) of its choice (s 17(3)(b) of the nsw act) with a copy served on the respondent (s 17(5)) within 10 business days s 17(3)(c) after receiving the payment schedule. 46 the respondent then has either a period of 5 business days 47 after receiving a copy of the application or 2 business days 48 after receiving notice of an adjudicator‟s acceptance of the application, whichever is the later, to lodge an adjudication response with the adjudicator. 49 if the respondent does not duly provide a payment schedule, it becomes liable to pay the claimed amount to the claimant on the due date for the progress payment (s 14(4)(b) of the nsw act). where no payment schedule is provided, the claimant has two paths available under the act by which to recover the payment claim. the first path is for the claimant to seek summary judgment in court for the debt due (s 15(2)(a)(i) of the nsw act), in which case the respondent is not entitled to bring any cross in a payment claim is due to be paid under the contract, the amount has not been paid in full, or the claim has been rejected or wholly or partly disputed (see s 6(a) of the wa act). 43 see coordinated construction co pty ltd v jm hargreaves pty ltd [2005] nswca 228; coordinated construction co pty ltd v climatech (canberra) pty ltd & ors . [2005] nswca 229; minister for commerce (formerly public works & services) v contrax plumbing (nsw) pty ltd & ors [2005] nswca 142; and, john holland pty limited v roads & traffic authority of new south wales & ors [2007] nswca 19. 44 eg, contractors‟ claims for delay and disruption costs caused by principals, and principals‟ claims for liquidated or general damages for contractor‟s delay in achieving practical completion. 45 except in the sa act which allows 15 business days – see s 14(4)(b)(ii) of the sa act. 46 except in the sa act which allows 15 business days – see s 17(3)(c) of the sa act. 47 except in the tasmanian act (7 business days) and act act (10 business days). 48 except in the tasmanian act (5 business days) and act act (5 business days). 49 see s 20(1) of the nsw act. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 25 claim against the defendant in the summary judgment proceedings, or raise any defence in relation to matters arising under the construction contract (s 15(4)(b) of the nsw act). the second path is for the claimant to apply for the payment claim to be determined in adjudication, 50 in which case the respondent will be disallowed from lodging an adjudication response (s 20(2a) of the nsw act), effectively denying the respondent any voice during the adjudication 51 as an adjudicator is essentially limited to a consideration of the submissions duly made by the parties 52 when determining an adjudication(s 22(2) of the nsw act). even in circumstances where the respondent has duly served a payment schedule, it may only include in its adjudication response reasons for withholding payment which have previously been included 53 in the payment schedule (s 20(2b) of the nsw act). thus, a respondent may be prevented from being able to present its full case to the adjudicator unless it has previously served a comprehensive payment schedule which covers all the issues it may wish to rely on subsequently. indeed, 41% of adjudication applications in queensland to date for the 2009/10 financial year have been made on the basis that the respondent has failed to duly serve a payment schedule 54 on the claimant (building and construction payments agency 2010). these highly restrictive provisions with regards to payment schedules and adjudication responses have a major impact upon considerations of procedural and substantive justice. failure to duly serve a payment schedule not only strips the respondent of any right to subsequently defend the payment claim, but may also potentially result in a gross miscarriage of substantive justice or, at the very least, an outcome which is not perceived as fair by the respondent. 55 it is difficult to conceive of any fair and respected dispute resolution process denying the right for one of the parties to put forward their arguments or, at the very least, to be heard. indeed, it is a fundamental right of most dispute resolution processes that both parties have the right to present their case. 56 lack of opportunity for the respondent to present its case, together with the consequent likelihood of a determination perceived as unjust by the respondent, would seem to be a recipe for respondent dissatisfaction with the dispute 50 if the claimant chooses this path, it must notify the respondent of its intention to apply for adjudication of the payment claim, and allow the respondent a second opportunity to serve a payment schedule within 5 business days from the date of such notification – see s 17(2) of the nsw act. 51 this second path may be preferable to some claimants in terms of speed of recovery as the claimant may request an adjudication certificate from the relevant ana stating the adjudicated amount (see s 24 of the nsw act) and file the adjudication certificate as a judgment for a debt in any court of competent jurisdiction (see s 25 of the nsw act). 52 ie, payment claim, payment schedule and all submissions that have been duly made in their support. 53 furthermore, whilst a respondent cannot include in its adjudication response a reason for withholding payment not included in its payment schedule, it has been held in minister for commerce (formerly public works & services) v contrax plumbing (nsw) pty limited [2005] nswca 142 per hodgson ja at [37] that a claimant can raise reasons its adjudication application to substantiate entitlement to payment even though such reasons were not included in its payment claim, provided that such reasons are by way of response to arguments raised by the respondent in its payment schedule. 54 such failure may be due to the potentially massive administrative task which a contractor may face of preparing dozens of payment schedules each month, or due to inadequate knowledge of the act by the respondent. accordingly, a survey of contractors and subcontractors in the nsw construction industry carried out by brand & uher (2010) showed that 49% had either low or no personal knowledge of the nsw act and 38% had only moderate knowledge of the nsw act. 55 for example, in walter construction v cpl [2003] nswsc 266, the builder submitted a payment claim for $14.9 million under the nsw act. the owner principal failed to provide a payment schedule and, therefore, became liable for the full amount of the payment claim even though the contract superintendent subsequently certified a payment of $952,351. the claimant builder successfully obtained summary judgment for the full amount of the payment claim despite several reasons put forward by the owner to avoid summary judgment. 56 for example, article 18 of the united nations commission on international trade law (uncitral) model law on international commercial arbitration embodies the basic principle that the parties shall be treated with equality and each party shall be given a full opportunity of presenting its case. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 26 resolution processes provided by the east coast model. the scores of applications by adjudication respondents to the nsw courts over the past decade to have adjudicators‟ determinations rendered void for a multitude of reasons 57 are, perhaps, indicative of such levels of dissatisfaction and perceptions of procedural and substantive injustice. if australia were a signatory to the european convention on human rights, it would warrant serious consideration as to whether the east coast model may be struck down as offensive. 58 a number of decisions of the european court of human rights on compulsory adr processes take the same general line: that signatory states should be given some latitude to make their own laws, but subject to some minimum safeguards, and in particular on the basis of an adequate opportunity for both parties to be heard. it is on this point that statistics show that the east coast model very frequently fails. the point is hypothetical, 59 but if several australian states were found to have failed to meet these international jurisprudential standards it would be bound to have some negative impact on australia's standing generally in the area of international law. unlike the east coast model, the west coast model provides no detailed statutory payment system but rather gives primacy to the parties‟ agreed contractual payment regime. 60 the west coast legislation does not make the serving of a response to the payment claim 61 a condition precedent to the right of a party who is served with an adjudication application 62 to lodge an adjudication response. additionally, there are no limitations as to the inclusion of reasons for withholding payment in a response to an adjudication application. thus, providing that a party lodges their response to an adjudication application within the time allowed by the legislation, 63 it will not be deprived of the opportunity to present its full case. this would appear to be a far more satisfactory approach in terms of achieving procedural and substantive justice in the dispute resolution process. furthermore, an adjudicator under the west coast legislation is not restricted to a consideration of documents submitted by the parties when making his or her determination as in the east coast model. 64 rather, the legislation encourages a west coast adjudicator to be more evaluative in their approach to determination by providing that an adjudicator “is not 57 the nsw supreme court has handed down at least 210 judgments, and the nsw court of appeal 41 judgments, in relation to issues concerning the nsw act since 2001. these judgments are listed on the contract administration group‟s website <http://www.contraxgroup.com/showjudgments.asp?area=1&section=1&subsection=57&state=2> 58 one of the authors raised the point at a lunch table in london consisting of senior construction lawyers; the view was unanimous that the east coast model would be declared unlawful. in austin hall v buckland securities ltd [2001] ewhc technology 434, the court refused to declare the uk adjudication regime unlawful, but then logic of the decision suggests that there is a serious question as to whether the east coast model would have been treated as unlawful. certainly, the east model would have real difficulty in meeting the dombo beheer b.v. v the netherlands (1993) ehrr 213 test; the court said, at page 230: the court agrees with the commission that as regards litigation involving opposing parties private interests, „equality of arms‟ implies that each party must be afforded a reasonable opportunity to present his case including his evidence under conditions that do not place him at a substantial disadvantage visà-vis his opponent. for the reasons set out in this paper, the east coast model would likely fail this test, but the west coast model would likely pass. 59 although s 24 of the victorian charter of human rights and responsibilities act 2006 contains the right to a fair hearing, which is in similar terms to article 6 of the european convention, upon which such a challenge could be attempted. 60 if no such payment regime is provided for in the construction contract, then the payment provisions set out in schedule 1 of the legislation are implied into the contract. 61 ie, the equivalent of a “payment schedule” in east coast terminology. although under the west coast legislation a response to a payment claim is a contractual requirement rather than a statutory requirement. 62 ie, the equivalent of the “respondent” in east coast terminology. 63 within 14 days (wa act, s 27(1)) or 10 working days (nt act, s 29(1)) after the date on which a party to a construction contract is served with an application for adjudication. 64 which, in practice, means that an adjudicator under the east coast legislation often makes a determination on documents only. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 27 bound by the rules of evidence and may inform himself or herself in any way he or she thinks fit.” 65 this has the effect of extending the adjudicator‟s investigative powers beyond the consideration of the parties‟ submissions, thus assisting the adjudicator in ascertaining the facts and the law. it is submitted that this approach would seem far more likely to result in an outcome which is far more palatable to both parties to the dispute if not only for the perception of justice having been carried out. this submission is, perhaps, borne out in the small number of applications to the wa supreme court and state administrative tribunal to have an adjudicator‟s determination set aside (see section 6.3 below) other issues affecting justice the east coast model does not permit the parties any legal representation (s 21(4a) of the nsw act) at conferences called by the adjudicator. the west coast model allows the adjudicator to determine his or her own adjudication procedure (s 32(6) of the wa act), and does not specifically preclude legal representation at hearings. thus, in wa and the nt legal representation at conferences is at the adjudicator‟s discretion. whilst the preclusion of legal representation contributes to keeping the costs of the adjudication process to a minimum, such preclusion may be detrimental to real and perceived substantive justice if it prevents the adjudicator from gaining a better understanding of the issues in dispute. this may particularly be so in disputes where the issues are of a complex nature, such as disputes regarding damages claims. in such disputes the barring of legal representation may, indeed, be a false economy if one of the parties subsequently pursues the dispute in litigation or arbitration due to a feeling of dissatisfaction with the way their case has been presented and/or understood in the adjudication process. under the east coast model, the adjudication application must be made to an ana chosen by the claimant (s 17(3) of the nsw act). it is then the duty of the chosen ana to refer the application to an adjudicator (s 17(6) of the nsw act). the parties, therefore, cannot agree upon the appointment of a particular individual as adjudicator. under the west coast model, the parties to the contract may agree upon a registered adjudicator or prescribed appointor (s 26(1)(c) of the wa act). the provision to agree upon a particular individual as adjudicator may be significant to the disputing parties‟ feeling of perceived and real substantive justice. this is particularly so where the issues in dispute are of a complex nature and the parties would prefer the appointment of an adjudicator who they feel is suitably qualified and experienced, and in whom they have mutual confidence, to determine the dispute in hand within a restricted timeframe. it may, however, be argued that blind adjudicator appointment, as per the east coast model, denies the opportunity for a party with dominant bargaining power to unfairly influence the identity of the adjudicator at the time of contract formation and thereby erode substantive justice. notably, the nz act circumvents this issue by providing that any agreement about the choice of adjudicator or ana/prescribed appointor is not binding if it was made before the dispute arose (s 33(3) of the nz act). the east coast model allows the minister to authorise anas to nominate adjudicators for the purposes of the act (s 28(1)(a) of the nsw act). the adjudication application must be made to an ana chosen by the claimant (s 17(3) of the nsw act). currently, nine anas are authorised in nsw, six of which are construction or legal professional bodies or 65 see s 32(1)(b) of the wa act, and s34(1)(b) of the nt act. note that the nt act substitutes the word “appropriate” for “fit” in this provision. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 28 associations, and three of which are private for-profit companies. the west coast model prescribes appointers of registered adjudicators in the regulations to the act. currently, the wa regulations list eight prescribed appointers, all of which are construction or legal professional bodies or associations. generally, the professional bodies and associations provide nomination/appointment services as part of their service to the profession they represent. all appointing bodies under the east and west coast models take a commission from the fee paid by the disputing parties to the adjudicator, either in the form of a lump sum or on a percentage basis.. the level of this commission widely varies between the different appointing bodies from 10% for some professional bodies to around 40% for some “for profit” companies (south australian house of assembly 2009: 4617) depending upon the level of services each provides to their adjudicators (overhead costs) and the profit margin (if any) each seeks to gain from appointing adjudicators. this raises a question as to whether adjudication outcomes are in any way affected by a claimant‟s choice of a particular appointing body, and particularly whether there is any correlation between the level of commissions appropriated from adjudicators‟ fees by appointing bodies and substantive outcomes of adjudications. there appears to be little, if any, research into this question to date. under the east coast model, a claimant may take months to prepare a comprehensive and lengthy payment claim for delay damages for inclusion in a payment claim leaving the unsuspecting respondent only ten business days 66 to respond in its payment schedule (s 14(4)(b)(ii) of the act). by way of example, davenport (2006: 147) refers to contrax plumbing, where the claimant contractor made a progress claim including an ambit claim for approximately $2 million which took 12 months to prepare and was supported by two boxes of files detailing the claimant‟s allegations. a similar “ambush” claim may also occur under the west coast model, which provides only a matter of weeks for a party to respond. 67 this is clearly an unfair practice which inevitably results in both procedural and substantive injustice. a potential solution to the problem of ambush claims may be to amend the legislation so as to limit the length of written submissions in a similar manner to the uk legislation. 68 administrative and legal burdens created by the legislation whilst the adjudication process in all australian jurisdictions is proving to be a relatively low cost method of resolving payment disputes per se, 69 the real costs to the construction industry of mandatory adjudication need to take account of any additional consequential administrative and legal costs. the statutory payment system operated by the east coast model inevitably creates extra administrative workload, above and beyond normal contract administration duties, for parties on a construction contract. this is not the case under the west coast model, which allows primacy of the contractually agreed payment system. preparation of payment claims under the east coast legislation, a payment claim must, amongst other things, identify the construction work or related services to which the progress payment relates (s 13(2) of the nsw act). accordingly, the relevant construction work has to be identified “sufficiently to 66 or, as noted above, 15 business days in the case of the sa act. 67 if nothing is stated in the construction contract, a party is given 14 days to respond to a payment claim under schedule 1, division 5 of the wa act. a claimant must then apply for adjudication within 28 days after the dispute has arisen (see s 26(1) of the wa act). a party who is served with an adjudication application then has 14 days to prepare and serve a written response to the adjudication application (see s 27(1) of the wa act). 68 see part i, s 13(g) of the uk scheme for construction contracts. 69 mean adjudication fees in wa reported by the construction contracts registrar (2009) for the year ended 30 june 2009 range between $1364 (for claims below $10,000) to $6065 (for claims above $500k). mean adjudication fees in queensland reported by the building and construction industry payments agency (2009) range between $919 (for claims below $10,000) to $16,324 (for claims above $500k). australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 29 enable the respondent to understand the basis of the claim”. 70 this is “a relatively undemanding test”. 71 however, in protectavale pty ltd v k2k pty ltd 72 the court held that a payment claim needs to identify which work has already been paid for (the „protectavale principle‟). 73 this may present a real problem for a claimant where, as is common on construction contracts, the contractual basis for a claim is the total value of construction works completed minus payments to date, and the claimant is not able to identify what has been paid for and what has not. this is particularly so if the previous payments by the respondent are vague as to what is being paid for, and the numbers cannot be readily reconciled with previous claims. the protectavale principle, therefore, has the potential to create an administratively complex task for claimants who need to ensure they keep track of which specific items of construction works have previously been paid for. this is a task which may be made especially difficult in the face of a canny respondent who is carefully trying to make it impossible for a claimant to know precisely how much it is paying for which item. 74 additionally, the application of the protectavale principle means that, in a situation where a respondent has been able to successfully “muddy the waters” with respect to which items have been paid for, procedural and substantive justice may be denied to a claimant. preparation of payment schedules it is suggested that the requirement for the respondent to prepare comprehensive payment schedules, in order to preserve its right to put forward the merits of its argument, is practicably too onerous. as one of us has noted (fenwick elliott 2007: 3), this feature of the nsw act: sets up tens of thousands of procedural traps (one for every payment claim that is received) and if head contractors or principals fail to divert sufficient resources to the massive task of preparing the appropriate payment schedules, a claiming contractor or subcontractor is entitled to obtain a more or less default adjudication decision. it would be hard to exaggerate the importance and the difficulty of providing payment schedules to every single payment claim that comes in to an office. a typical head contractor will receive a large number of payment claims each month, and it is extremely common for head contractors to fail to keep on top of the paperwork required by the legislation. furthermore, if a respondent rejects a payment claim in a payment schedule, this does not prevent a tenacious claimant from making the same claim month after month. as noted by the nsw department of public works and services (2002: 21): a vexatious claimant may serve the same payment claim repeatedly over a period of time, with the hope that the respondent will eventually fail to serve a payment schedule. the claimant could then recover the full amount of the claim through court under s 15 of the act. 70 coordinated construction co pty ltd v climatech (canberra) pty ltd [2005] nswca 229 at [25]. 71 nepean engineering pty. ltd. v. total process services pty. ltd. (in liquidation) [2005] nswca 409 at [48]. 72 [2008] fca 1248 (a victorian case). 73 the „protectavale principle‟ was also applied in queensland in neumann contractors p/l v peet beachton syndicate limited [2009] qsc 376. 74 for instance, it is not a requirement of a payment schedule that a respondent breaks down the amount that he proposes to pay amongst all of the items claimed. thus, provided the respondent identifies which items he is not paying for in full, and says why he is not paying for them in full, he can still comply with the act without telling the claimant party precisely how much he is prepared to pay in respect of which item. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 30 therefore, a respondent may have to defend the same payment claim on several occasions throughout the duration of the construction contract, spelling out all of the reasons on each occasion. 75 volume of litigation and clarity of the law as previously referred to, there have been at least 210 nsw supreme court judgments, and 41 nsw court of appeal judgments, in relation to issues concerning the nsw act since 2001. the majority of these judgments represent cases where a respondent has attempted to have an adjudicator‟s determination, or part thereof, set aside. principal issue before the court no. of cases whether payment claim (in full or in part) is valid 76 5 whether a construction contract or arrangement within scope of act exists 77 5 whether plaintiff was denied natural justice and/or adjudicator failed to make a bona fide attempt to exercise his/her task under the act 78 2 whether, under the corporations act a genuine dispute exists for an off-setting claim against the adjudicated amount which the claimant is trying to enforce by statutory demand 79 2 whether there has been an abuse of the processes under the act 80 1 whether adjudicator correctly applied s 34 of the act to include sums in the adjudicated amount over and beyond an agreed sum in the contract 81 1 whether adjudicated amount should be corrected 82 1 whether adjudicator was validly appointed 83 1 whether damages claimed in adjudication application outside of scope of payment claim 84 1 whether reasons for withholding payment can be incorporated by reference into the payment schedule 85 1 whether payment schedule can be provided by an agent of the respondent 86 1 total 21 table 1 judgments of the nsw supreme court in 2009 with respect to applications challenging payment of adjudicated amount ten years on from the commencement of the nsw act, the numbers of such applications show little signs of abatement, with at least 21 87 related judgments coming out of the nsw 75 although, note that in perform (nsw) pty ltd v mev-aus pty ltd & anor [2009] nswca 157, the nsw court of appeal held that a payment schedule could indicate reasons for nil valuation by referring to previous payment schedule. 76 the owners strata plan 56587 v consolidated quality projects [2009] nswsc 1476 ; allpro building services v c&v engineering services [2009] nswsc 1247; urban traders v paul michael [2009] nswsc 1072; the university of sydney v cadence australia pty limited & anor [2009] nswsc 635; perform (nsw) pty ltd v mevaus pty ltd trading as novatec construction systems [2009] nswsc 416. 77 parkview v fortia [2009] nswsc 1065; cardiacos v cooper consulting & construction services (aust) pty ltd [2009] nswsc 938; levadetes v iberian artisans [2009] nswsc 641; olbourne v excell building corp pty limited [2009] nswsc 349; duynstee v dickens & dickens [2009] nswsc 292. 78 robson civil projects pty limited v walter mining pty limited [2009] nswsc 1071; reid v eire [2009] nswsc 678. 79 project v tqm [2009] nswsc 699; diddy boy v design [2009] nswsc 14. 80 filadelfia projects pty limited v entirity business services pty limited [2009] nswsc 1468. 81 roseville bridge marina pty ltd v bellingham marine australia pty ltd [2009] nswsc 320. 82 holdmark v melhemcorp [2009] nswsc 305. 83 kittu randhawa v monica benavides serrato [2009] nswsc 90. 84 parkview constructions pty ltd v sydney civil excavations pty ltd & anor [2009] nswsc 61. 85 perform (nsw) pty ltd v mev-aus pty ltd trading as novatec construction systems [2009] nswsc 416. 86 lucas stuart v hemmes hermitage [2009] nswsc 477. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 31 supreme court in 2009. 88 all of these 2009 cases for one reason or another (see table 1 below) sought to challenge the payment of an amount determined in adjudication. by any measure, this is a significant amount of litigation. furthermore, this does not include cases where, dissatisfied with the outcome of adjudication, a respondent has subsequently applied to court or arbitration to have the payment dispute finally determined. 89 this compares with a total of three wa supreme court judgments (and no wa court of appeal judgments) in relation to issues concerning the wa act since its enactment in 2004, only one 90 of which concerned an application to have the adjudicator‟s determination set aside. 91 such diversity in the amount of litigation generated by the nsw and wa legislation may, perhaps, be reflective of respondents‟ level of dissatisfaction, and consequent lack of willingness to accept the adjudicator‟s decision, with the substantive and procedural justice afforded by each of the two models. additionally, the significant body of nsw case law generated by the act may be reflective of a lack of clarity with respect to the legislative drafting leaving many issues to be interpreted and given certainty by the judiciary. hence, there has been, and still appears to be, the potential for respondents to argue that an adjudicator‟s determination should be set aside on the basis of several issues. these include issues relating to delay damages, grounds for reviewability of an adjudicator‟s determination, 92 payment claim reagitation or issue estoppel, 93 information to be included on a duly submitted payment claim (protectavale pty ltd v k2k pty ltd [2008] fca 1248), the scope of section 34 of the act with respect to voiding contractual provisions which restrict the operation of the act, 94 and conflict between the act and federal corporations and trade practices law. 95 conclusion a successful dispute resolution process is one that is sustainable in the context of the industry in which it operates. to be sustainable, the procedure and outcomes of a dispute resolution process need to satisfy the dispute stakeholders in order to achieve efficiency (in terms of time and cost) and finality. the real and/or perceived justice afforded by the dispute resolution process is a key factor in stakeholder satisfaction. furthermore, an adequate 87 this figure was obtained by conducting a search on the nsw lawlink case law website <http//:www.lawlink.nsw.gov.au/lawlink/caselaw/ll_caselaw.nsf/cases/cl_sc > using the keywords “building and construction industry security of payment act”. the figure is indicative and not necessarily a fully accurate number of the total judgments in 2009. 88 additionally, at least four judgments were made by the nsw court of appeal in 2009 in relation to issues concerning the nsw act. 89 no existing data in this respect could be found. 90 o’donnell griffin pty ltd v john holland pty ltd [2009] wasc 19 where the plaintiff applied for a writ of certiorari to quash the adjudicator‟s determination. 91 note that a search on the wa state administrative tribunal (sat) decisions database website <http://decisions.justice.wa.gov.au/sat/satdcsn.nsf> revealed that there have been 34 sat judgments since the enactment of the wa act in 2004. however, most of these judgments concern a review of an adjudicator‟s decision to dismiss an adjudication application without making a determination of its merits (see s 31(2)(a) & s 46(1) of the wa act). sat has made it clear it will only review adjudicators‟ decisions with respect to jurisdiction, and that it will not review an adjudicator‟s determination on the merits – for example, see match projects pty ltd and arcon (wa) pty ltd [2009] wasat 134. 92 musico & ors v davenport & ors [2003] nswsc 977; brodyn pty limited t/as time cost and quality v davenport & anor [2004] nswca 394; holmwood holdings v halkat electrical contractors & anor [2005] nswsc 1129. 93 see dualcorp pty ltd v remo constructions pty ltd [2009] nswca 69; urban traders v paul michael [2009] nswsc 1072; and filadelfia projects pty limited v entirity business services pty limited [2009] nswsc 1468. 94 see minister for commerce v contrax plumbing [2004] nswca 142; john goss projects v leighton contractors pty ltd & davenport [2006] nswsc 798; john holland pty ltd v roads and traffic authority of new south wales[2006] nswsc 874. 95 see greenaways australia pty ltd v cbc management pty ltd [2004] nswsc 1186; aldoga aluminium pty limited v de silvia starr pty limited [2005] nswsc 284; bitannia pty ltd v parkline constructions pty ltd [2006] nswca 238. australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 32 opportunity for disputants to be heard and a belief that any third party tribunal has acted fairly in determining the dispute have been found to be important components of real and perceived justice. accordingly, a successful construction industry payments legislative scheme needs to not only facilitate as far as possible the flow of cash down the contractual chain in an expedient manner, but be able to sustain such improved cash flow for all parties across the whole construction industry by maximising real and perceived justice of the scheme, minimising overall costs to the construction industry of settling payment disputes, and encouraging positive relationships between the contracting parties. whilst the numbers of adjudication applications in the east coast model jurisdictions have progressively increased to a high level since commencement of the legislation, and adjudication fees have been consistently low, it would appear that the legislation generates significant consequential administrative and legal burdens upon the construction industry. this is particularly evinced in the considerable resources needed by principals to prepare potentially numerous comprehensive payment schedules in each payment period and the vast amount of litigation in the nsw courts initiated by disgruntled respondents in an attempt to have adjudication determinations set aside. it is suggested that such administrative and legal burdens can be directly related to the lack of procedural and substantive justice afforded by the east coast legislation, particularly as a result of the restrictions the legislation places on the rights of respondents to present their case in adjudication responses and the adjudicator to ascertain the facts and law beyond what is contained in the parties‟ submissions. additionally, several issues arising from the legislative provisions have required judicial interpretation, creating both: opportunity for unhappy respondents to argue in court that an adjudicator‟s determination should be set aside; and, a lack of legal clarity for stakeholders regarding the use of the legislation. there have been substantially fewer applications to the courts in wa to have adjudicators‟ determinations set aside. additionally, as the west coast legislation gives primacy to any contractual interim payment scheme agreed by the parties, it does not generate the extra administrative burden associated with the east coast model‟s dual payment system. further, as the west coast legislation places no restrictions on the right of either disputing party to present its case in adjudication, and the adjudicator may inform himself or herself about the dispute in any way he or she thinks fit, it is proposed that the west coast model affords higher levels of procedural and substantive justice than the east coast model. this paper is principally concerned with the australian experience. nevertheless, it is useful to compare the australian experience with the experience overseas, and in particular that of the uk and nz. the uk model is even more evaluative than the west coast model, in that the adjudicators are under a duty to exercise their initiative to ascertain the facts and the law. before the uk legislation was passed by the housing grants, construction and regeneration act 1996, the construction industry there was (per latham 1993) suffering badly from a lack of trust engendered by the ability of paymasters to delay or evade payment with relative impunity. since that legislation was implemented, there has been a considerable improvement, and all parties (including, importantly, head contractors) appear to regard adjudicators' decisions as generally fair, and the industry has benefited from much more balanced and productive relationships between contracting parties. parties who have been through adjudications inter se have often moved on rapidly to an enhanced working relationship. conversely, anecdotal evidence suggests that east coast model adjudications are not typically perceived by both australasian journal of construction economics and building coggins, j et al. (2010) ‘towards harmonisation of construction industry payment legislation: a consideration of the success afforded by the east and west coast models in australia’, australasian journal of construction economics and building, 10 (3) 14-35 33 parties as fair, and often lead to a total breakdown of the commercial relationship between the adjudicating parties. whilst it is hoped the observations and propositions made by the authors in this article will provide a useful platform for debate and further discussion, it is recognised that little work has been done to canvass the opinions of the legislation‟s stakeholders across australia with respect to levels of satisfaction with the various acts. there is a need for such a nationwide survey before any firm recommendations can start to be formed as to the most appropriate conceptual framework and detail to be adopted in any harmonised model. as such, the recently conducted survey by the society of construction law australia, 96 calling for submissions and views from its members in relation to the current security of payment legislative framework and potential avenues for reform, is a step in the right direction. addendum since the preparation of this paper, the court of appeal in new south wales has handed down its decision in chase oyster bar v hamo industries 97 , in which it was decided that adjudication decisions in new south wales are susceptible to court review by way of certiorari, and that the limits for court review are not set by the five “basic and essential requirements” identified in brodyn v davenport. although the court did not dwell on the point, it seems that such certiorari challenge is not limited to challenge on the grounds of want of jurisdiction, and indeed spigelman cj found that the fatal defect in this case – a failure by the claimant to give notice of intention to apply for adjudication within 20 days of the due date for payment as required by section 17(2) of the nsw act – was not a jurisdictional matter. and so perhaps challenges will be available on the other certiorari grounds 98 . it was also found that the court is not bound by findings of the adjudicator as to jurisdictional matters. in victoria, the courts had come to a similar view as to the availability of certiorari 99 , but subject to the view that it would not disturb adjudicators‟ findings as to jurisdictional issues. the numbers of victorian adjudications remain low, and the impact of certiorari there has been correspondingly slight. in western australia, the courts have held that certiorari is excluded by the terms of the wa act. it remains to be seen what impact the chase oyster bar case will have on security of payment cases. it appears to represent some turning of the judicial tide away from the legislative objective of a quick and enforceable process. potentially, many east coast adjudications might now be susceptible to challenge on the basis of error on the face of the record, and this may represent a further point of distinction from its west coast cousin. references bailey. i. 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(2009) „why national legislation is required for the effective operation of the security of payment scheme‟, building and construction law journal, 25, 376 issue1_2009.indb the australasian journal of construction economics and building [vol 9, no 1] 37 5 role of leadership in transforming the profession of quantity surveyinggeorge ofori and shamas-ur-rehman toor (department of building, national university of singapore, singapore) abstract the construction industry is facing a period of change. the roles of the professions involved in the industry in general, and of quantity surveyors in particular, are also changing. there are opportunities for surveyors to seize the initiative to broaden their involvement in projects, and attain strategic positions within the industry. however, they will have to improve upon their skill sets and their knowledge bases. senior quantity surveyors interviewed in singapore shared their views on the challenges facing the construction industry, and their profession. they suggested that the quantity surveying profession would only be able to address the pressing issues it faces if it pays more attention to innovation and the development of its people. it should be able to attract and retain talent. knowledge management will be of critical importance. this will be enabled and facilitated by knowledge leadership. keywords: quantity surveying, challenges, knowledge management, knowledge leadership, singapore. introduction: the changing face of the construction industry the world is changing rapidly. so are the demands on the professions, and hence the role of professionals. organizations in all sectors of the economy are under increasing pressure to offer value added services, innovate, and learn to survive and grow in the face of increased competition and rapid change. business enterprises are under threat from their competitors which may be able to offer superior and more comprehensive services. the changing landscape of the construction industry also demands that current practitioners as well as future professionals should be proactive to drive change instead of merely coping with developments. the construction industry faces several technical, social, fi nancial, political, and cultural challenges (toor and ofori, 2008a). these include the growing volume of construction demand and activity in many countries which is resulting in severe pressure on resources (ofori, 2003); increased private-sector participation in infrastructure projects (raftery et al., 1998); and lack of quality people and an ageing workforce (songer et al., 2006). projects are becoming bigger and more complex in nature with higher numbers of stakeholders with different intentions for the project who may have multi-ethnic and multi-cultural backgrounds (ofori and toor, 2009). clients are also becoming more knowledgeable and hence more demanding and selective in what they want from consultants and to whom they award the work (preece et al., 2003). consequently, there is a need for changes in many aspects of the operations of the construction industry (ofori, 2003). there should be greater focus on how project procurement processes can be improved (kumaraswamy and dulaimi, 2002); how the construction value chain can be made more effi cient (atkin, 1998); how the concerns of sustainable development, health and safety in project delivery can best be addressed (lingard and rowlinson, 2006); how the level of professionalism in the industry can be enhanced (vee and skitmore, 2003); how the adversarial mindsets of practitioners can be transformed and a collaborative and partnering approach promoted (li et al., 2001); how corruption in the industry can be eradicated (stansbury, 2005; transparency international, 2006); how the social image of construction can be enhanced (rameezdeen, 2007); and perhaps above all, how to attract, retain, and develop talent (toor and ofori, 2008b). the quantity surveying profession is also going through a period of rapid transformation. a profession that was considered to be facing extinction a decade ago has been revitalised, and faces a high demand for its services in the construction market in many countries (cartlidge, 2006). there is a new optimism about the future of quantity surveying as a profession and quantity surveyors are now seen as important players in the construction industry (smith, 2004). the trends highlighted in the preceding paragraph show that there is even greater potential for the quantity surveyor as there are many areas where innovative application of the existing skills of the surveyor, as well as judicious extension and enhancement of these skills, can result in progress in the industry. objectives of the paper this aim of this paper is to explore how the leaders of the quantity surveying profession in singapore perceive the future of their fi eld, and the role of the quantity surveyor in the new situation in the construction industry. the objectives are: • to review the challenges facing the construction industry in general and their implications for the quantity surveyor in particular • to examine and evaluate recent developments in the quantity surveying profession and consider the likely future of the profession • to consider the role of leaders in the transformation of the industry to enable it to face the future. the changing face of quantity surveying quantity surveying is not a new profession. ever since humans have built buildings, they have found it necessary to estimate the cost of the whole endeavor, as well as the quantity of the materials that would be required. the historians suggest that the egyptians had some systems of quantity surveying. however, the profession fi rst developed more formally in the 17th century in the uk. primarily, the quantity surveyor is the project cost consultant, and the adviser to the client and other members of the project team on matters relating to procurement and the contract (fellows et al., 2003). in a contractor’s organisation, the functions of the surveyor centre around cost and contract management. the australasian journal of construction economics and building [vol 9, no 1] 38 over the last few decades, quantity surveying as a profession has gone through a number of transitions. the advent of information technology and the potential it offered, coupled with the downturn in construction activity in the uk and a number of other countries during the mid-1980s and late 1990s, and the challenges that included those discussed above, which saw even more intense competition in the construction industry with fi rms seeking opportunities beyond their professional domains, led many observers to predict, and many within the profession to fear, that quantity surveying might disappear as a formal profession. when cartlidge wrote the fi rst edition of his book ‘new aspects of quantity surveying practice’ in 2002, he noted that the profession was facing several challenges and people thought that it was on the verge of being extinct (cartlidge, 2002). however, in 2006, cartlidge noted that there was a severe shortage of quantity surveyors. he cited the survey of the royal bank of scotland which found that quantity surveyors were the best paid graduate professionals in 2005 (see: cartlidge, 2006). the reasons for the ‘new’ rise of the profession include increase in the volume of construction activity, growing scarcity of other construction professionals, and demand for experts in cost engineering and fi nancial management. challenges for quantity surveyors the changes in the construction industry discussed above pose a number of challenges to all who work in it. they also offer business opportunities, and avenues for greater achievement. two examples of these may now be discussed from the perspective of the quantity surveying profession. the fi rst of these challenges is the movement for sustainability. the development and application of comprehensive assessment tools for green buildings incorporating the existing tools which focus only on the environmental aspects (such as the green mark in singapore and the leadership in energy and environmental design [leed] in the us) is an area in which quantity surveyors can play a signifi cant role. they need to further enhance their skills, and help to develop the technologies and innovations to achieve sustainable buildings. thus, the drive towards sustainable development offers the opportunity for quantity surveyors to go beyond their present focus on cost to provide leadership in the area of overall economic viability of constructed items, which incorporates the issue of sustainability. second, the many recent scandals show that the business world faces corporate malfeasances and ethical transgressions (see: mehta, 2003; revell, 2003; treviño and brown, 2004; manz et al., 2008). unethical leaders have been able to exploit the loopholes in management systems to fulfi ll their personal desires at the expense of their organisations and employees (see: padilla et al., 2007; schaubroeck et al., 2007). the construction industry is perceived in many countries as one of the most undesirable sectors to work for (toor and ofori, 2007). transparency international (2006) found construction to be the most corrupt industrial sector. some researchers have studied the reasons for unethical behaviour in construction. fan et al. (2001) suggest that the increasing ethical problems in construction professions may be due to the perception gap about ethical issues between senior and relatively younger professionals. the quantity surveyors responding to their survey ranked employer, self and client as more important when they faced any ethical dilemma. on the contrary the interest of the general public was ranked relatively low. ho and ng (2003) discovered a signifi cant impact of education and experience on the attitude of quantity surveyors towards sacrifi cing their self-interest for the greater good. they found that more junior quantity surveyors place more emphasis on duty whereas more senior professionals are more concerned about process and consequence. as quantity surveyors are responsible for cost engineering and fi nancial management on construction projects, they are in a strong position to help to establish higher standards of transparency and accountability. they can establish mechanisms which can ensure greater fi nancial transparency on projects. they can use technology to integrate the cost and other relevant data to institute accountability and responsibility for all stakeholders. these challenges call for transformation in the way quantity surveyors function. for example, harun and torrance (2006) suggest that quantity surveyors should not contain themselves within the traditional boundaries of cost management; they need to develop new niches, cultivate new knowledge and break into new areas in order to enhance their competitiveness. smith (2004) suggests that there is some uncertainty about the capacity in which, and for whom, the quantity surveyor would work, and the nature of quantity surveying fi rms in the future. brümmer (2004) also suggests that quantity surveyors should play a more effective and proactive role across all stages of the project life cycle. he draws attention to constantly changing procurement systems, necessitating refi nement in the services that quantity surveyors offer. the next section discusses opportunities that the quantity surveyors can exploit in order to play a more strategic role in the construction supply chain. opportunities for quantity surveyors the discussion above shows that there is a broad sentiment in the industry about the potential role that the quantity surveyors can play. mbd (2004) noted: despite the threat of the erosion of conventional functional boundaries in the building services sector as a result of developments in information and communications technology, mbd believe that there are clear opportunities for quantity surveyors to capitalise on the resources and capabilities that they have gained in order to continue to add value to customers, albeit through an increasingly professional and management function … mbd believe that there are suffi cient grounds for optimism that quantity surveyors will be able to adapt to these challenges. however, … the potential development of the market is likely to be determined by the strategies adopted by the large surveying companies in the face of an increased threat to their traditional position. it has been suggested that quantity surveyors should expand their expertise to other areas relating to construction such as facilities management, arbitration, construction law, value management, construction management and project management (harun and torrance, 2006). other areas that quantity surveyors can operate in include health and safety, and environmental performance (verster, 2004), and information management (smith, 2004). other potential areas are e-commerce, fi nancial risk management, supply chain management, organisational behaviour and organisational culture (harun and torrance, 2006). yin (2004) predicts a surge in market demand for construction cost professionals in china. he argues that the increase in the volume of construction works in china is likely to result in the need for more quantity surveyors. he noted that the total number of cost engineers in china was 60,000 in 2004 and that this number was increasing at an annual rate of 7,000. the australasian journal of construction economics and building [vol 9, no 1] 39 in a survey in australia, smith (2004) found the following: (i) the role of the quantity surveyor as an independent consultant will expand in the future; (ii) future quantity surveyors will mainly be employed as part of a professional team in multi-disciplinary practices providing integrated ‘in-house’ services; (iii) quantity surveyors will be key players in the construction industry in ten years time; (iv) the quantity surveying profession should be actively involved in utilising, developing and promoting the use of computer-aided design (cad) automated quantities; and (v) greater use of information technology will enable the quantity surveying profession to provide better services to clients. smith (2004) noted that ‘fee-cutting’ due to competition among the fi rms was an unhealthy trend. he emphasises that quantity surveying fi rms should maintain and develop expertise in their core competencies, invest in technology, diversify and broaden the range of services they offer, engage in continuing professional development, and learn to utilise information technology such as cad, while ensuring that their knowledge and techniques evolve with the key developments in the technology. to address the issues highlighted above, the quantity surveying profession needs change leaders. the surveyors are in a position to seize these opportunities by developing new skills, establishing new niche areas for these skills, and expanding their current functional role. the profession must be bolder, more entrepreneurial and proactive. in his proposal for developing competitive strategies for quantity surveyors, grant (2004) proposes that the surveyors should diversify their domain of expertise and strengthen the bases of their strategic assets such as education, training, experience, and knowledge. research approach a total of 45 senior practitioners in the industry were interviewed out of whom 6 were senior executives and leaders in the major quantity surveying fi rms in singapore (see table 1 for demographic details). these executives were nominated as authentic leaders and successful professionals by their peers in their own professions and the industry. the interview questions were based on the review of the literature on authentic leadership. the interviews focused on the leaders’ developmental experiences and the strategies they used to infl uence their followers and organisations. the part of the study reported on in this paper was based on responses to the following questions: (i) the personal and professional challenges the interviewees have faced in their leadership development; (ii) what they want to achieve as leaders; and (iii) the legacy the interviewees hope to leave behind as leaders. under the fi rst question on personal and professional challenges, the senior surveyors interviewed discuss the issues the profession has faced. the discussion of what they want to achieve as leaders includes consideration of opportunities for surveyors in general. finally, the responses on the leaders’ legacy also covers the changes in the construction industry in general and the surveying profession which they wished to see. the interviews were audio-recorded, transcribed and analysed. interview findings analysis of the relevant portions of the interview transcripts results in a number of issues that leaders of major quantity surveying fi rms in singapore had underscored. some of the leaders interviewed who belonged to other professions also raise issues that are pertinent to surveyors. some of these points are discussed in the following sections. mindset of the industry: main basis for competition there was general agreement among the interviewees that the construction industry, including the quantity surveying profession, is going through a period of considerable change. most interviewees note that the mindset of the industry needed to be changed. one interviewee, while talking about the changing nature of quantity surveying and the basis of competition, notes: the service in the old days was more easy-going. but over a period of time, procurement methods changed and the practice got more diffi cult and challenging. we always seemed to be doing more work for less fees. i went through three recessions, in 1976, 1986, and 1998. each time we come out of a recession, new fee benchmarks, and new service benchmarks are set. in the recession we competed for work, and we competed on fees. then you try to do more for the same fee. so, we were going through all these changes. he notes further: then, in late 1980s and 1990s, when the developers were bidding for land and land prices were about 75 percent of the development cost, we looked at other methods to procure building contracts quickly in order to build faster… it has always been very challenging in that sense, because when developers pay hundreds of millions of dollars for the land, … the interest is very high. so the timetable is always tight. so it has been getting more challenging, year after year. on a broader front, the interviewees also highlight the need for: greater levels of professionalism in the industry; the need for the industry to consider adopting manufacturing processes in its operations; and the need for innovation in construction methods. table 1: demographic details of subjects interview gender industry experience position in the organisation a male over 30 years executive chairman b male over 10 years executive director c male over 15 years director d female over 10 years director e male over 25 years managing director f male over 25 years managing partner the australasian journal of construction economics and building [vol 9, no 1] 40 one of the interviewees expressed his desire for construction professionals to be given more time to achieve quality in their work. he observes: i wish people are given more time to do their jobs better … that’s really something we need … there is no quality of work or quality of life. that is the saddest thing of our industry. our clients take years to decide to build and to develop a project. the moment they decide, they want to fi nish it yesterday … everybody is working during the night. if you’re working so late, could there be quality of work? it can never be so because you are just rushing to fi nish the work … in the uk, it’s a lot different; people have more time to think, more time to plan. but i think the work has changed, now everything is superspeed – because of computers, because of the internet … i remember in the uk, our site meetings used to be once a month. here in singapore, there is a site meeting every week. thus, every week, our quantity surveyors will go to the site … and sometimes twice a week. they just want to go through the minutes of the meeting; … and this is ridiculous … due to these deadlines and short schedules, we are taxed. i wish we get more time to accomplish quality work. the human resource challenge from the discussion of the interview fi ndings in the preceding section, it is clear that quantity surveyors in singapore are facing growing pressure to perform more for smaller compensation. although this trend has led to unhealthy competition among the fi rms, it has also motivated them to offer new services and pursue innovation to be competitive in the market. one adverse consequence of fee-based competition is its effect on compensation packages in the profession. a senior executive in a leading quantity surveying fi rm highlighted the issues of scarcity of human resources due to unattractive salaries in the quantity surveying profession. he observes: we have problems getting people to do the quantity surveying work now. staff come and go, which is also a problem. and all this affects the fi eld. we cannot pay our staff very well so they go somewhere else. comparatively, lawyers, doctors, accountants and even architects get more pay. with the amount of work that we do, we deserve to get more actually. so this is something we hope we can change, but it is very diffi cult. the government is having this pro-competitive air, opening up the market. all this will press the fi eld down. this is a general issue for the whole industry. some interviewees showed their concern about the shortage of young graduates in quantity surveying. one interviewee observes: my main concern is with the lack of skills and talents in asia. traditionally, we had to rely on uk and australia which, understandably, have higher proportions of graduates in the market. here, there are very few, and the industry here is booming, burgeoning all over. so, our struggle has always been to get the right people at the various levels in the fi rm because we need to see a structure to move up as well, and this has been very, very diffi cult. it is even worse now, because of the huge demand for construction work in the middle east, china and singapore now. so that has been our main worry. another interviewee emphasised the importance of human resource management and development to his fi rm. he says: i want to go more into hr; how to retain staff and motivate them. to improve and elevate ourselves to provide more value services to our clients. the interviewees highlight the need to change the mindsets of young professionals. they note that many ambitious young professionals are not willing to climb the ladder of their careers, but quickly want to take up senior management positions. one interviewee observes: every year, we employ nus (national university of singapore) graduates and it takes a long time for us to really change their mindset of how we expect them to deliver our services. it is not their fault. firstly they do not have the experience. they only have some knowledge but they do not know how to undertake work in practice, using this knowledge, so we have to teach them. secondly, a lot of them are undecided whether this is the place for them. they just want to try it out for two years …. and during this period, that is when many disappointments arise; disappointments from us, from clients, from themselves. you see, if a student walks into this offi ce and is determined that ‘i want to be the best quantity surveyor and i want to serve this fi rm’, it is a totally different attitude from a guy who walks in [thinking] ‘let me look-see, what they have to offer, see whether this profession is for me’… i have only had one employer in my whole life … so i am very loyal; i want to serve this fi rm. but i don’t get that commitment from the staff, and this is the greatest challenge. i would say 50% of them leave because of disappointment; their expectations are not met. you see, it is the chicken and egg situation now. how can i let you do something that you like when i don’t even trust you yet? how can i say i will let you do this job, or let you meet this client when i am still having problems with you doing the fundamental things? they get disappointed because the fundamental things they have to do are so boring, so mundane. [they think] ‘i am trained for higher things’, ‘i want to be the leader’, ‘i am not going to measure doors’, ‘it is the most boring thing’ etc … this is a problem, but there is nothing you can do; the young people have their own minds. this detailed description of the attitude of young professionals shows that the organisations have to work hard to attract, develop and retain fresh blood. describing this as a big challenge, one interviewee notes: a lot of companies, especially the large international fi rms, tend to have very short-term policies in terms of retention of talent within the fi rm. so i think that is one area that is very important … the question is not technology. you can get all the best pcs (personal computers) and whatever, best software, but it is actually the people [who do the job]. so the question is how do you get the best people, and how do you retain the talent, and how do you groom the talent as the next generation of leaders. need for innovation the fee-based competition among professional quantity surveying fi rms also militates against their efforts to accumulate resources to support research and innovation in the fi rms. the executive director of one quantity surveying fi rm stressed the need for innovation in the construction process. he observes that it is important to change the industry’s mindset regarding the basis for competition, and that clients should be willing to pay for innovation. he notes: as far as the industry is concerned, it is hard to see an improvement. we have many smaller fi rms with 5 to 10 employees. they charge very, very low fees to survive. in our case [the bigger fi rms] the developers don’t pay for the r&d the australasian journal of construction economics and building [vol 9, no 1] 41 we do. they just want to get the job done. so long as you have developers who still do not see the light and encourage r&d, i don’t see the change coming in the construction industry. in smaller fi rms with 10 staff, they work from home and use cheaper software and their overheads are so low. we do r&d and we have bigger overheads. there is a difference, you see, but the clients are not ready to pay for this. if they are not ready to pay for this, then i don’t see the industry growing. another interviewee spoke about the need for investment in research and innovation. he observes: i think the construction industry in singapore is a very big dinosaur in terms of technology usage, construction methodology, usage of equipment, and related construction skills. the industry has tried a lot of things from modular design to pre-cast usage. some incentives have also been given by the government, and clients, for example, to promote quality. but the bottom line is actually the dollars and cents for contractors and developers. it’s largely because of the recession in the industry over the last few years as fi rms do not have funds to invest in the new technology and the development of new skill sets. with more money these days, as the industry is in a boom, more can be spent on r&d, and invested in developing the skill sets of our people, and in human resource training. now is the time, and we should ensure that we take the necessary measures to benefi t from it. knowledge leadership knowledge leadership also emerges as an important topic in the interviews. leaders of quantity surveying fi rms highlight the importance of knowledge in the competitive business world. they also emphasise the importance of leadership to drive the effective management and appropriate application of knowledge. an executive director spoke about the efforts he had made in building the knowledge management system within his organisation. he says: …i came up with knowledge management. knowledge in the offi ce should be retained. if a person goes, knowledge goes with him. so we retain the knowledge… a senior executive in a large quantity surveying fi rm notes the importance of knowledge and its management: …we have the university graduates and polytechnic graduates. as we move with knowledge management into the future to do business, this difference [between university and polytechnic graduates] may actually become no difference at all. because these graduates from the polytechnic are doing just as well with knowledge management as the university graduates. this is going to change our business. take that further, i project the value add of our staff, in terms of skills, in future is going to be more than what value they are to us now. in the time to come, with this huge data base of knowledge management on so many areas, … you will fi nd that even those from the polytechnics are going to come out just as [good], with knowledge … actually, this knowledge management and information is very important, but people don’t realise it ... i see it happening, that’s why i spent time building it up. some of the leaders interviewed also expressed the need for sharing knowledge across the industry. they draw attention to the willingness of the leader to look beyond the traditional narrow perception of knowledge management as providing competitive advantage for the fi rm. one interviewee highlights the importance of sharing knowledge: many would say … ‘why do you teach your competitors?’ but people do not realise that the more you do, it will be better for you. because people see you as a leader, as a provider of information, they look at you differently from the rest. i think very differently, and i have a very positive response from the industry, from the community, from my fellow professionals. and they have always helped me in return, when i have diffi culties, when i approach them. these views underscore the need for a culture of knowledgesharing and knowledge-caring in which professionals are willing to learn from others as well as share their experiences and knowledge with others. other issues the interviewees highlight several other issues. first, they are concerned about the recognition of quantity surveying as an established profession. a senior executive in a quantity surveying fi rm notes that: i hope our profession will be accepted and recognised more by the industry and everybody. because not many people know about quantity surveying and they don’t know what the quantity surveyor does. we have problems attracting people to come and study and join the profession as quantity surveyors. another interviewee underscored the importance of skills and the need to adopt it tools. he says: one part of the picture is the fees and the other part is how you do your work. you put in investments and efforts to make yourself more productive. if you become more productive, the fees you get will be comparatively higher. so computerisation is something we pay a lot of attention to in our fi rm, in our work as quantity surveyors … and we have all these it tools to help us do more … to improve the processes. discussion quantity surveying is a knowledge-intensive profession. in such a fi eld, competitiveness depends on how its practitioners generate, retain, and successfully apply knowledge (lengnick-hall and lengnick-hall, 2003; kearns and lederer, 2003). knowledge is now becoming a defi ning characteristic of economic activities, as opposed to tangibles such as goods, services or production processes. some researchers even consider knowledge as the new capital resource that offers better leverage as compared to fi nancial investment (harun and torrance, 2006). companies need to organise their knowledge (davenport and prusak, 1998) in order to enhance their effectiveness (cummings, 2004). many researchers argue that knowledge management is crucial for the effective performance of organisations (davenport and prusak, 1998; sabherwal and becerra-fernandez, 2003), and that it is also an important factor in organisational success (quintas, 2002). some researchers have warned that it is a mistake to relate knowledge management to only the development of information and communication technology tools or infrastructure (yahya and goh, 2002). knowledge management makes a difference to the performance of the organisation only when people are willing to use the information and data it provides, and are committed to exploring its full potential (van winkelen, 2006). huang et al. (2008) suggest that knowledge sharing is a human act, and therefore, voluntary and discretionary in nature. it can be encouraged and motivated but not mandated. in this sense, it is suggested that the consideration should transcend knowledge the australasian journal of construction economics and building [vol 9, no 1] 42 management, and focus on ‘knowledge leadership’ (see, for example, kaplan and reed, 2007). leaders who are able to drive knowledge management effectively and get more of the employees of their organisations to apply the resources it provides are termed “knowledge leaders” (singh, 2008; viitala, 2004; lakshman, 2005). skyrme (2000), among the fi rst to use the term “knowledge leadership”, argued that knowledge leadership constantly promotes the development and innovation of organisational resources such as information, individual skills, knowledge, and learning networks. knowledge leaders do not only set an example and inspire vision for knowledge sharing (alvesson and sveningsson, 2003), but they are also instrumental in modelling good practices, coaching and mentoring others (debowski, 2006), and providing resources for an adequate technological infrastructure and a supportive environment in which knowledge management can fl ourish. knowledge leadership is a vital factor that can drive the future of quantity surveying as a profession. as knowledge leaders, future quantity surveyors will need to take the responsibility to explain the needs, objectives, and goals of knowledge management within their own fi rms as well as across the industry. they will need to invest in human and social capital in order to establish relationships and networks that will help them to drive the construction industry towards a knowledge-sharing future. they will need to empower their employees and offer them opportunities for growth and development. the leaders interviewed also want to see signifi cant changes in the way the construction industry in singapore operates. a common aspiration of the interviewees is a desire for a high level of professionalism in the industry. they wish to see changes in the practices, relationships and overall culture of the construction industry in singapore, especially the main bases for competition. the responses of the interviewees indicate that there is a strong desire for change among the industry’s leaders. this bodes well for the future of the construction industry in this country. finally, as toor and ofori (2008b) propose, a concerted effort by the academic institutions, industry, professional bodies and government agencies is essential to produce professionals who are adequately equipped to deal with the challenges of their fi elds in the 21st century. with such concerted effort, quantity surveying education can be transformed to meet the needs that various authors have highlighted (see, for example, harun and torrance, 2006). a holistic range of courses – including, but not limited to, facilities management, arbitration, sustainability, information management, professional practice, entrepreneurship and organisational behaviour – can to help prepare quantity surveyors of the future. (see, for example, smith, 2004; verster, 2004; harun and torrance, 2006). the collaborative initiatives can also include structured mentoring schemes, internships, joint research and involvement of professional bodies in the delivery of particular modules such as professional practice. government agencies can provide a catalyst of the whole process through funding, changes in regulations and other forms of support. the empirical study presented in this paper was conducted in singapore. however, the majority of the respondents were senior practitioners who were exposed to the international market. they mostly speak in the global context while discussing the transformation of the profession. it is pertinent to note that the sentiments of the construction leaders in singapore about the qs profession are not much different from other views on the profession that have been identifi ed elsewhere in the world (see, for example, harun and torrance, 2006; yin, 2004; smith, 2004). therefore, the fi ndings in this paper are not only useful for qs professionals in singapore, but are also relevant and valuable to professionals from other countries. conclusion the profession of quantity surveying has been revitalised during the last few years. growing demand for construction and changes in the industry and the construction process offer both challenges and opportunities. they make it necessary for quantity surveyors to redefi ne their role. some of the key trends include the greater level of sophistication in the demands posed by, and expectations of, clients, users, and the community at large. considering the prevailing and future challenges and opportunities, quantity surveying can be seen as a profession at an important cross-roads from which it can go beyond its traditional cost engineering and fi nancial management roles and use its core competencies to assume a leadership role in the industry. for example, the quantity surveying profession can promote integration of the construction supply chain by developing niches in procurement, contract management and arbitration, facilities management, life-cycle costing, and sustainable development. in order to realise this and other potentially benefi cial initiatives, the quantity surveying profession needs leaders to drive the effort towards exploiting the opportunities. quantity surveyors have the potential to emerge as knowledge leaders in the construction industry. references alvesson, m. and s. sveningsson (2003) ‘good visions, bad micromanagement and ugly ambiguity: contradictions of (non)leadership in a knowledge-intensive organization’, organization studies, 24(6), 961-988. atkin, b. 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(2004) ‘internationalisation of skills, competencies and quality service by cost engineers, quantity surveyors and project managers’, international roundup, 19(1), available at: www.icoste.org/roundup1204/verster.pdf. viitala, r. (2004) ‘towards knowledge leadership’, leadership and organization development journal, 25(6), 528-544. yahya, s. and goh, w. (2002) ‘managing human resources toward achieving knowledge management’, journal of knowledge management, 6(5), 457-468. yin, y.l. (2004) ‘latest developments in the cost engineering profession and higher education in mainland china’, international roundup, 19(1), available at: http://www.icoste.org/roundup1204/ yin.pdf#../roundup1204/yin.pdf. book review advanced building technologies for sustainability asif sayed, wiley, 2012, isbn 987-0-470-54603-1, 256p, aud 105.00 nzd 120.00, gbp 57.50, euro 68.00, usd 85.00. e-book version aud 84.99, nzd 99.99, gbp 47.99, euro 54.99, usd 69.99. this book is a timely presentation of new technologies being promoted to achieve energy efficient buildings insofar as this is a first attempt to deliver a book bundling these technologies together into a coherent whole. it is certainly not a design guide, but a good primer for architects and engineers. the author has structured chapters suggesting how the equipment can be used for specific building types, e.g. hospitals, educational buildings etc. consequently i am aware of a fair bit or repetition, and i am conscious of encountering paragraphs that i have met several times previously. infuriatingly, it is intended for a us audience, and the australian/european reader has to concern themselves with changing degrees farenheit to celcius, btu and therms to kilowatts and joules. the book gives us insights into the principles behind the operation of these systems: it is not so much as the equipment is new, but the alternative way the components are placed. it is implicit that whatever system is involved, if it relies on thermal mass and/or low velocity deliveries of conditioned air, that a thorough digital computer simulation (with all the caveats that this exercise includes) is carried out by experts. the potential for getting it wrong (or not entirely right) is high given our australian experience with our high performance green buildings to date. the technologies covered include firstly the technologies of radiant cooling, underfloor delivery and displacement delivery of chilled air and ventilation: secondly the best use of the building envelope as a climatic modifier: and thirdly, low energy systems. radiant cooling and displacement systems my suspicion of radiant cooling stems from first, the weakness of air flow when relying on thermal buoyancy compared to the thrust generated by an electrically driven fan. secondly the directionality of radiation. finally the hidden trade-off between its energy savings and the cost of installing, operating and maintaining the control systems that keep the systems in balance. comfort in warm climates is measures by the environmental temperate (envt) which is 2/3 mean radiant temperature (mrt) plus 1/3 dry bulb temperature (dbt). this means that whichever part of the body is exposed to the radiator (or absorber) would be experiencing a different temperature to those parts experiencing the air temperature. this asymmetry could cause discomfort. the building envelope as a climatic modifier. trying to teach sustainable design of buildings without recourse to computer simulations has resulted in buildings based on some rather optimistic assertions by their designers. there is no generic model of an optimised working energy efficient building. we can talk about thermal mass, control of glazing and insulation, but until we see the cfd models and the numbers, green buildings have become a design style rather than a performance specification. for example, a common furphy is for designers to argue that air conditioning leifer, d (2012) book review, australasian journal of construction economics and building, 12 (4) 91-92 92 and cooling are not required simply because the building has opening windows and is therefore naturally ventilated. low energy systems these chapters (9 to 11) i found useful and informative. to discuss coand tri-gen without describing absorption chillers to some detail strikes me as an omission. the section of geothermal energy was very useful. stand-alone systems will only work if either they are endowed with a massive redundancy of equipment, or building users are prepared to tailor their energy usage to that of supply. until then, sell-back to the grid will be the only economic option unless some miraculous new battery technology comes to the fore. building control systems at the end of the day all building environmental systems will depend on their electronic controls. opening windows, individually controlled induction units, the difficulties of controlling the leaching and charging of heat once thermal mass is primed, require complex building management systems involving multitudes of sensors, logic units, actuators, and heuristic algorithms. these components need regular calibration and maintenance, and i suspect that they require greater cost than the energy saved. however, if we are concerned with carbon reduction rather than cost, then this is a necessary overhead. summary i am now of an age where i am sceptical of the introduction of new technologies in the australian hvac sector, particularly the haste to install chilled beams as the great panacea. however, mr sayed’s book is forcing me to review my predilections. at the end of my read i suggest that the title of this book should be more exactly advanced air conditioning technologies for sustainability. i commend this book to students of architecture and construction management. prof d.leifer bond university, gold coast, australia ideological leaning and praxis of housing cooperatives in south africa: matters arising jimoh richard, (federal university of technology minna, nigeria) jasper van wyk, (nelson mandela metropolitan university, south africa) abstract social movements came about as a result of dissatisfaction felt by society from the status quo. the grievances are presented through demonstrations, strikes, riots, occupation of land, boycott of business or by the development of social and economic alternatives such as self-help schemes or saving clubs. in south africa, people join housing co-operatives because it takes a long time to wait for the reconstruction development project (rdp) houses promised by the government. the leaning of 5 housing co-operatives was examined within the context of ideology and praxis that are components of triad model. this was done through a multi-case study whereby the chairpersons of the housing co-operatives were interviewed using structured interview format. findings from the study indicated that the housing co-operatives were not all open and voluntary; also, the housing co-operatives were not administered the same way. in all, efforts were put in by the housing co-operatives in engendering the ideology of co-operatives on one hand and the government on the other hand to provide the necessary subsidy so that the gap in the housing deficit could be bridged. keywords: housing, co-operatives, ideology, praxis, principles, south africa housing co-operatives in south africa in 1996, the gauteng provincial board enabled the approximately 2000 tenants of seven apartment buildings in hillbrow, joubert park and berea to become owners of the flats they were living in (shf, 2000; cull, 2001; rust, 2001; fish, 2003; crofton, 2006 & ndoh, 2009). this marked the beginning of housing co-operatives in johannesburg’s inner city and to a large extent south africa, as there was no prior documented evidence of the use of cooperatives to access the institutional subsidy of government. the question is why has it taken this long for this approach to be used in housing delivery? type of property gauteng north west western cape kwazulunatal eastern cape php & informal 1 1 0 9 11 hostel upgrade 0 0 2 0 0 greenfield 2 0 0 1 0 flats renovation 20 10 1 0 0 total 23 11 3 10 11 total units 105,000 ownership 70% blacks, 25% coloureds, 5% indians demographics 50% women, 40% youth & 10% disabled employment opportunity 1,715 permanent employees table 1 national co-operative housing membership statistics in five provinces source: matsela, 2010; presentation on housing co-operatives to the national housing portfolio committee parliament, cape town. australasian journal of construction economics and building richard j and van wyk j (2013) ‘ideological leaning and praxis of housing co-operatives in south africa: matters arising’, australasian journal of construction economics and building, 13 (2) 54-66 55 table 1 above is an indication of the low number of housing co-operatives in south africa. four provinces, namely mpumalanga, northern cape, free state and limpopo are not represented. even those represented show low membership statistics. however, in the later part of the 1990s, with the slower rate in the delivery of housing by government, people started looking back at the rationale behind the communal approaches to addressing their housing needs. the developmental phases in co-operative housing the ccmh (commission on co-operative and mutual housing, 2009) stated that there are three stages or phases of evolution of housing co-operatives up to the present time:  the first phase is characterised by grass roots bottom up initiatives by trade unionists or housing and community activists experimenting with the development of housing cooperatives as a means of meeting the housing needs of people who are not able to get a decent home that they can afford. in countries such as germany, austria, sweden and canada, as stated by ccmh (2009), that were the pioneers of the co-operative housing approach, this phase was characterised by not well defined legal and financial frameworks and limited professional and technical expertise.  phase two replicates, consolidates and adapts successful pioneering experiments, leading to the emergence of a recognisable co-operative housing subsector. regional and national federations of co-operative and mutual housing start to form; support services able to facilitate the development of co-operative and mutual housing begin to develop and codes of conduct and best practice begin to emerge. ccmh (2009) emphasised that the success of this phase was attributable to two reasons: o the advocacy role of the national co-operative movements in countries such as germany, austria, sweden, norway and canada. this was dependent on the belief exhibited by the various governments that the co-operative housing could help to solve the housing problem of the people; and o the formation of savings and loan schemes established for members to save towards their co-operative membership shares.  phase three, according to ccmh (2009), is the period when co-operative housing has been the entrenchment in the psyche of the public; a situation where specific provision is made for co-operative and mutual housing within the national legislation and housing systems. the level of support received by the housing co-operatives from their various governments may be connected with the percentage of housing stock provided through the co-operative housing approach. ccmh (2009) stated that the phases do not have a distinct division among them; a phase does not start and finish before the next one can begin. the development of the phases differs from one country to another but the common denominator is that housing cooperatives pass through the three phases for a sustainable co-operative housing subsector to be developed. from the above characterisation, the south african housing co-operatives are at the first phase, where the rate of failure is at its highest. if efforts are not put in place to ensure that the housing co-operatives develop past that phase, it is not likely to move to the next phase. this phase requires a lot of sacrifices on the part of all the stakeholders. the developmental phases in co-operative housing has shown that without beneficial legislative and policy frameworks in place, the growth, development and sustainability of housing co-operatives will be near impossible. australasian journal of construction economics and building richard j and van wyk j (2013) ‘ideological leaning and praxis of housing co-operatives in south africa: matters arising’, australasian journal of construction economics and building, 13 (2) 54-66 56 the problems of housing co-operatives in spite of the benefits that could be derived from co-operative housing as a delivery option, housing co-operatives around the world are beset by problems ranging from inadequate legislative frameworks, lack of understanding of the public and government officials on cooperative housing to inadequate finance as established by nubi, 2009; eglin, 2008; nnkya, 2001; byaruhanga, 2001; fruet, 2005; fall, 2009; mubvami & kamete, 2001; cmhn & vnc, 2004; cmhc, 2003 and mcclean & onyx, 2009. these problems are tabulated in table 2: developing countries developed countries lack of awareness by the officials of government. lack of information and knowledge on cooperative housing. unfavourable legislation towards cooperative housing. inappropriate regulation framework. interference by agency responsible for housing delivery. lack of support structures. opposition to co-operative model. hostile environment. lack of support by all the spheres of government. restrictive regulation. lack of access to finance. lack of sustainable finance. weak internal control. inadequate management structure. non payment of fees by the members. default in the payment of rents. lack of understanding by the members on co-operatives. inadequate education and participation by the members. table 2 problems experienced by housing co-operatives in developing and developed countries (source: authors own summary) for the purpose of the summary in table 2, the developing countries are nigeria, south africa, tanzania, uganda, brazil, senegal and zimbabwe. developed countries are united states, u.k, canada and australia. the above tabulation brings a salient issue to the fore, irrespective of where the housing cooperatives are based, the challenges are the same. theoretical framework from the previous literature review, the problems that housing co-operatives experienced in different countries around the world were identified and presented in table 2. the problems can be grouped into two categories: the first has to do with the mobilisation of resources such as land and finance and secondly, organising these resources based on the principles of co-operatives, which form the mainstay of any housing co-operative. these principles distinguish housing co-operatives from other co-operative-like initiatives; hence the need to locate the study within a theory or model for proper understanding of the research was imperative. the study was anchored on the develtere model, called the “triad” model shown in figure 1 below. it was used to study social movements in co-operatives, since housing co-operatives is a microcosm of a co-operative movement; hence the model can be used. gerard and martens (cited by develtere, n.d.) distinguished three components or forces in all social and cooperative movements. the ideology of the movements present the images of a desirable society based on specified values and the ways to achieve them. there is also the praxis or the action that is responsible for the mobilization and participation of the membership base. australasian journal of construction economics and building richard j and van wyk j (2013) ‘ideological leaning and praxis of housing co-operatives in south africa: matters arising’, australasian journal of construction economics and building, 13 (2) 54-66 57 to realize their objectives, as stated by gerard and martens (cited by develtere, n.d.), they also develop at least a minimal organisational structure. ideology organisation praxis figure 1: the three components of co-operative movements in developing countries adapted from develtere (n.d.), page 39. develtere (n.d.) established that there is a continuous interaction among the components (the ideology, the praxis and the organisation). over the years, due to the resources deployed by the members of co-operatives through their participation in co-operative activities, the ideology is created and recreated. this ideology determines who can be members and the resources expected from the members. based on the ideology and the praxis, according to develtere (n.d.), the structure of the organisation (in this case the cooperative) is defined. the interaction of these components creates the identity of a social movement (develtere, n.d.). social movements came about as a result of dissatisfaction felt by society from the status quo, as emphasized by develtere (n.d.). they present their grievances through demonstrations, strikes, riots, occupation of land, boycott of business or by the development of social and economic alternatives such as self-help schemes or saving clubs. in south africa, people join housing co-operatives because it takes a long time to wait for the reconstruction development project (rdp) houses promised by the government. they also want to have control of the outcome of their houses when completed. in other climes where there are no subsidies, as is being provided in south africa, people form housing cooperatives where ordinarily they would have been incapacitated as individuals to get control of their destiny (willie-nwobu cited by olusanya, 2000). as stated at the outset, housing co-operative is a microcosm of the co-operative movement. since the study was based on an in-depth understanding of housing co-operatives in south africa, it has to do with the interplay of the principle of co-operatives (ideology); the praxis (the resources employed by both the members and external bodies such as donor agencies and government) and the way the organisation is structured. in order words, it investigated how the housing co-operatives adhered to these principles, the way resources were employed by both the government and the housing co-operatives members and finally, the way the members structured their various housing co-operatives. develtere’s “triad” model was suitable for the study. only 2 (two) of the components of the model (ideology and praxis) were reported in this paper which covered open and voluntary membership; education, training and information; democracy; autonomy and finance. australasian journal of construction economics and building richard j and van wyk j (2013) ‘ideological leaning and praxis of housing co-operatives in south africa: matters arising’, australasian journal of construction economics and building, 13 (2) 54-66 58 research methodology a multi-case study method was used. gummesson (2007) defined a case study research as one where cases from real life are used as empirical data for research, especially when knowledge of an area is sparse or missing. yin (2009) stated that a case study is used when a “how” or “why” question is being asked about a contemporary set of events over which the investigator has little or no control, and the boundaries between phenomenon and context are not clearly evident. for the purpose of this study, structured interviews were used with both closed and open ended questions asked from the interviewees. in determining the number of housing co-operatives to be interviewed, purposive sampling was used. this sampling technique is a non-probability sampling procedure which is usually used in qualitative research that has to do with selecting the people to be interviewed based on the interviewer’s knowledge on the appropriateness and typicality of the sample selected (david & sutton, 2004; cohen et al, 2005; teddlie & yu, 2007). eisenhardt (cited by meyer, 2001) stated that the logic of the sampling is different from statistical sampling because the idea is to select cases that are replicable or be able to further the emergent theory. yin (2009) suggested that 2 or 3 cases could be selected for literal replication whereas 4 to 6 cases can be used to study theoretical replication (predicting contrasting results). initially, 6 cases were selected from the housing co-operatives in johannesburg for this study based on the following parameters:  due to the large concentration of housing co-operatives in johannesburg; there were twenty-nine housing co-operatives identified based on the list from the registrar of cooperatives office;  the cosmopolitan nature of the city that makes the poor, with limited or inadequate housing, continue to migrate there in search of opportunities. it is the belief of the national government that co-operative housing could be explored to solve the housing problem of this group of people (ndoh, 2009); and  the selection of housing co-operatives that have been in business of providing housing for their members for more than 3 years. it was the belief of the authors that this set of housing co-operatives will provide more insight than those that have just started out. however, only 5 housing co-operative chairpersons were interviewed, due to the fact that one of the housing co-operatives identified requested an interpreter. the authors decided not to interview this chairperson because of fear of misinterpretation or inadequate interpretation from the interpreter. the first interview was conducted on 26 may 2011 and lasted for 30 minutes. it was recorded and notes were also taken. the permission of the interviewee was sought before recording the interview. the second interview took place on 29 may 2011. it was difficult to interview the other 4 chairpersons individually because the convenient time for them was before their provincial meeting. as a result of this, it was necessary to change the format of interviewing adopted in the first interview to group interviewing. in this approach, the authors asked questions based on the research guide, while the chairpersons answered them in the interview guide given to each of them based on the peculiarity of their respective housing co-operatives. there was no need to sound record this session, since each individual housing co-operative answered in writing and enough time was usually given for all those present to complete a particular question before moving to the next one. this session lasted for 2 hours and 25 minutes. australasian journal of construction economics and building richard j and van wyk j (2013) ‘ideological leaning and praxis of housing co-operatives in south africa: matters arising’, australasian journal of construction economics and building, 13 (2) 54-66 59 results and discussions profiles of the housing co-operatives interviewed profile co-op a co-op b co-op c co-op d co-op e year established 2000 1999 1999 1999 1999 year registered at companies & intellectual property registration office (cipro) 2001 2001 1999 2000 2001 number of members 120 351 55 84 28 number of houses 120 351 55 84 28 table 3 profiles of the five (5) housing co-operatives interviewed the above table shows the years the housing co-operatives were established and when they were registered at cipro. as stated earlier, the year of establishment was a condition in the selection of the housing co-operatives to be interviewed. all the housing co-operatives have been in ‘business’ for more than twelve years which is an indication that the information supplied can be relied upon. open and voluntary membership the first principle of all the co-operatives irrespective of t type is for the membership to be open and voluntary. the extent to which this principle was pursued by the co-operatives varied based on underlying parameters establishing such co-operatives. in south africa the development of housing co-operatives hinged on the subsidy provision of the national government from the beginning hence the open and voluntary nature of the membership was restricted. to be eligible for the subsidy, prospective beneficiaries must be in a household with a joint income of between $143-$700. in this respect none of the housing cooperatives could be said to be open and voluntary to new members. education, training and information it was discovered that out of the four organisations listed [the small enterprises development agency (seda), social housing foundation (shf), south africa housing cooperatives association (sahca) and non governmental organisations (ngos)], the housing co-operatives only availed themselves of the training conducted by sahca. the training provided by sahca according to the interviewees ranged from adequate to fairly adequate; hence, they all canvassed for improvements to be made. the chairperson of housing co-operative a was aware of the existence of the shf, but did not know the procedures to follow in order to benefit from its workshops and training opportunities. education and information are important, but were lacking in this instance; probably not due to the fault of the chairpersons but as a result of limited promotion of shf activities that would have informed housing co-operatives of how to approach the shf for training. seda, according to dti (2010), was an agency of the department of trade and industry which among other services provided social and skills enhancement for co-operative members and to support and promote co-operatives. the support provided was usually in the form of training on how business plans were prepared and how to run the co-operative. the shf (the responsibilities has now been taken over by social housing regulatory authority [shra]) was also a government agency accountable to the department of human settlements and was expected to develop a sustainable social housing sector for south africa. this goal was approached by implementing rental strategy and providing training and workshops within the confines of the social housing sector (un-habitat, 2008 & shf, 2009). australasian journal of construction economics and building richard j and van wyk j (2013) ‘ideological leaning and praxis of housing co-operatives in south africa: matters arising’, australasian journal of construction economics and building, 13 (2) 54-66 60 it was stated that the housing co-operatives offered education and training to both the members of the housing co-operatives and the employees. in addition to these, public enlightenment was also provided. a classic example was given by housing co-operative b to the effect that across the road, there was rental housing that charged more than the housing co-operative was charging on a monthly basis and that no better enlightenment could be found. corroborating the responses of the interviewees, during the second interview, someone from canada was introduced by the president of sahca to the members present. the national body facilitated the arrangement in order for the housing co-operatives to be taught the development in co-operatives in general and housing co-operatives in particular. democracy in housing co-operative a, the board members were usually elected by the members and were expected to serve for three (3) years. the committee members were also expected to serve for three (3) years and were selected by the board members. this arrangement for selecting committee members is not in line with democratic tenets and is capable of being abused by the board of directors, especially when the board of directors’ associates are selected to be members of the committee. one good thing here was that the housing cooperative had only one committee: the finance committee; hence the extent of abuse of power was reduced. the positive aspect of this selection of committee members was that the chairperson stated that the finance committee was often effective in discharging its functions. in taking decisions, the following were usually adhered to by the housing co-operative:  major decisions were taken at the general meetings.  important and minor decisions were taken by the board members. in housing co-operative b, the situation was somehow different. the board members were usually elected for more than four (4) years and due to the re-organisation going on in the housing co-operative, there was no committee in place. electing board members to run for more than four years could lead to vices such as lack of accountability, favouritism, corruption, apathy and perpetuation of self interest (ccmh, 2009). in taking decisions, the general secretary indicated that major and important decisions were normally taken by the board members while minor decisions were left to be decided at the general meetings. this type of arrangement will only further perpetuate some of the vices earlier mentioned. though running housing co-operatives by general meetings according to ccmh (2009) could lead to a situation where the housing co-operative may become difficult to administer it would have been more appropriate to have major and important decisions vested in the general meetings to ensure checks and balances. however, annual general meetings have not been held for sometime due to the re-organisation going on in the housing co-operative. in housing co-operative c, the situation was that both the board members and committee members were elected and are expected to run for four (4) years and one (1) year respectively. there were maintenance and social committees which were mostly effective in the discharge of their responsibilities. this may be connected with the limited time allowable for the committees; the idea of positively impacting the housing co-operative cannot be overemphasised. important and minor decisions were usually taken by the board members while major decisions were taken at the general meetings. annual general meetings were held annually. in housing co-operative d, both the board members and committee members were elected for a period of three (3) years and there were maintenance, finance and social committees in place. major decisions were taken at the general meetings while board members take important and minor decisions. annual meetings took place every year. australasian journal of construction economics and building richard j and van wyk j (2013) ‘ideological leaning and praxis of housing co-operatives in south africa: matters arising’, australasian journal of construction economics and building, 13 (2) 54-66 61 lastly, in housing co-operative e, board members and committee members were elected for a period of four (4) years and one (1) year respectively and there were maintenance, finance and social committees in place. major decisions were usually taken at the general meetings while board members took important and minor decisions. of note is that in all the housing co-operatives, women have been very active in their participation in the activities of the co-operatives. for housing co-operatives to be sustainable, the interviewee stressed that women should be given equal opportunities and should be supported to achieve this. the strength of any housing co-operative is hinged on the members’ participation and as such the housing co-operatives embarked on the following measures to ensure adequate members participation in addition to the annual general meetings:  new members were informed of the need to participate actively in the co-operative activities. this measure was sometimes effective as observed by the chairperson.  providing training for all the committee members. this measure was important and has been found to be very effective.  regular house to house visits was also an effective measure usually adopted by the housing co-operative in ensuring members’ participation.  in addition to the above measures, housing co-operatives d and e imposed fines when members fall due in their participation. autonomy one of the principles of co-operatives is that they should be autonomous; hence they should not be subjected to external control from bodies such as government and donor agencies. housing co-operatives a and b claimed that there has never been a time when any agency of the government, shf, sahca and the board of directors tried to impose their will on the housing co-operatives. however, when looked at from the perspective of monitoring and evaluation, this is not a positive development because it implies that the housing cooperative was left to either ‘swim or sink’. a modicum of control was expected especially when the subsidy of government was involved, as it was in these cases. however, the story was different in housing co-operatives c, d and e that have been subjected to some form of control. finance the chairpersons were asked about the various sources of finance available to the housing co-operatives and the level of adequacy. it was discovered that the housing co-operative a had used members’ contribution, government institutional housing subsidy and a loan from the national housing finance corporation (nhfc) to finance the day to day activities of the housing co-operative. the nhfc, according to un-habitat (2008), was an agency of the human settlements department, whose objective among others was the development and appropriate funding of institutions such as housing co-operatives, offering a variety of tenure arrangements for residential purposes in the areas of the housing market that were not well covered. as to the adequacy, members’ contributions and the government institutional subsidy were very adequate while the loan from nhfc was adequate. however, the other housing co-operatives (b, c, d and e) had only used members’ contribution and government institutional housing subsidy. as to their adequacy, they claimed that only the subsidy was adequate except housing co-operative e where both the subsidy and the members’ contribution were adequate. none of the housing co-operatives was registered as a social housing institution (shi) in order to be able to benefit from australasian journal of construction economics and building richard j and van wyk j (2013) ‘ideological leaning and praxis of housing co-operatives in south africa: matters arising’, australasian journal of construction economics and building, 13 (2) 54-66 62 government grants apart from the subsidy. efforts of policy makers were not encouraging in creating sustainable co-operative housing. this statement was borne out of the statement that appeared on page 9 of the 2005 social housing policy and page 18 of the 2009 social housing policy as shown below: “primary and secondary housing co-operatives registered under the co-operatives act of 1981, and accessing funding through this programme will be considered together with the social housing institutions and will have to be accredited as social housing institutions. separate guidelines, however, will be drafted to accommodate the specific nature, operations and regulatory requirements of the housing co-operatives”. four years after the first social housing policy was published, separate guidelines for housing co-operatives have not yet been drafted. hence, it will become difficult for the housing co-operatives to access the social housing grant. interestingly, the co-operative act of 1981 does not distinguish housing co-operatives from agricultural based co-operatives, which were predominant at that time; it was the co-operatives act 14 of 2005 that recognised other specialised co-operatives such as housing co-operatives. this further showed that there is a minimal understanding by the agency responsible for the formulation of housing policies and legislation vis-à-vis co-operatives policies and legislation. this limited understanding may be connected to the low level of growth and development experienced so far in the co-operative housing subsector. apart from this, it was going to be difficult for housing co-operatives to benefit from the current grants, except if some aspects of the social housing act 16 of 2008 were changed. this issue came up during the presentation of the social housing act regulations by the shra to the portfolio committee on human settlements on 7 th september 2011. the committee remarked that no funding framework existed for housing co-operatives at the national level. this can be validated from page 9 of the 2005 social housing policy and page 18 of the 2009 social housing policy highlighted above. the institutional subsidy that formed the main subsidy that housing co-operatives use, was not exclusively for housing co-operatives but also for other housing institutions such as rental, share block and instalment sale. the main policy intent of the subsidy was to provide capital for the provision and maintenance of affordable rental housing (ndoh, 2009a). in essence, it amounted to the survival of the fittest in getting the subsidy. in spending the funds of housing co-operative a, it was the responsibility of the members and the board members to decide on how the money of the co-operative was spent. this was a good method as it checked the unilateral spending by either the chairperson or the person in charge of finance. also, this housing co-operative as a matter of statutory regulation ensured that its accounts were audited as enshrined in the 2005 co-operatives act 14 in section 47 subsections 1d, although a co-operative may apply for exemption to the registrar of co-operatives if for reasons of finance the co-operative could not meet the requirements. housing co-operatives b and c accounts were (as at the time of the interview) administered in a trust account. this may be indication of a problem in the housing cooperatives. in co-operatives d and e, the chairperson and the person in-charge of finance authorized the spending of the co-operative’s funds. to ensure that members pay their fees, the following measures were put in place by all the housing co-operatives:  initially, electricity to defaulters were disconnected but this policy resulted in the defaulters seeking redress in court. the policy was later terminated as it was not in the statutes of the housing co-operative;  presentation of letter of demand to the defaulter and  evicting defaulters. over the years, members have been evicted. australasian journal of construction economics and building richard j and van wyk j (2013) ‘ideological leaning and praxis of housing co-operatives in south africa: matters arising’, australasian journal of construction economics and building, 13 (2) 54-66 63 the eviction of members of the housing co-operatives was something that should have been looked into as it was not a positive development. in a study of the co-operative housing subsector conducted by the community and neighbourhood services department, city of toronto (2004), the following eviction prevention strategies were suggested:  eviction should be the last resort;  provision of late notices;  a progressive approach to arrears management and conflict resolution;  repayment schedules;  provision of clear information on the eviction process, options and rights; and  allowance of time and opportunity to explain and resolve problems such as arrears and to contest eviction. matters arising all co-operatives, according to johnston (1999), are in several ways created with ideology that is predetermined. in essence, there is a mission that each co-operative wants to achieve that is encapsulated in the co-operative principles. the implementation of these principles as stated by johnston (1999) differs from one country to the other and also from one cooperative to the other. hence, the essence of the principles is to provide a framework for cooperatives to carry out their businesses. co-operative business is just a means to an end, a method of doing business which results in advantages to the society not otherwise possible in a capitalist system. in a collection of 21 cases of housing co-operatives from 12 countries reported in munkner (2009), none of the housing co-operatives was able to apply all the principles of cooperatives but became distinctive by one form of the principle or the other. munkner (2009) concluded that what is important in any housing co-operative is the promotion of the interest of the members and that the existence of housing co-operatives hinges on this. of note is that all over the world, there are different models of housing co-operatives available because of their flexibility to suit the environment in which they operate. in the words of munkner and trodin (1999), there is no single model for the development of self-help organisations, of which housing co-operatives is one that can be transferred from one country or region to another. munkner and trodin (ibid) are of the view that experience has shown that housing co-operatives differ from one community to another. for housing co-operatives to be successful, they have to be structured in line with the local needs of the members. this is not to say that best practice cannot be copied but with adaptations to suit the local needs of the members. irrespective of the model chosen, the principles of co-operatives have to be embedded because without that, there is no housing co-operative. the praxis may be broken down into internal and external actions. the internal praxis consists of members participating in the decision making in areas such as electing/selecting members to boards of directors, attending meetings or paying all levies. while external praxis refers to the relationship between housing co-operatives and other bodies such as government and donor agencies in terms of resources provision. where the state provides the bulk of the finances through institutional subsidies the issue of autonomy may in the long run become challenging as government may control operational decisions hitherto taken by the board of directors. this will make the housing co-operatives unable to function as member owned and democratically controlled organisations. this scenario was seen in the membership structures of the housing co-operatives studied, as prospective members have to be in an income bracket to qualify for the subsidy. to curb this dependence on the government, members have to demonstrate commitment to internal practices. australasian journal of construction economics and building richard j and van wyk j (2013) ‘ideological leaning and praxis of housing co-operatives in south africa: matters arising’, australasian journal of construction economics and building, 13 (2) 54-66 64 conclusions five housing co-operatives based in johannesburg, south africa have been examined using the triad model for their ideology and practises. the housing co-operatives examined were not open since membership depended on being a citizen within certain income bracket due to the institutional subsidy from the government that is involved. the test showed a mixed result on the matter of democracy as reflected in the ways the housing co-operatives chose their executives and committee members (internal praxis). the tests showed the same result for finance. in all, efforts were put in by the housing co-operatives in engendering the ideology of co-operatives on one hand and the 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(2009) case study research: design & methods, 4 th edition, sage publications, california http://www.unhabitat.org/publications/ performance of design-build projects in terms of cost, quality and time: clients, architects and contractors’ views 12 design–build: how to increase its usage, and its impact on architects and contractors in singapore florence yean yng ling (department of building, national university of singapore, singapore) abstract a the purpose of this paper is to explore the ways to increase the usage of design-build (db). the scope covers how project managers (local and foreign) can play a role in increasing db usage in singapore. it is found that owners would adopt db if their requirements can be properly met. this is achieved by having clear and comprehensive bid documents, having sketch designs prepared by client appointed consultants, and engaging experienced db contractors. clients also need to engage project managers and consultant quantity surveyors to manage the db projects, but the liability for design rests on db contractors. clients want db contractors to provide warranty for fitness for purpose. the conclusion is that clients welcome the use of db if some concrete steps are taken to make it meet their needs better. this study also concludes that consulting and contracting companies welcome db, as this procurement method does not have a significantly negative impact on them. keywords: procurement management, designbuild, architects, owners, contractors, singapore. introduction a several studies have been conducted to compare design-build (db) with a number of different types of procurement routes available for clients to choose from. in the usa, konchar and sanvido (1998) compared the performance of projects using db, traditional design-bid-build (dbb) and construction management routes. they found that db projects perform better than design-bid-build projects in all the three aspects: schedule, cost and quality. in the uk, bennett et al. (1996) also discovered that db projects‟ performance is not worse than design-bid-build projects. in singapore, ling and leong (2002) investigated the perceptions of clients, architects and contractors on db procurement system. clients and contractors supported db because they perceived db projects have high functional, architectural and technical quality, shorter in project time, and lower project costs. the objectives of this paper are: to investigate the possible ways to make db more suitable for owners‟ use; and to explore the impact of db on architects and contractors. db is explored because its current level of usage in singapore is low; only an average of 15% of projects were based on db between 2002 and 2004 (building and construction authority, 2005). it is important to increase db‟s usage since studies have shown that db projects perform better than traditional design-bid-build projects in terms of time, cost and quality (konchar and sanvido, 1998). db is an important procurement system for the singapore construction industry as db projects perform significantly better than designbid-build projects in terms of higher project delivery speed, lower operations and maintenance costs, and low clients‟ administrative burden (ling and kerh, 2004). the relative low usage of db in singapore, despite its demonstrated superior performance indicates that some alterations may need to be undertaken before clients adopt this procurement method. tookey et al. (2001) found that clients make changes to conventional procurement systems to obtain the best outcome. the second objective is important to find out if db has a negative impact on construction industry participants such as architects and contractors, which may have caused db‟s low usage. these negative impacts therefore need to be identified, and ways found to overcome them, if necessary. the study singled out architects and contractors for investigation because the status of these two actors is radically changed in db system compared to design-bid-build. there is a change in leadership in db; the architect is now responsible to the contractor for the design he has produced and answers to the contractor. 13 the study of db encompasses a wide scope. for example, it is possible to study the strengths and weaknesses of each type of procurement system, by comparing the performance of the projects using different systems (ling and kerh, 2004). ling (2004a, 2004b) had investigated critical success factors affecting db and dbb projects. another study had been conducted on how to predict the performance of db and dbb projects (ling et al., 2004). the scope of the paper is confined to increasing usage of db and perceptions of architects and contractors in singapore for reasons given earlier. this paper is important because owners‟ concerns in db are identified. the findings can be used to fine-tune the db procurement system to suit owners‟ needs better, and thereby encouraging increased usage. the impact of db on architects and contractors is also uncovered. after the introduction, a brief literature review is given. this is followed by the research methodology and results of surveying owners, architects and contractors. the discussion is divided into three parts; how to increase db usage, and its impact on architects and contractors. this paper ends with limitations of the study and a conclusion. literature review a many studies have shown that despite its advantages, there is no widespread usage of db. in the uk, for example, db usage is predicted to stagnate at 23% of the market for new building works (bennett et al., 1996). in the usa, db accounted for about 24% of the us$286 billion of non-residential construction output in the usa (tarricone, 1996). in singapore, as previously mentioned, only 15% of building projects were based on db (building and construction authority, 2005). this may be because some changes are needed to make db more suitable for use. in this study, changes are operationalised using the theory of construction process re-engineering (cpr), whereby radical improvements are founded on incremental change (love and li, 1998). common themes of re-engineering include: examining current work operations to combine multiple components, possibly jobs or functions into one; undoing standards created by division of labour and replacing these with models which cater specifically to each case; and aiming for interenterprise harmony and synergy based on aptitude and mutual benefit (betts et al., 1997). using cpr, several initiatives that may bring about higher usage of db are identified. the first aim of this paper is to gauge the extent to which singapore‟s clients and contractors felt that the suggested solutions would bring about improvement in db projects. the possible solutions to make db projects more suitable for usage are now reviewed. owner‟s level of construction sophistication even though db contractors have single point of responsibility, owners still have many duties and responsibilities these include conducting feasibility studies, obtaining planning approvals, preparing bid documents and request for proposals (rfps) (ndekugri and turner, 1994), establishing the budget, conducting value engineering, selecting contractors to bid (kluenker, 1996), evaluating bids, and checking contractors‟ proposals. owners also need to administer the contract such as making progress payments and inspections, responding to contractors, and ensuring schedules are followed (kluenker, 1996). they should manage design changes, claims and defects, undertake quality control (national joint consultative committee (njcc), 1985) and ensure that their own requirements are met (akintoye and fitzgerald, 1995). as owners using the db procurement system are not expected to engage a team of design consultants, the many duties of the owners described above do point to the need for owners to be knowledgeable in construction matters if they want to procure projects through the db route. studies have shown that db is not suitable for owners who do not possess any knowledge of the workings of the construction industry (ndekugri and turner, 1994). katsanis and davidson (1998) suggested that owners need to have a high degree of sophistication, be knowledgeable and have a detailed awareness of their own requirements when procuring projects through the db route. the fieldwork would investigate whether only owners who are familiar with construction process should use db contractual arrangement. project size ling et al.‟s (2001) study showed that db is suitable for projects of any size. however, there are studies that showed that db should be used only for large projects (songer et al., 1996). in 14 view of the different opinions encountered, the fieldwork investigated if db should be used only for large projects. organizational structure db is a procurement system in which the contractor provides all the design based on the owner‟s brief, and subsequently undertakes construction. this is known as „pure db‟ (janssens, 1991). however, clients are known to heavily amend procurement routes to the point that they do not follow an orthodox type of structure (tookey, et al., 2001). in db, hybrid forms have surfaced to combine the advantages of several different contractual arrangements while retaining some of the advantages of pure db. these include develop and construct, and novated db. in develop and construct, the owner signs a contract with its architects and engineers to produce the preliminary design. after the contract is awarded, the contractor selects and appoints its own consultants to develop the design and working drawings. they are responsible for ensuring structural sufficiency, method of construction and other special requirements. in this arrangement, the owner‟s consultants are responsible for the documents they prepare and contractors are responsible for technical efficacy, price and schedule (janssens, 1991). novated db has two distinct stages, the prenovation stage which is similar to the design-bidbuild system, and post novation stage, which is akin to a pure db arrangement (chan and lam, 1995). in the pre-novation stage, the consultants engaged by the owner may develop 30% to 80% of the design (chan and lam, 1995). at the post novation stage, contractors must employ these same consultants who had carried out the preliminary design under the owner. in the fieldwork, owners‟ preference for which organizational structure for db was investigated. bidding issues a rfp document may contain the owner‟s brief, which communicates his/her requirements to db bidders. there is no agreement on how comprehensive the brief should be (murray, 1995). it may vary from a general statement of needs to a detailed schedule of requirements incorporating drawings and specifications (ndekugri and turner, 1994). however, it should contain information such as owners‟ requirements, project objectives (osborne, 1996), project constraints (ndekugri and turner, 1994), physical design needs, and the intended specific use of the building (marshall and morledge, 1988). in the fieldwork, the importance of a comprehensive brief was investigated. bidding cost for db contracts is more than twice that of traditional procurement routes (latham, 1994). it is considered one of the most unfair aspects of db because contractors and their designers need to be willing to underwrite the substantial cost of preliminary design and engineering to prepare the overall estimate and bid price, which is not recoverable if they are not successful in the bid (kawaguchi et al.,1994). the consequences of high bidding costs are: ultimately, owners must pay for these costs on future projects (greenfield, 1982); and more competent contractors may decline to bid if there are too many bidders (ndekugri and church, 1996). this will then deprive owners of the opportunity to secure good quality proposals (osborne, 1996) and also discourage competition (dreger, 1993). there are several possible solutions to the problem of high bidding cost. these include reimbursing bidders for front-end costs, limiting the number of bidders (njcc, 1985; latham, 1994) and refraining from asking bidders to provide too many details. the fieldwork investigated whether owners should reimburse bidding costs to obtain better design proposals. selection of contractors for db projects to be successful, owners should select db contractors carefully (njcc, 1985). the main criteria to be used include the contractor‟s track record, ability to provide competitive price, attitude and interest in the project, financial status, past experience, and reputation. in db, it is usual not to invite open bids in order to control the quality of bidders. bidding is generally preceded by a prequalification exercise where interested bidders submit their job references and curriculum vitae. there are many criteria for prequalifying contractors for db projects. these include relevant experience and a good record in db projects (janssens, 1991). after the initial screening, only suitable contractors are invited to submit proposals and bid for the next project. 15 owners may also consider selecting contractors and design consultants who form joint ventures to undertake db projects. the advantage is that because of profit sharing, consultants will produce a design that is as efficient as possible (hodgson and bayfield, 1996). the disadvantages of design consultants jointventuring with contractors are that each entity loses its individual identity, and there is a reduction in profit coupled with increased risk to the organization (yates, 1995). however, it is arguable whether there is actually a reduction in profit because the synergy provided by the firms ensures that performance is enhanced. the fieldwork investigated selection of contractors based on previous db experience, importance of prequalification; and formation of joint ventures between builders and designers. quality control some owners are not willing to use db because they feel that db projects have lower quality than design-bid-build projects, aesthetics is compromised and maintenance issues are not considered by db contractors (ling et al., 2000). db lacks independent checks and balances compared to the traditional form (dreger, 1993). to increase db usage, more quality control practices may be needed. in meeting the owner‟s requirements on the construction project, the contractor‟s behavior is normally to provide service at the minimal acceptable level to maximize profit (kluenker, 1996). to achieve high quality of constructed facility, the rfp should state the minimum quality levels to be achieved. a good constructed product may also be procured if contractors provide a guarantee for fitness for purpose. this is an absolute obligation to produce a constructed facility which does not contain faults (marshall and morledge, 1988). this is a higher duty than exercising reasonable skill and care because contractors may still be liable even if there is no fault or negligence on their part. this requirement would not be unduly unfair to db contractors because they have control over the whole development process and are thus in a position to guarantee the performance of their buildings (bennett et al., 1996). to safeguard their interests further, owners with no in-house project management team should engage independent project managers and consultant quantity surveyors to monitor the work of contractors and their consultants and administer the contracts. however, the independent consultants add cost to the project and erode the advantage of the single point responsibility afforded to owners in db projects. in a survey of contractors in singapore, 58% felt that the presence of owner-engaged supervisors in db projects slows down their work (ling et al., 2000). the fieldwork investigated ways to control quality of db projects. impact of db on architects a in db, the role of architects is different from design-bid-build arrangement. cecil (1983) commented that db implies major changes in roles, relationships and responsibilities for no one more radically than the architect. in db projects, the contractor becomes the paymaster of the architect. the architect‟s traditional role in a construction contract in which he is empowered to administer, is absent in the db situation. friedlander (1998) pointed out that the contractor-led db projects have often been criticized by architects for their mediocre design, believing that the design often overvalues considerations of costs and constructability at the expense of aesthetics and other traditionally important design criteria. a study by akintoye and fitzgerald (1995) to determine what role architects expect themselves to play in db contracts concluded that architects do not wish to give up responsibility for contract administration. they further found that architects resent db because of loss of professionalism, reduction in professional fees, job dissatisfaction, erosion of professional roles and responsibilities, and lack of sufficient time to produce good design solutions. their study also concluded that architects generally felt that the quality of product and design innovation is sacrificed. the roles that architects play in db projects are different from design-bid-build projects. architects may need to relinquish control in db projects. they may also encounter problems with project owners and db contractors. architects need to adapt to the loss of their leadership position in db projects. in the fieldwork, the impact of db on architects was investigated. 16 impact of db on contractors a db contractors are responsible for producing a proper design in response to the brief, supplying good quality materials and workmanship, and meeting residual liabilities until extinguished at law due to the passage of time (gardiner and simmons, 1995). db contractors assume total responsibility to guarantee price, completion time and quality (cecil, 1983). the db contractor‟s single point responsibility allows effective and detailed planning from inception to completion of the project (osborne, 1996). better co-ordination and decision-making lead to time reduction (akintoye, 1994). contractors are able to control the type of materials and method of construction without needing to add a large contingency to cover themselves for unforeseen situations. db allows flexibility in contractors‟ operations so that they can innovate and adapt to new technology (yates, 1995). contractors have more control over design and construction (dreger, 1993). therefore, contractors should have more job satisfaction in db projects, compared to traditional design-bid-build projects. in the fieldwork, the impact of db on contractors was investigated. methodology a with knowledge of the project owners‟ needs and requirements from the literature review, 14 possible solutions to improve db were formulated. these solutions were designed after interviews with three experts in the construction industry. these are a project manager, an architect and a construction manager, all with more than 10 years of experience and have handled more than five db projects each. owners‟ views on the applicability of these solutions were sought in the fieldwork using a structured questionnaire. they were asked to state their level of agreement with the solutions suggested on a 5-point scale (1= totally disagree; 5= strongly agree). this is to ensure that future projects could include the suggested solution so as to make db procurement more suitable for owners and contractors. the impact of db on architects and contractors was also investigated in the fieldwork. views of architects and contractors were obtained using two different structured questionnaires. statements in the questionnaire sought to find out how architects and contractors felt about db and its impact on them, on a 5-point scale. besides the structured questions, respondents were also asked demographic questions in the second part of the questionnaire. the survey package comprised a questionnaire, a cover letter indicating the objectives of the research and a self-addressed and stamped envelope. the population frames for this study comprised architects, project owners and contractors who operate in singapore. 150 survey forms were sent to randomly selected architects who practice in the public and private sectors. another 150 questionnaires were sent to randomly selected public sector clients and property developers representing private sector owners. questionnaires were sent to all 155 registered large building and civil engineering contractors (paid up capital above us$1 million each). only large contractors were surveyed because it was felt that they would have the resources to undertake db projects. after the survey and data analysis, the results were discussed with the same three experts. results a 40, 30 and 25 usable responses were received from contractors, architects and owners respectively. this represented response rates of 26%, 20% and 17%, which are considered to be adequate for a study of this nature. 20 responses were from private architects and 10 from public sector architects. 91% of the architect respondents have practised in the construction industry for more than 10 years. 70% of the architects have also been involved in db projects. there were 15 and 10 usable responses from private and public sector owners respectively. 92% of the owner respondents have practised in the construction industry for more than 10 years. 80% have procured projects using db system. of the 40 responses received from building and civil engineering contractors, 83% of the respondents have practised in the construction industry for more than 10 years. 90% of the respondents have handled db projects in the past. the demographic characteristics of the respondents indicate that they are very experienced construction industry players. a large majority of them also have experience in 17 db projects. therefore, their views on db would be noteworthy. mean ratings for all the statements were calculated for each of the categories of respondents (see tables 1 to 3). statistical t-test of the mean was carried out to check whether the population would agree to these statements or otherwise. for each statement, the null hypothesis that the statement did not receive agreement amongst the population and the alternative hypothesis that the attribute was agreeable are set out below. to test the null hypothesis ho:   o against the alternative hypothesis h1:  > o, where  is the population mean. o is the critical rating above which the attribute was considered agreeable by the population. in this study, o was fixed at 3 because by definition given in the rating scale, ratings above 3 (i.e. 4 and 5) represented „agree‟ and „strongly agree‟. the significance level was set at 0.05. an analysis of the 14 statements that may help to improve db procurement system shows that owners agree with nine of them (see table 1). when comparing owners and contractors‟ responses, the analysis of variance (anova) shows that they did not rate in the same manner in eight instances. an analysis of the 13 statements relating to the impact of db on architects shows that architects agree with none of them (see table 2). an analysis of the 14 statements relating to the impact of db on contractors shows that contractors agree with five statements (see table 3). no . suggested solutions to improve db projects mean (owners) t value sig. mean (con-tractor) f value sig. 1 owners’ construction sophistication 1.1 only owners who are familiar with construction process should use db contractual arrangement 2.933 0.222 0.587 2.925 0.001 0.981 2 project size 2.1 db should be used for large projects (eg. above us$25 million) 4.000 3.623 0.002* 2.825 4.373 0.041# 3 organizational structure 3.1 owners should opt for „pure db‟ organizational structure 3.071 0.366 0.360 3.700 4.862 0.032# 3.2 owners should opt for „develop and construct‟ organizational structure 3.786 3.015 0.005* 2.825 5.082 0.006# 3.3 owners should opt for „novated db‟ organizational structure 3.071 0.366 0.360 2.450 7.005 0.009# 4 bidding issues 4.1 owner‟s brief to db contractors should be very clear and comprehensive 4.467 5.358 0.000* 4.250 0.729 0.397 4.2 owners should reimburse bidding costs to obtain better design proposals 3.000 0.000 0.500 3.675 6.461 0.014# 5 selection of contractors 5.1 only contractors with previous db experience should be awarded db contracts 4.000 3.623 0.002* 2.850 8.449 0.005# 5.2 there should be a pre-qualification of db teams 3.933 3.108 0.004* 3.650 0.748 0.391 5.3 contractors and design consultants should form joint ventures to undertake db projects 3.000 0.000 0.500 3.250 0.444 0.508 6 quality control 6.1 owners should engage project managers to manage the design and construction of the db project 4.000 3.623 0.002* 3.400 4.373 0.041# 6.2 owners should engage consultant quantity surveyors to administer db contracts 3.600 2.073 0.029* 2.775 8.449 0.005# 6.3 db contracts should state the minimum quality levels to be achieved 3.786 3.015 0.005* 3.225 3.913 0.053 6.4 db contractors should bear design liability and provide warranty for fitness for purpose 4.133 3.900 0.001* 3.600 3.084 0.085 * clients agree with the suggestion at 5% significance level. # clients and contractors did not rate in the similar manner. table 1: survey results on solutions to make db projects more suitable 18 no. impact of db on architects mean (architect) t value 1-tail sig. 1 there is a loss of job satisfaction for architects in db projects 2.933 -0.174 0.568 2 architects are unable to give independent professional advice in db projects 3.200 0.526 0.303 3 relationship between owners and architects is remote in db projects 3.067 0.202 0.471 4 owners for db projects still believe that architects are answerable to them, as in traditional projects 3.067 0.235 0.409 5 db contractors are acting as an “uneducated” barrier between owners and architects 2.867 -0.459 0.674 6 architects are reluctant to provide adequate service due to lack of incentive in db projects 3.067 0.174 0.432 7 db contractors generally do not adopt architects‟ recommendations 3.133 0.367 0.359 8 db contractors curtail architects‟ powers 3.467 1.333 0.102 9 db contractors do not understand their management role 3.200 0.587 0.283 10 db contractors are not familiar with the relevant building regulations 2.867 -0.381 0.355 11 there is a lack of architect‟s involvement during construction stage of db projects 2.867 -0.397 0.651 12 there is insufficient time for designing and interpreting owner‟s requirements in db projects 3.200 0.526 0.303 13 proper development of design and detailing rarely occur in db projects 3.000 0.000 0.500 table 2: survey results on impact of db on architects 19 no. impact of db on architects mean (contractor) t value 1-tail sig. 1. contractor-engaged architects provide cost effective designs 3.925 5.867 0.000* 2 contractors should monitor the overall quality of db projects 4.075 8.897 0.000* 3 owners should engage project managers to examine db contractor‟s proposal and verify contractor‟s solution on site 3.150 0.947 0.175 4 there is more job satisfaction for contractors in db projects compared to traditional projects 4.100 9.348 0.000* 5 there is insufficient time for designing and interpreting owner‟s requirements in db projects 2.725 -1.602 0.942 6 db contractors generally do not adopt architects‟ recommendations 2.125 -7.656 1.000 7 db contractors curtail architects‟ powers 2.650 -2.058 0.977 8 proper development of design and detailing rarely occur in db projects 2.175 -6.418 1.000 9 owners lose control over the design of db projects 1.975 -8.101 1.000 10 db contractors want to execute the works to meet minimum requirements at the lowest possible cost 3.225 1.270 0.106 11 bidding costs of db projects are much higher than traditional design-bid-build projects 3.400 1.688 0.049* 12 bid award decisions for db projects are not as fair as traditional design-bid-build projects 2.725 -1.638 0.946 13 profit margins for db projects are higher than traditional projects 2.900 -0.644 0.739 14 db projects pose more risks to contractors than traditional designbid-build projects 3.750 4.713 0.000* * contractors agree with the statement, at 5% level of significance. table 3: survey results on impact of db on contractors discussion a the discussion in this section is based on the statistical results in tables 1 to 3. owners are not required to have construction knowledge the survey results show that owners did not agree that they should have construction sophistication before embarking on db and contractors also agreed with them (see table 1). this finding departs from previous studies that suggested that only owners who are familiar with the construction process should use db contractual arrangement (ndekugri and turner, 1994; friedlander, 1998). the conclusion is that owners who are not familiar with the construction process do not want to be precluded from db procurement system. this group of owners makes up a large percentage of clients and project initiators who require built facilities but are not in construction or real estate business. they therefore may not have the necessary experience and expertise in construction operations. the implication of this finding is that project managers can help these owners manage the db projects. projects must be large the results of this study show that owners felt that db is only effective if projects are sufficiently large (see table 1). this does not concur with ling et al.‟s (2001) finding that db can be used for projects of any size. anova showed that contractors disagreed that projects should be sufficiently large. contractors may have rated this way because precluding db from medium and small projects would reduce the market share of db. the implication of this finding is 20 that project managers should offer the db procurement system to owners only if projects are sufficiently large, for example, above us$25 million. project managers also benefit because fees, which usually commensurate with the size of project, would be higher. db project owners should provide some sketch design the survey results show that owners are not comfortable with „novated db‟ and „pure db‟ organizational forms. instead, they felt that db would be more widely used if „develop and construct‟ were used, in which owner-appointed consultants undertake the sketch design, and db contractors are tasked with preparing working drawings and construction. the three experts who were interviewed felt that it is unreasonable to force db contractors to accept ownerappointed consultants in „novated db‟ arrangement. „pure db‟ did not find favor with owners because it is difficult to specify all requirements in writing. it would be clearer if owners could provide sketch design for contractors to work on, thus, the preference for „develop and construct‟ arrangement. the findings provide support to tookey et al.‟s (2001) hypothesis that in future, procurement systems will be an amalgam of various facets from distinct procurement systems. this study also provides empirical support to murray‟s (1995) suggestion that hybrid db arises because pure db is not responding to and fulfilling owners‟ expectations. the implication of this finding for project managers is that they should have some architectural design capability, as owners would like some design to be done, before engaging contractors to develop the design further before undertaking the construction work. it is not unexpected that contractors prefer „pure‟ db. they dislike hybrids of db as these are unnecessary hindrances to the single point of responsibility. bid documents must be comprehensive the results show that owners should make sure that their rfps, containing the owner‟s requirements, are very clear and comprehensive. this finding is in agreement with previous studies on the importance of comprehensive briefs (ndekugri and turner, 1995). a complete brief is the only way owners could have a constructed facility that meets their requirements. therefore, project managers could help owners prepare detailed rfps, as owners who do not possess construction knowledge may not be competent. as the cost for bidding for a db project is substantial, another suggestion to improve db is to ask owners to reimburse db contractors for the cost incurred in submitting proposals (latham, 1994). as this means that owners will incur additional cost, it is hardly surprising that they disagreed with it, though it is very welcomed by contractors. the implication of this finding is that project managers should not suggest that bidders be reimbursed, as it would discourage owners from using db procurement system. contractors should have db experience the results show that owners only want to engage contractors who have previous db experience. as expected, contractors disagree with this, as it puts them in a catch-22 situation; how can they gain experience in db if they are not allowed to participate in db projects without prior db experience. the implication of this finding is that foreign db contractors would find it easy to secure db jobs in singapore, as many singapore-based contractors still do not have db experience. indigenous contractors can work as subcontractors first, or form joint ventures with db contractors, so that they can accumulate db experience. owners and contractors felt that db would be more widely used if there is pre-qualification of db teams. this would allow owners to study the background of the teams before inviting them to submit proposals and bid for the projects. the implication of this finding is that a project manager who helps the owner manage a db project should screen potential contractors through a formal pre-qualification exercise first, prior to actual invitation to bid. owners and contractors disagreed with the suggestion that contractors and design consultants should form joint ventures to undertake db projects. this finding departs from hodgson and bayfield‟s (1996) earlier study which found that companies should form joint ventures to undertake db projects. the implication of this finding is that owners prefer design consultants to be subcontractors to db contractors, instead of being a joint venture partner. this means that design firms that are interested in db projects must be prepared to work as subcontractors under main contractors. this is consistent with 21 db principle of single point of responsibility, where owners prefer a team leader, instead of allocating responsibilities between contractors and design consultants. quality control owners agreed that they should engage project managers to monitor design and construction carried out by db contractors because left on their own, some contractors may seek to maximize their profits at the expense of quality. this is because single point responsibility may also lead to a reduction in quality because of fewer in-built checks and balances (nahapiet and nahapiet, 1985). however, contractors did not rate this is the same way as owners, as the introduction of other parties may dilute the single point of responsibility bestowed on contractors in db projects, and slow down their progress (ling et al., 2000). project managers could help to draft bid documents, which are generally difficult to prepare. in addition, writing functional and performance specifications for db, which includes describing required quality, is inherently very difficult. owners felt that they would procure more projects using the db route if they could employ very experienced consultant quantity surveyors to administer db contracts. as is already known, db contractors are responsible for, among other things, technical quality, functional quality and workmanship quality. however, owners still need someone to handle the contractual issues, payments and change orders. therefore, the services of a consultant quantity surveyor would be welcome. it is not surprising that contractors disagree with the engagement of consultant quantity surveyors. this is consistent with the earlier finding about owners engaging project managers, because contractors may feel that these owner-appointed consultants hinder their work unnecessarily (ling et al., 2000). the implication of this finding is that project managers‟ role in db is not diminished. to further guarantee the quality of db projects, owners and contractors felt that it is important that db contracts state the minimum quality levels to be achieved, such as the technical quality, functional quality, workmanship quality and architectural quality (pain and bennett, 1988). owners and contractors also agreed that db contractors should bear design liability and provide warranty for fitness for purpose. this follows from the single point of responsibility that db contractors are conferred with. the implication is that contractors should insure themselves adequately for this high level of duty in db projects. architects do not abhor db the survey results show that architects do not see db in a negative light, as was previously thought. table 2 shows that architects rejected all the perceived negative impacts of db. architects felt that there is no loss of job satisfaction for them in db projects. it is untrue that they are unable to give independent professional advice in db projects. architects also felt that their relationships with owners are not remote in db projects. owners for db projects are aware that contractors have single point of responsibility, and do not ask architects to be answerable to them, as in traditional projects. as regards architects‟ relationship with contractors, again, the former do not cast contractors in a bad light. they did not think that db contractors are acting as an “uneducated” barrier between them and owners. they are not reluctant to provide an adequate level of service as there is no lack of incentive in db projects. it is not true that db contractors generally do not adopt the architects‟ recommendations, or that db contractors curtail their powers. architects confirm that db contractors do understand their management role. db contractors are also familiar with the relevant building regulations. architects do not see their roles diminished in db projects. they felt that they are adequately involved during construction stage of db projects. while it is known that owner who choose db route generally want their projects to be completed faster, architects felt that they do have sufficient time to design and interpret owners‟ requirements in db projects. the respondent architects also confirmed that there is proper development of design and detailing in db projects. the above finding indicates that architects in singapore are not totally opposed to db procurement system. this is a departure from previous findings (example akintoye and fitzgerald, 1995). this means that the perception that architects oppose db is untrue. the implication of this finding is that architects are receptive towards db, thus giving db a higher chance of wider usage in singapore. 22 contractors welcome db the results on the impact of db on contractors are shown in table 3. the results show that contractors felt that they do receive cost effective designs from architects engaged by them. they acknowledged that they should monitor the overall quality of db projects. bid award decisions for db projects are generally as fair as traditional design-bid-build projects. bidding costs and risks of db projects are much higher than traditional design-bid-build projects. however, profit margins for db projects are not higher than traditional projects. contractors did not feel that there is insufficient time for designing and interpreting owner‟s requirements in db projects. they felt that there is proper development of design and detailing in db projects. they also said that they do adopt the architects‟ recommendations, and would not curtail the architect‟s powers. db contractors said that owners do not lose control over the design of db projects. they do not agree that owners should engage project managers to examine their proposals and verify their solutions on site. they deny that they would execute the works to meet minimum requirements at the lowest possible cost. overall, contractors felt that there is more job satisfaction in db projects compared to traditional projects. the findings indicate that contractors welcome db, as it puts them in charge of projects, instead of constantly taking instructions from architects and engineers, and merely constructing according to drawings and specifications. limitations of the study this study has several limitations. the responses gathered from contractors, architects and owners constitute a relatively small sample and a bigger sample would therefore give a more accurate indication of opinions. however, this is partially overcome by discussing the results with three experts who have extensive experience in db. the next limitation is the fieldwork being conducted in singapore and hence may not be representative of owners, contractors and architects‟ views in other countries. however, the practical use of this study is that foreign construction industry practitioners who want to undertake work in singapore can understand the db market better. this study also identified work opportunities for project managers, architects and contractors. as singapore practices free trade, the work opportunities would apply to both local and foreign construction industry practitioners. conclusion a the literature review has shown that db projects perform well in terms of schedule, cost and quality. however, the percentage of projects that are procured using db is still low. this study has found several ways to increase the usage of db in the construction industry. more projects will be procured through db, even if project owners are not familiar with construction, if they can be assured that the constructed facility will be of good quality. this can be achieved by owner-engaged project managers managing design and construction matters, and administering the contracts. rfps should state the minimum quality levels to be achieved and state owners‟ requirements clearly and comprehensively. in addition, db contractors should bear design liability and provide warranty for fitness for purpose. they should be short listed, and only those who already have prior db experience should be allowed to submit proposals. db usage can be increased if the „develop and construct‟ organizational format is used, instead of „pure db‟. even though pure db allocated responsibilities very clearly, owners are worried that the end product may not meet their requirements. projects should be sufficiently large for it to be procured using db, as small projects are not worth the effort of asking every bidder to assemble a design team. references a akintoye, a. 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(1995). use of design/build in e/c industry. journal of management in engineering, 11(6), 33-38. issue2_2009.indb the australasian journal of construction economics and building [vol 9, no 2] 17 3 project culture in the chinese construction industry: perceptions of contractorsjian zuo and george zillante (school of natural and built environments, university of south australia, australia)vaughan coffey (school of urban development, queensland university of technology, australia) abstract in recent years culture has become one of the most studied topics in project management research. some studies have investigated the infl uence of culture at different levels – such as national culture, industry culture, organisational culture and professional culture. as a project-based industry, the construction industry needs to have more insight concerning cultural issues at the project level and their infl uence on the performance of construction projects. few studies, however, have focused on culture at the project level. this paper uses a questionnaire survey to determine the perceptions of chinese contractors about the impact of project culture on the performance of local construction projects. this is augmented by a series of in-depth interviews with senior executive managers in the industry. the fi ndings indicate that specifi c project culture does contribute signifi cantly towards project outcomes. in particular, goal orientation and fl exibility, as two dimensions of project culture, have a negative statistical correlation with perceived satisfaction of the process, commercial success, future business opportunities, lessons learnt from the project, satisfaction with the relationships, and overall performance. this paper also indicates that the affordability of developing an appropriate project culture is a major concern for industry practitioners. keywords: project management, culture, project performance, affordability, construction industry, china. introduction many researchers and practitioners believe that culture is one of the main determinants of management practice. some studies have investigated the infl uence of culture at different levels (e.g. national culture, organisational culture, industry culture and professional culture) on project management practice (loosemore and muslmani, 1999; chan and tse, 2003; rowlinson, 2001; mcgeorge et al., 2002; wang, 2001). however, few studies have focused on culture at the project level and its infl uence on construction project management practice. given that the construction industry is project-based (black et al., 2000; sözen and kayahan, 2001; whyte et al., 2002), such issues need to be examined at the project level. the main objectives of this paper are to: • review the literature on project culture, • investigate project culture in the chinese construction industry and its impact on the performance of construction projects, and • discuss the fi ndings and provide suggestions on how to manage culture at the project level. project culture general concepts there are a few studies that discuss the concept of project culture and its impact on business operations. generally, project culture is defi ned as the general attitude towards projects within the business (widmen, 2004). korzilius (1988) stresses that it is very important to establish a unifi ed, strong project culture for successful projects, as a lack of a unifi ed culture can be detrimental to the attainment of the overall project objectives. project culture was identifi ed by gareis and huemann (2000) as an objective of the project management process, together with the scope of work, the project schedule, the project costs, the project organisation and the project context. furthermore, it is a project manager’s ability to shape project culture that stimulates teamwork and high levels of personal motivation, as well as a capacity to quickly identify and resolve problems that threaten project work (gray and larson, 2000). similarly, there are many claims in the literature about the importance of project culture (kwan and ofori, 2001; walker, 2002) although these are rarely supported by empirical research. empirical research most empirical studies on project culture are of a quantitative nature. anderson (2003) applies the organisational culture model and instrument developed by harrison (1972) and advanced by handy (1985) to measure culture at both project and organisational levels. the outcome of a project was found to have a weak correlation with task-oriented culture, which is generally regarded as the appropriate project culture. the results show that a strong task-oriented culture may improve the budget performance of a project, while having no direct infl uence on other performance factors of a project such as schedule, participants’ satisfaction and functionality of the fi nal product. gray (2001) conducted a study to examine the relationship between project outcomes and the social and management climate in which those projects are implemented. based on extensive fi eld research involving project management professionals in major british organisations, there is evidence to suggest that project success declines as the level of personal and environmental threat perceived by project staff increases. other organisational characteristics, such as free expression, questioning, participation in the defi nition of goals, innovation and intrinsic satisfaction from the work itself, are all found to be positively associated with successful project outcomes, while organisational change and confl ict are negatively associated with project success. thomas et al. (2002) employed the standard ‘competing values framework’ model as well as the instrument developed by cameron and quinn (1999) to assess the project culture of thirteen the australasian journal of construction economics and building [vol 9, no 2] 18 australian construction projects. the fi ndings indicated that clantype cultures were positively correlated with quality outcomes whereas market cultures, more common on construction projects, were found to be negatively correlated with quality outcomes. thomas et al. (2002) subsequently suggested that the project culture of construction projects should be shifted from the current common market culture to a clan culture. they argue that a project culture should be designed to align organisational goals and objectives with those of the individual participants (which helps to reduce confl icts), to enhance communication and coordination and to increase the ease with which project objectives are achieved. kumaraswamy et al. (2001) suggested a framework to explain and analyse the origins and formation of project culture in construction projects. in this framework, a typical project culture is derived from a set of four overlapping sub-cultures: i.e. organisational subcultures, operational sub-cultures, professional sub-cultures, and individualistic sub-cultures. project culture can also be evaluated via a qualitative approach. for example, van marrewijk (2007) investigated the development of the project culture of the environ megaproject for the project life cycle using anthropological fi eldwork methods to collect data. the culture of the environ megaproject was found to consist of innovativeness, creativeness, non-traditionalism, and independency. limitations previous studies about project culture have had several limitations including: • no clearly accepted defi nition of project culture, especially in the context of construction projects, resulting in signifi cant diffi culties in conceptualising and measuring the project culture. • the few examples of a simple application of a conventional organisational culture model to measure the project culture of construction projects (e.g. thomas et al., 2002) are limited, as they are derived from generic management organisational culture models and pay little consideration to the specifi c characteristics of construction projects. for instance, the integration between the functional departments of one organisation, which is highlighted in numerous organisational culture models (e.g. cameron and quinn, 1988; harrison, 1972; handy, 1985) must be modifi ed to suit construction projects (kog et al., 1999; arditi et al., 2002). • the framework proposed by kumaswamy et al. (2001; 2002) is too complex to measure project culture by applying hofstede’s (2001) cultural model to each sub-culture and its contributory components. given the number of organisations and specialists involved in a typical construction project, it is not surprising that a lot of resources are required to diagnose the project culture. in summary, measuring the project culture in one construction project requires a relatively simple, easy to use and contextspecifi c framework. with reference to the well-recognised defi nition of organisational culture (hofstede, 2001; schein, 1985), zuo and zillante (2005) defi ned project culture as ‘the shared values, basic assumptions and beliefs that the participants involved in a project hold that determine the way they process the project and the relationship with each other in the project environment’. subsequently they proposed a conceptual framework (see table 1) to measure the project culture in the construction context. research methodology development of the conceptual framework and associated research instruments zuo and zillante’s (2005) model is one of the very few studies that investigate project culture issues in the construction industry. during the development of the defi nition and conceptual framework of project culture, zuo and zillante (2005) adapted the well recognised organisational culture models of hofstede (2001) and cameron and quinn (1999) whilst considering the special characteristics of construction projects. accordingly this model was considered to be an appropriate model to use to measure the culture of construction projects. empirical research was conducted to test the validity of the zuo and zillante (2005) model. initially, fi eld studies were conducted. these comprised observational studies of project meetings and preliminary interviews with project participants in order to identify the features of project culture in construction projects. interviewees were also asked to nominate key performance indicators for measuring the success of their projects. the aim of attending the project meetings was: (1) to understand current practice in the australian construction industry; and (2) to observe any manifestations of project culture during the meeting. the researchers simply observed the proceedings of the meeting (e.g. the common topics for the meeting, communication methods, negotiation methods and dispute resolution methods) without asking any questions. initially a letter was sent to major construction fi rms in south australia requesting assistance in locating projects that the authors could use for the purpose of attending site meetings. the response was overwhelming in terms of numbers and the projects were selected at random. ten projects facilitated by four different integrative inputs of various contributing parties (for example, design, construction and consultants) are encouraged in the early stages of the project process. cooperative there are few conflicts during the process of the project. emphasis is placed on aligning the objectives of different participants and organisations to a common goal – the objectives of the project. teamwork is popular. the project participants are collaborative with each other. goal-oriented results are always given the highest priority while the means to obtain the goals can be tolerated in the construction projects with a goal-oriented culture. risk-taking is acceptable to accomplish the task in specific conditions and project participants are comfortable with uncertainty within the project environment. flexible the way a project is processed is very flexible and easy to change in the projects with a flexible culture. innovative approaches, which include risk-taking, are encouraged and rewarded in the project process. failure is viewed as an opportunity for learning and improvement. people-oriented the people issues are given higher priority in the construction projects with a peopleoriented culture. decision-making is pushed down. opportunities are given to develop capabilities during the project process. table 1: the components of the proposed project culture model the australasian journal of construction economics and building [vol 9, no 2] 19 construction fi rms were selected for attendance. these four construction fi rms were the four largest in south australia and thus the meetings provided good insights about the way that projects are managed in this state. preliminary interviews were then conducted with a separate group of interviewees, representing government agencies, construction fi rms, architects, engineering and project management consultants. a total of 21 respondents took part in the preliminary interviews. they comprised industry professionals who had been involved in a number of construction projects. their roles included acting as the client, the main contractor, the architect, the quantity surveyor and the project manager. these practitioners were selected from the major companies that provide services and functions within the construction industry in south australia. the reason for attending the site meetings and conducting the preliminary interviews was to collect statements that enabled the quantifi cation of each dimension of the project culture model. the outcome of this process was a questionnaire and interview schedule developed from the theoretical model and tested and modifi ed following observations of project meetings and preliminary interviews with academic and industry experts. the questionnaire was also tested in pilot studies (zuo and zillante, 2006a). measurement of project performance generally, cost, time and quality are recognised as the most important performance dimensions of construction projects (xiao and proverbs, 2002; odusami et al., 2003; baloi and price, 2003). some researchers suggest that safety should be added to that list (cox et al., 2003; lim and mohamed, 1999; sawacha et al., 1999). these performance indicators are employed to measure the performance of a project, the most important of which are viewed as key performance indicators (kpis). this study examined the performance of a construction project by utilising the perception of the project participants. the evaluation of project personnel, users and other stakeholders are identifi ed as one of the ways of measuring the performance and success of a project (diallo and thuillier, 2004; westerveld, 2003). it is not the intention of this study to determine the best indicators of project performance. rather, a list of common performance indicators was adopted in order to measure the relationship between project culture and project performance. a list of common performance indicators was shown to the industry practitioners during the preliminary interviews. the measures of project performance adopted in this study are shown in table 2. questionnaire survey and interviews the questionnaire was translated into chinese for use in mainland china. a similar approach to low and shi (2002) was adopted. the english version questionnaire was fi rstly translated into chinese by the research team, and then discussed with some chinese academic staff. those academic staff were bilingual and also had many years of professional experience in the construction industry, especially in the construction management fi eld. in particular, they were experienced in detecting misleading messages due to inappropriate translation. the chinese version of the questionnaire was then revised based on their comments. subsequently the chinese version of the questionnaire was translated back into english to test that the meanings had not been altered. subsequently some twenty industry practitioners in china were invited to participate in pilot-testing of the questionnaire. those practitioners had been involved in the local industry for at least ten years and accordingly they served as a good contextual benchmark against which to test the chinese version of the questionnaire. their feedback suggested that the content and the format of the questionnaire were appropriate for china. they also suggested that follow-up interviews should be conducted in order to fi nd out more in-depth information on the cultural issues in construction projects and how this would affect the performance of these projects. they strongly recommended interviewing some offi cers of the relevant government departments. the ministry of construction and the respective provisional / municipal committee of construction were highlighted as the key government authorities in the local industry. they also suggested that a study based on beijing and shenzhen could be considered as a representative sample of the chinese construction industry. a fi ve-point likert scale was used to examine the extent of correlation between perception of project participants about the culture and performance of construction projects (see figure 1). the chinese construction industry uses a qualifi cation and registration system for contractors in that contractors are ranked into four classes according to their contracting ability: 1) special class (highest rank); 2) fi rst class; 3) second class; 4) third class. as the highest rank, the special class contractors are allowed to bid for mega and complex projects. the target population was the special class contractors in beijing and shenzhen. these two cities comprise developed areas with many large construction projects already built or under construction. the researchers believe that these two cities represent the situation at the forefront of current construction practice in china. the contractors were approached for permission to distribute the questionnaire within their companies and ten agreed to participate in the research. a coordinator was appointed in each company to coordinate the survey process. the coordinators helped distribute the questionnaire to twenty randomly selected construction managers in their companies. after one month, the coordinator collected the completed questionnaires and forwarded them to the researchers. one hundred and sixty-fi ve construction managers from a majority of contractors answered the questionnaire. of those returned, 158 questionnaires were able to be analysed. others were either not answered completely or contained an unreliable pattern of answers (for example, all questions were answered with the same score). the response rate was 79 percent (158/200). performance dimensions measures references economic aspect 1. commercial success 2. future business opportunities chan and chan (2004); bassioni et al. (2005); shenhar et al. (2001) continuous improvement 3. satisfaction with the project process 4. lessons learnt from the project chan and chan (2004); luu et al. (2008) relationship aspect 5. satisfaction with the relationship with other parties chan and chan (2004); bassioni et al. (2005); shenhar et al. 2001; luu et al. (2008); wang and huang (2006) overall 6. overall performance lam et al. (2007) table 2: dimensions and measures of project performance adopted in this study the australasian journal of construction economics and building [vol 9, no 2] 20 figure 1: research framework in addition to the above, a range of in-depth interviews were conducted to investigate: • the manifestation of project culture in actual projects, and • how project culture affects the performance of construction projects. the interviewees were executive managers and senior construction managers of the major construction companies in beijing and shenzhen, china. they were approached for their comments about project culture issues and the impacts of these on the performance of construction projects. a total of 43 industry persons were interviewed, including 38 executive managers and senior construction managers and fi ve government offi cers. they were selected because of: (1) their extensive experience in the local industry, (2) the positions they held, and (3) they were available at the time when the research was undertaken. all interviewees had more than 10 years professional experience in the local construction industry. three quarters of the interviewees had worked in the industry for more than 16 years. it is also important to note that 32 out of the 43 interviewees (a signifi cant majority) had worked on international projects. this enabled them to compare a variety of experiences in different construction projects regarding project culture and procurement approach issues. during the pilot studies, the industry practitioners suggested that interviews should concentrate on senior management because: (1) it is more probable that these people have more knowledge of the cultural and procurement approach issues than junior managers and labourers, (2) they normally have more professional experience in the industry, and (3) people in senior positions make project and corporate decisions. accordingly, contractor interviewees comprised executive managers or senior construction managers in major construction companies in china. government intervention in the chinese construction industry is still comparatively high when compared to western countries such as australia. the researchers were fortunate to have the opportunity to interview government offi cials as this is rare in china. the offi cials were drawn from the ministry of construction, the beijing municipal construction committee and the shenzhen municipal construction committee. these government interviewees were in charge of the construction market at both the national and municipal level and were thus in an excellent position to supplement the comments made by the interviewees from the private sector. these government offi cers’ comments were extremely useful about how the research fi ndings could be implemented in china. hypothesis testing sekaran (1992) defi ned a hypothesis as a logically conjectured relationship between two or more variables expressed in the form of testable statements. a hypothesis needs to be testable, positive and be expressed in clear and simple language (fellows and liu, 2002). the hypothesis for this study is: h1: an eastern style of approach is responsible for improved project performance. the null hypothesis is: h0: an eastern style of approach is not responsible for improved project performance. as the literature survey found, an eastern style of approach is seen as more integrative, more cooperative, more people-oriented, less goal-oriented and less fl exible. project performance is meaured by the perceptions of respondents by satisfaction with the process, commercial success, future business opportunities, lessons learnt from the project, satisfaction with the relationship, and overall performance. questionnaire findings descriptive analysis overall, 79% of respondents had more than ten years of professional experience in the construction industry, thereby the australasian journal of construction economics and building [vol 9, no 2] 21 making them well-qualifi ed to answer the questionnaire and comment on the research questions, as shown in figure 2. as mentioned previously, all the contractors involved comprised major construction companies in terms of market share and were of the highest rank in the qualifi cation and registration system for chinese contractors. 90% of their projects exceeded rmb $50m (aud$8.33m) in value and 60 percent of all projects had a construction value of more than rmb $500m (aud$83.33m), as shown in figure 3. reliability analysis the internal consistency of the questions belonging to the fi ve cultural dimensions was checked by means of cronbach’s alpha coeffi cients (liu, 1999). since the coeffi cients are all above the acceptable level of 0.70 (see table 3), the reliability of the constructs was accepted for further analysis. pearson correlation analysis the pearson correlation coeffi cients were computed to determine whether the variables (dimensions of project culture and indicators of project performance) were statistically correlated (see figure 4). these show that, among the fi ve dimensions of project culture, only fl exible and people-oriented types of project culture have a signifi cant correlation with the lessons learnt from the project. these correlations are comparatively small however (around 0.3). there are also signifi cant correlations between the rest of the performance indicators (i.e. satisfaction with the project process, commercial success, future business opportunities, satisfaction with the relationships with other parties, and overall performance). there are medium to large positive correlations between all fi ve dimensions of the project culture and all indicators of the performance of the project except lessons learnt from the project (see figure 4). the strongest correlations (signifi cant at the 0.01 level 2 tailed) are: • satisfaction with the project process – integrative culture • commercial success – goal-oriented culture • future business opportunities – integrative culture • lessons learnt from the project – fl exible culture • satisfaction with the relationships with other parties – integrative culture • overall performance – integrative culture the majority of these correlations are positive except that goaloriented and fl exible culture has a negative correlation with the performance of the project in terms of: (1) satisfaction with the project process, (2) commercial success, (3) future business opportunities, (4) satisfaction with the relationships with other parties, and (5) overall performance. this suggests that strongly goal-oriented and fl exible approaches should be avoided in order to achieve better project outcomes and that: • project culture does contribute towards the better performance of construction projects, and • the items in the questionnaire do identify those features of the project culture that lead to better project performance. multiple regression analysis multiple regression analysis (mra) was used to predict to what extent each project culture dimension contributed to each project performance variable. the regression models can be seen in table 4. the mra results are consistent with the correlation analysis results. as shown in the table 4, fi ve dimensions defi ned in the established project culture model explain at least 41.6 per cent of the variance in most of the project performance variables. this is considered to be satisfactory. the only exception is the regression model for lessons learnt from the project. table 4 indicated that only two project cultural dimensions (i.e. fl exible and people-oriented culture) are correlated with this project performance variable. as shown in table 4, fi ve project culture dimensions explain 11.2 per cent of the variance of lessons learnt from the project. table 5 indicates that the integrative project culture dimension makes the strongest contribution to explaining most of the project performance variables. therefore, in order to achieve exceptional performance, the project team should aim to develop and maintain an integrative culture. furthermore, fl exible and peopleoriented cultures are conducive to an integrative culture and not mutually exclusive. given all of the above, the hypothesis (h1) is accepted (p<0.05) – i.e. that an eastern style of approach is responsible for improved project performance subject to some minor deviations in the lessons learnt variable. therefore the following two subhypotheses will be accepted (p<0.05): • h1.1: an eastern style of approach is responsible for improved project performance that is measured by satisfaction with the project process, commercial success, future business opportunities, satisfaction with the relationships with other parties, and overall performance. • h1.2: flexible and people-oriented types of project culture are responsible for improved project performance, which is measured by lessons learnt from the project. interview findings the current state of project culture issues in the industry the common theme expressed by interviewees is that a confrontational culture exists within a typical construction project. of the various reasons given for this is that it is not unusual for the client to dominate during the life-cycle of the project, thereby making it more diffi cult for contractors to be involved in the decision-making process. one interviewee showed his disappointment by stating: “…from my point of view, as the contractor, i feel that our construction capabilities could help to improve the constructability of the project. but we seldom have the chance to do so. we are left out of the door of the decision making room – quite disappointing.” this is an interesting response as the conventional wisdom in western (or outside chinese) construction organisations is that early involvement of the builder is an important benefi t to a project and procurement systems often try to achieve that outcome through partnering or other relationship management techniques between designer, client and builder. the australasian journal of construction economics and building [vol 9, no 2] 22 table 3: reliability of internal consistency dimensions of the project culture number of questions cronbach’s alpha coefficient integrative 10 0.886 cooperative 8 0.802 goal-oriented 5 0.766 flexible 6 0.773 people-oriented 6 0.899 figure 2: experience of respondents (years) figure 4: perceived statistical relationships between project culture and project performance figure 3: value of projects (rmb) the australasian journal of construction economics and building [vol 9, no 2] 23 common features of appropriate project culture all interviewees agreed that specifi c features of project culture helped to foster a collaborative relationship among project participants and in turn achieved optimum project outcomes, as shown in figure 5. the client”s needs to satisfy the clients’ needs is identifi ed as the major function of project culture. according to the interviewees, no matter what the culture is in the project, if it does not fi t the client’s requirements, it is not a good culture. there are generally two types of requirements from the client’s perspective, namely explicit requirements and implicit requirements. for the interviewees, the implicit requirements (the subjective measures) rather than the explicit requirements (objective measures) were more important. one interviewee went on to explain that the subjective measures important to him were good relationships, especially personal relationships with the rest of the project team (and with the client and/or the client representative in particular). guanxi (关系) is important for achieving business success in confucian societies such as china (yeung and tung, 1996; buttery and wong, 1999). good relationships, willingness to help and teamwork good relationships, especially interpersonal relationships, were identifi ed as key characteristics of an appropriate project culture. the owner, the designer, the main contractor and subcontractors were identifi ed as the most important stakeholders. for instance, one interviewee stated: “good relationships means that each party would like to consider the other parties’ interests and objectives. the chinese call it ‘thinking by standing in the other’s position’. certainly the clients’ needs are the ultimate consideration and should be the common goal of all participating parties.” equal position of all parties one theme that featured in the interviews was the need for all contracting parties to be equal. being located at the bottom of the supply chain, subcontractors are vulnerable to being treated unfairly and there were many occasions when subcontractors could not secure their scheduled payments. common interests / values / goals and consideration of others the majority of interviewees stressed the importance of the whole project team having a common goal. according to them, a mismatch of objectives of the participating parties in a construction project is detrimental to both inter-fi rm relationships and the performance of the project. according to the interviewees, all participants should have a common goal – the project objectives – rather than focusing on their own interests. effective communication another feature that was identifi ed as part of an appropriate project culture was effective communication among participants. poor communication can frustrate team members and create a tense atmosphere. from the beginning of the project, each party’s responsibility, power and benefi ts should be stated very clearly. in many cases, confl icts emerge simply because there is a lack of such communication. table 4: multiple regression models model r r square satisfaction with the process .721 .520 commercial success .645 .416 future business opportunities .689 .474 lessons learnt from the project .334 .112 satisfaction with the relationship .727 .529 overall performance .725 .526 table 5: reliability of internal consistency standardized coefficients (beta) model satisfaction with the process commercial success future business opportunities lessons learnt from the project satisfaction with the relationship overall performance integrative .617** .541** .572** .176 .628** .652** cooperative .589** .485** .527** .127 .593** .591** goal-oriented -.469** -.587** -.526** -.094 -.498** -.487** flexible -.574** -.412** -.482** .261** -.615** -.485** people-oriented .590** .435** .511** .235* .602** .512** ** p < .01, * p < .05. the australasian journal of construction economics and building [vol 9, no 2] 24 economic benefits rewarding cost savings was highlighted by interviewees as an important feature of an appropriate project culture. from the interviewee’s point of view, the cooperation and willingness to help each other should not be based upon money lost. for instance, if the cost savings derived from an initiative are not enough to cover the cost of the commitment, there will not be many companies prepared to make efforts to build an appropriate project culture. respect and trust trust is another feature identifi ed as part of an appropriate project culture. lacking common goals, the achievement of one party’s objectives might be based on sacrifi cing another party’s interests. one interviewee noted that, in order to win the contract, the contractor might submit a bid with little or no profi t margin, or even below cost, in the expectation that he will be able to put in later claims that will make the work profi table. this deliberate approach leads to distrust between the contracting parties. support from senior management interviewees commented that support from senior management is one aspect of appropriate project culture. with no support from senior management, it is very hard to develop and maintain a positive project culture throughout the project lifecycle. importance of the project culture all interviewees acknowledged the importance of project culture, especially its impacts on the performance of construction projects. it is interesting to note, however, that most construction manager interviewees highlighted the diffi culties in establishing an appropriate project culture, even though they acknowledged the crucial role that this played. eighteen contractor interviewees were concerned about the affordability of developing a project culture (i.e. resources required). senior managers, however, had different views – stressing that it was still necessary to develop and sustain an appropriate culture. as one interviewee stated: “there is no doubt that the project culture plays a key role in improving the performance of construction projects. certain resources, for example, time and cost, are required to develop an appropriate project culture from very early on. the chinese know this as “sharpening the axe means that you don’t waste time when you are chopping wood”. flexible and goal-oriented culture interviewees were asked to make comments, particularly on the fi ndings from the questionnaire survey, and these indicated that fl exible and goal-oriented project cultures should be avoided so that a better project outcome can be achieved. these two features of project culture have a positive correlation with the performance of construction projects (anderson, 2003; zuo and zillante, 2006b; olsson, 2006). interestingly, interviewees emphasised that they recognised the benefi ts of being fl exible and goal-oriented. however, these need to be considered carefully in the chinese context. they explained that in order to run a project smoothly, it is not enough to focus on the result whilst ignoring the process. all interviewees believed that it is hard to achieve the project objective (outcome) if there are no well-defi ned procedures or rules. in addition, interviewees expressed concerns about the uncertainties existing in the project. there was a consensus view that every effort should be made to minimise the uncertainties. furthermore, it was perceived by interviewees that chinese project managers are generally reluctant to take risks. failure is not viewed as an opportunity for learning and improvement. discussion and implications both the questionnaire survey and the in-depth interviews serve to identify features of project culture that lead to better project figure 5: common features of appropriate project culture, drawn from the interview fi ndings the australasian journal of construction economics and building [vol 9, no 2] 25 performance. the results indicate that certain types of project culture do contribute towards better project performance. the statistical analysis of the questionnaire responses indicated that integrated, cooperative and people-oriented cultures should be developed so as to achieve better project outcomes. naoum (2003) noted that one of the features of the construction industry is its fragmented nature, in that design is separated from construction. in construction, integration helps to: (1) create a culture of effi cient and effective collaboration by individuals and organisations, (2) promote a working environment where information is freely exchanged between different participants, and (3) improve the effective and effi cient delivery of the project (baiden et al., 2006). cooperation, characterised by mutual trust, teamwork, open communication and exchange of information, openness and honesty is identifi ed as one of most important factors for the success of construction projects (walker et al., 2002). according to the australian procurement and construction council (apcc), developing capabilities of employees is crucial if one wishes to improve the competitiveness and effectiveness of the australian construction industry (apcc, 1997). chinese culture focuses on maintaining harmony and building trust among people (batonda and perry, 2003). ‘face’ is very important for the chinese people and face-saving behaviour ensures harmony within the group. wherever possible, efforts should be made to save the face of oneself and others. it is embarrassing if face is challenged in public. face will be lost when the person (or those related to him) fails to meet essential requirements placed upon him by virtue of his social position. this includes the loss of reputation or standing in the eyes of others (frank et al., 2000). it is essential for the chinese to avoid confrontation and preserve any vertical authority relationship. coupled with the high power distance of chinese culture (hofstede, 2001), it is very hard for chinese practitioners to ‘talk straight’, which is identifi ed in western cultures as a key feature of positive project culture (zuo et al., 2006). the survey fi ndings also showed that the outcome-oriented and fl exible types of project culture had a signifi cant negative correlation with the performance of construction projects. this indicates that chinese practitioners focus not only on project outcomes but also on the process of the project that achieved those results. in addition, chinese practitioners tend to be risk averse and uncomfortable with uncertain situations and prefer a stable project environment (stable rather than fl exible). hofstede (2001) pointed out that a process-oriented culture is dominated by technical and bureaucratic routines. the main characteristics of a process-oriented culture include: cohesiveness, openness and generosity, preparedness and involvement and creativity (huse et al., 2005), indicating that a process-oriented culture is crucial for contributing to the decision making process. the interview results indicated that chinese practitioners would like to pay more attention to building and maintaining interpersonal relationships with other project team members. interpersonal relationships are often referred to as guan xi, (or guanxi) which is defi ned as ‘a relationship combined with reciprocity of special relationships that two persons have with each other’ (kwan and ofori, 2001). guanxi connections are the preferred informational networks for the chinese and may facilitate transactions (martinsons and westwood, 1997). guanxi among key project stakeholders is already known to be one of most important criterion of project success in china (wang and huang, 2006) – its development also being said to be a key strategy for a foreign architectural design and construction fi rm to do business in china (zou and wang, 2007). collectivism and high uncertainty avoidance are also two features of chinese culture (fan, 2000; brockner et al., 2001; zhao and hu, 2003). from a national culture perspective, a high uncertainty avoidance ranking indicates the country has a low tolerance for uncertainty and ambiguity (hofstede, 2001). uncertainty avoidance (ua) affects practitioners’ attitudes to risk and approaches to the management of risk. a strong ua culture of chinese practitioners indicates that they are uncomfortable with uncertain or unstructured situations, and prefer predictability and stability. they tend to fear unfamiliarity and risky or ambiguous situations. risk avoidance and risk aversion are the usual actions taken in such circumstances (chen and partington, 2004). there is a sharp difference in behaviour among organisational members towards people from other organisations which results in greater hostility towards those who do not belong to one’s own organisation (phua, 2002; phua and rowlinson, 2003). perceptions of the in-group versus the out-group among project participants that largely come from a collectivist society could have a signifi cant effect on group members’ attitudes towards each other as well as on their willingness to cooperate in the construction project environment (phua and rowlinson, 2004). this again indicates that chinese practitioners prefer stable rather than fl exible project environments. from the interviewees’ perspective it is clear that for the success of the project, the relationship with the client is more important than the relationship with the rest of the team. this is particularly important for chinese construction projects, where the client has absolute power to make the decision of whether or not to award a contract, to appoint or dismiss a project manager (and consequently his long-term team) and to decide when and how much to pay for the work (chen and partington, 2004). western project management practice will not necessarily be supported by chinese culture (chen and partington, 2004). there are three traits of chinese traditional culture that are major cultural barriers to the adoption of western project management in chinese enterprises. these comprise strong hierarchy, family consciousness, and boss orientation (wang and liu, 2007). this suggests that industry practitioners from western countries would benefi t signifi cantly by having a better understanding of chinese culture when entering the chinese construction market. conclusion the questionnaire survey of the construction managers from the major construction companies revealed that statistically there is strong correlation between the project culture and the project outcomes from the chinese industry practitioners’ perspective . it is interesting to note that goal-orientation and fl exibility, as two dimensions of the project culture, have a (statistically) signifi cant negative correlation with perceived performance of construction projects in terms of the satisfaction with the process, commercial success, future business opportunities, lessons learnt from the project, satisfaction with the relationships of other parties, and overall performance. it is clear that chinese practitioners focus on the process of the project as well as the outcomes. all those who took part in the in-depth interviews agreed that project culture has a signifi cant effect on project performance. they acknowledged that a positive and appropriate culture does the australasian journal of construction economics and building [vol 9, no 2] 26 contribute towards the success of construction projects. however, the fi ndings also showed that the affordability of developing an appropriate project culture is a major concern of industry practitioners. the results indicate that respondents associate classical eastern culture characteristics with improved project performance in china. one limitation of this study is that six subjective indicators were adopted to measure the performance of construction projects. the incorporation of objective measures (e.g. key performance indicators) will help to validate the performance evaluation. similarly, this research only covered two developed cities, i.e. beijing and shenzhen. a wider survey from more areas will be helpful to further validate the fi ndings. in addition, it would be benefi cial to have more in-depth interviews of parties other than contractors to further establish the nature of culture at the project level and its impacts on the project outcomes. acknowledgements the authors would like to acknowledge the contributions from the industry professionals by attending the interviews and answering the questionnaire. for reasons of confi dentiality their names cannot be listed. similarly, the authors acknowledge the contribution of professor martin skitmore for his constructive suggestions on how to improve this paper. references anderson, e.s. 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(2006) ‘the client’s role in driving an appropriate project culture leading to innovative performance outcomes: a context of australia and china’, in clients driving construction innovation: moving ideas into practice, k. brown, k. hampson and p. brandon (eds), crc for construction innovation, brisbane, australia. cost deviation in road construction projects: the case of palestine ibrahim mahamid and amund bruland, (norges teknisk-narurvitenskapelige universitet, norway) abstract this paper investigates the statistical relationship between actual and estimated cost of road construction projects using data from road construction projects awarded in the west bank in palestine over the years 2004–2008. the study is based on a sample of 169 road construction projects. regression models based on this data, reveal that 100% of projects suffer from cost deviation: 76% of projects are under-estimated while 24% are overestimated. the deviation between estimated and actual cost average 14.6%, ranging from 39% to 98%. the results show that the relationship between the project size (length and width of road) and the cost deviation is very weak, the coefficient of determination r 2 = 0.0028. keywords: cost deviation, road construction, over-estimation, under-estimation, overrun introduction ‘’the construction industry has its own characteristics that distinguish it from other sectors of the economy. it is fragmented, sensitive to changing variables such as political and environmental factors, and has a significantly high rate of business failure’’ (nega, 2008). the iron triangle (cost, time, and quality) is used to measure the project performance and success. generally, the success measure for a project is defined by completing it within specified cost, time and quality. however, the construction industry is full of projects that were completed with significant cost deviation (amhel et al., 2010). cost deviation is simply defined as a difference between the final cost of the project and the contract amount without any changes to the original contract. in palestine, the construction industry is one of the main economic driving sectors, supporting the economy. it contributes to 26% of the palestinian gdp (map, 2002). it also plays a basic role in providing homes, public facilities and infrastructure, absorbing work forces and in improving the west bank economy as a whole. however, many local construction projects report poor performance in cost and time due to causes that include: unavailability of materials, frequent amendments of design and drawings, poor coordination among participants, ineffective monitoring and feedback, lack of project leadership skills (unrwa, 2006). this paper presents the statistical relationship between actual and estimated cost of road construction projects using data from road construction projects awarded in the west bank in palestine over the years 2004–2008. the study is based on a sample of 169 road construction projects. objectives the objectives of this study are:  to reveal the magnitude and direction of cost deviation in road construction projects awarded in the west bank over the years 2004 to 2008 based on the collected data  to assess the relationship between the estimated and actual cost australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 59  to address the relation between the cost deviation and the project size (i.e. road length and road width) relevant past studies many studies have been conducted to investigate cost deviation in construction projects. pickrell (1990) conducted a study for the us department of transportation covering us rail transit projects with a total value of £15.5 billion. the total cost overrun for eight projects was calculated to be 61%, ranging from −10 to +106%. battaineh (1999) evaluated the progress reports of 164 building and 28 highway projects constructed during the period 1996-1999 in jordan. he found that delays were extensive: the average overrun of actual completion time to the planned contract duration was 160% for road construction projects and 120% for building projects. odeck (2004) investigated the statistical relationship between actual and estimated costs of road construction using data from norwegian road construction over the years 1992-1995. his findings revealed a discrepancy between estimated and actual costs, with a mean cost overrun of 7.9% ranging from -59% to +183%. in absolute terms, cost overruns amounted to a formidable 519 million norwegian kroner. one particular finding was that cost overruns appear to be more predominant among smaller projects as compared to larger ones. he also concluded that the size of cost overruns was influenced by completion time of the projects and the regions where projects were situated. al-zarooni et al. (2000) conducted a survey to investigate variations in uae public projects' estimates. they found that the variations (positive or negative) between feasibility and contract cost, ranging between -28.5% and +36%. they stated that these variations could be explained by the fact that feasibility estimates in the government agencies are usually budgeted using a single unit estimating (cost per square foot) basis, regardless of the nature of projects and their associated risks or the construction complexity of each building type. and it may also be because feasibility studies are normally done before any details are settled. flyvbjerg et al. (2003) conducted a study of 258 transportation infrastructure projects. the distribution of the projects was as follows: rail: 58, fixed link (bridges and tunnels): 33, and road: 167 projects. the projects were located in 20 nations on 5 continents, including both developed and developing nations. the geographical distribution of projects was: europe: 181, north america: 61, and other: 16 projects. the main findings from the study are as follows: 1. 9 out of 10 transport infrastructure projects experienced cost deviation. 2. for rail the average cost deviation was 45%. 3. for fixed links (tunnels and bridges) the average cost deviation was 34%. 4. for roads the average cost deviation was 20%. 5. for all project types the average cost deviation was 28%. 6. cost deviation exists across 20 nations and 5 continents; it appears to be a global phenomenon. 7. cost deviation appears to be more pronounced in developing nations than in north america and europe. 8. cost deviation has not decreased over the past 70 years. cost and time overruns are common in infrastructure and building construction projects. researches on construction projects in some developing countries indicate that by the time a project is completed, the actual cost exceeds the original contract price by about 30 % (almomani, 1996). australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 60 mahamid (2011) investigated the statistical relationship between actual and estimated cost of road construction activities based on a sample of 100 road construction projects awarded in the west bank in palestine. the findings revealed that the average cost deviation in the investigated activities is as follows: earthworks= -15.7%, base works = 12.9%, asphalt works = 18.5% and furniture works = 36.4%. a study by skamris et al. (1996) compared the accuracy of traffic forecasts and cost estimates on large transport projects in denmark. the main conclusion from this study is that cost overruns of 50–100% are common for larger transport infrastructure projects and that overruns above 100% are not unusual. jahren et al. (1990) conducted research on predictors of cost overrun rates. the analysis included 1,576 navy construction projects that were in progress from 1984 to 1987. it was found that the shape of the frequency distribution for the cost-overrun rates changed with the size of the project. cost overruns occurred more frequently for larger projects. studies have shown that the size of a construction project (contract amount) influences the rate of cost deviation. randolph et al. (1987) found that cost overrun rates decreased as the contract amount increased based on their study for contract costs in lansing, michigan. while rowland (1981), in a study of southern united states construction contracts, found that cost overrun rates increased with increase in the contract amount of construction projects. research methodology after establishing the objectives of the study, the needed data to achieve these objectives were collected from the west bank in palestine. the data analysis includes regression analysis, t-test, and statistical modeling. based on the collected data, the discrepancies between actual and estimated cost were studied and used to derive the magnitude and direction of the ratio λ of divergence defined as: λi = ((κ-ε)/ε)i i = 1 …n (1) where κ is the actual cost and ε is the estimated cost. data collection to investigate the cost deviation in construction projects, extensive historical data are required. the data were collected from contracts awarded by the palestinian agencies who are the clients of road construction projects in the west bank. the data collected comprised 169 projects awarded over the years 2004-2008. the data were tabulated to ensure that all costs were considered, none is double-counted and all are clearly defined. all the data were deflated to 2008 using the construction cost index from the palestinian economic council for development and reconstruction (pecdar). table 1 shows the index values over the years 2004-2008, the base year is 2008 (construction index = 1). year 2004 2005 2006 2007 2008 cost index 0,60 0,62 0,66 0,88 1 table 1 construction cost index value in the west bank the collected data were classified based on their cost according to table 2. australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 61 classification category < $70000 very small project $70000 $150000 small project $150000 $300000 medium project > $300000 large project table 2 classification of road construction projects in west bank (pecdar, 2009) attention was paid to the following points during data collection: distribution of years awarded a consideration was taken to include approximately equal numbers of projects for each year over the sample period. during 2004, the effects of the second intifada were still there, hence a low number of projects awarded during this year. the following table shows the distribution of projects in the collected data. award year # of projects 2004 9 2005 34 2006 39 2007 42 2008 45 table 3 projects number vs. year awarded in the collected data project size a consideration was taken to include an approximately equal number of each projects size. the following table shows the distribution of projects sizes. it should be noted that there are comparatively few very small projects awarded in the west bank. project size # of projects very small 20 small 46 medium 48 large 55 table 4 projects distribution based on size. model development previous studies show different methods used to study the relation between the construction cost and factors believed to influence construction costs. regression models are widely used in these studies. they are effective due to a well-defined mathematical approach, as well as being able to explain the significance of each variable and the relationships between independent variables (sodikov, 2005). these models with their relational structures are expected to provide reliable long-term estimates (wilmot and cheng, 2003). the developed models in this study are of this type. once the variables to be included in the proposed models have been identified, a series of models were developed. australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 62 results and discussion analysis of cost deviation  for the collected data of 169 road construction projects, a statistical analysis shows the following results:  100% of projects suffer from cost deviation  129 projects out of 169 projects (76.33%) have cost under-estimates  40 projects out of 169 projects (23.67%) have cost over-estimates  the average cost under-estimate is 22.34% ranging from 0.39% to 98.04%  the average cost over-estimate is -10.54% ranging from -39.27% to -0.17%  the average cost deviation in all projects is 14.56%, this is calculated by taking the arithmetic average of cost deviation percentages of all projects  the total cost deviation in percent is 6.67%, this is calculated by dividing the sum of cost deviation of all projects over the sum of estimated cost of all projects classification of cost deviation in road construction projects the following charts show the frequencies of cost over and under estimation in total cost of 169 road construction projects. figure 1 shows the s-curve of cost under estimation in road construction projects. it shows the accumulative frequency of 129 projects with cost under-estimates. knowing that the contracts accept ±10% cost diverge, it can be concluded from the figure that 70% of the projects have critical cost under-estimates ranging from 10% to 100%. this means that most of projects suffer from fund shortage which is problematic to all construction parties. figure 1 s-curve of cost under estimation in road construction projects in the west bank figure 2 the s-curve of cost over estimation on 40 road construction projects shows that:  57.5 % of projects have actual cost less than estimated cost plus the allowable margin of 10%.  42.5% of projects have cost over-estimates of between 10% and 40% c u m u la ti v e f re q u e n cy ( # ) australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 63 figure 2 s-curve of cost overestimation in road construction projects in the west bank figures 1 and 2 indicate that cost under estimation is more predominant than cost over estimation in road construction projects implemented in the west bank. cost deviation vs. project size cost deviation in very small projects the cost deviation analysis of 20 very small projects shows that 11 projects have cost underestimates and 9 have cost over-estimates. the cost deviation average is 9.15% ranging from -39.27% to 61.17%. the following charts show the frequencies of cost over and under estimation in the total cost of very small road construction projects. figure 3 shows that the cost deviation in very small projects with cost under-estimates range between 0% to 40%; and that 20% of the projects are within the allowable margin of 10% and that 80% have critical cost under estimation. figure 4 below shows that cost deviation in very small projects with cost over-estimates range from 0% to 40% and that 33% of project have cost over-estimates of less than 10% while 67% have cost over-estimates of more than 10%. figure 3 cost under estimation vs. no of projects in very small road construction projects c u m u la ti v e f re q u e n cy ( # ) n o . o f p ro je ct s australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 64 figure 4 cost over estimation vs. no of projects in very small road construction projects the results from figures 3 and 4 indicate that both cost over-estimates and under-estimates are frequent in very small construction projects constructed in the west bank. cost deviation in small projects the cost deviation analysis shows that of 46 small projects, 40 were under-estimated and 6 over-estimated. the cost deviation average is 22.78% ranging from -28.99% to 98.04%. figure 5 shows the frequencies of cost overand under-estimates in total cost of small road construction projects. the frequency of small road construction projects with cost under-estimates indicates that:  10% of the projects were within the allowable margin of 10%.  90% of the projects have cost under-estimates of more than 10%. figure 5 cost under-estimates vs. no of projects in small road construction projects n o . o f p ro je ct s n o . o f p ro je ct s australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 65 the frequency of small road construction projects with cost over-estimates (fig 6), indicates that:  50% of the projects are within the allowable margin of 10%  50% of the projects have cost over estimation of more than 10%. figure 6 cost over-estimates vs. no of projects for small road construction projects the results from figures 5 and 6 indicate that cost under-estimates are more common than cost over-estimates for small construction projects. cost deviationin medium sized projects the cost deviation analysis for 48 small projects shows that 42 projects have cost underestimates and 6 projects have cost over-estimates. the cost deviation average is 17.67% ranging from -11.63% to 43.53%. the results are shown in charts 7 and 8. figure 8 shows the frequency of medium road construction projects with cost under estimation, it indicates that:  25% of the projects are within the allowable margin of 10%.  75% of the projects have cost under-estimates above 10%. figure 7 cost under-estimates vs. no of projects in medium sized road construction projects n o . o f p ro je ct s n o . o f p ro je ct s australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 66 figure 8 shows the frequency of medium road construction projects with cost over estimation, it indicates that:  83% of the projects are within the allowable margin of 10%  17% of the projects have cost over-estimates above 10%. figure 8 cost over-estimates vs. no of projects in medium sized road construction projects the findings of figures 7 and 8 indicate that cost under-estimates are more common than cost over-estimates in medium sized construction projects. most road construction projects in the west bank are within this category, therefore the findings reflects the severity of problem of cost overruns. cost deviation in large sized projects data on 55 large projects show that 36 projects are under-estimated and 19 over-estimated. the cost deviation average is 6.94% ranging from -25.91% to 49.92%. the following charts show the frequencies of cost over and under estimation in large sized road construction projects. figure 9 shows the frequency of large road construction projects with cost under-estimates indicating that:  39% of the projects are within the allowable margin of 10%  61% of the projects have cost under-estimates outside 10% figure 9 cost under-estimates vs. no of projects in large sized road construction projects n o . o f p ro je ct s n o . o f p ro je ct s australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 67 figure 10 shows the frequency of large sized road construction projects with cost overestimates, and indicates that:  63% of the projects are within allowable margin of 10%)  37% of the projects are outside this range. figure 10 cost over estimation vs. no of large sized road construction projects the findings of figures 9 and 10 indicate that for large sized construction projects cost under-estimates are more common than cost over-estimates. given that the costs of such projects are greater than $300000, the magnitude of the resulting additional costs in such projects is relatively high (i.e. 30% cost deviation equals at least $90000). this makes the problem of cost deviation in road construction projects in the west bank critical, since the government (client of road construction projects) depends on very limited external funds to implement their projects. regression models development actual cost vs. estimated cost a linear relation between estimated and actual cost of road construction projects can be shown in the following scatter gram. figure 11 actual cost vs. estimated cost in road construction projects n o . o f p ro je ct s australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 68 an equation that describes the relationship between actual and estimated costs is: actual cost ($) = 25389.83 + 0.98∗ estimated cost ($) the following could be noted from this equation:  the coefficient of determination r2 for the equation = 0.96 as shown in table 5.  the analysis of variance test confirmed the statistical significance of the model at a significance level of 0.05 as shown in table 5  the coefficient of estimated cost in the equation (0.98) meaning that the values of actual and estimated cost are close to each other  the positive constant (25389.83) meaning that in general cost deviation in small projects is larger than it in large projects regression statistics coefficients p-value multiple r 0,98 intercept 25389,83 0,000290848 r square 0,96 estimated cost 0,982752 2,8412e-122 adjusted r square 0,96 observations 169 f 4445,82 table 5 regression statistics of estimated cost vs. actual cost in road construction projects to establish that the relative cost deviation in small projects is larger than it in large projects, two regression models are developed; one describing the actual cost as a function of estimated cost for all projects except the large ones (i.e. projects with actual cost < $300000) and the other for projects of cost greater than $300000, the results are: model for projects with cost < $300000 is: actual cost ($) = 1.14∗ estimated cost ($) model for projects with cost >$300000 is: actual cost ($) = 1.01∗ estimated cost ($) the coefficient of determination r2 is 0.98 for both models as shown in table 6 and 7. both models give better r2 when the intercept is set to zero. the coefficient of estimated cost in the first model is greater than it in the second one which means that the relative cost deviation tends to be larger in small projects. regression statistics coefficients p-value multiple r 0,99 intercept 0 #n/a r square 0,98 estimated cost 1,142148 1,09e-96 adjusted r square 0,97 observations 114 f 5278,053 table 6 regression statistics of estimated cost vs. actual cost in road projects with cost less than $300000 regression statistics coefficients p-value multiple r 0,99 intercept 0 #n/a r square 0,98 estimated cost 1,010129 2,52e-47 adjusted r square 0,96 f 2592,42 observations 55 table 7 regression statistics of estimated cost vs. actual cost in road projects with cost more than $300000 australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 69 cost deviation vs. estimated cost a weak linear relation between cost deviation and estimated cost could be observed in the following chart. figure 12 cost deviation vs. estimated cost in road construction projects a regression equation between relative cost deviation and estimated cost of road construction projects was estimated and the r2 (0.11) indicates a weak linear relation between them: cost deviation(%) = 0.20 – (1.9*10 -7 )∗ estimated cost ($) cost deviation vs. project size the regression analysis indicates that there is no linear relationship between cost deviation in road construction project and the project size (i.e. road length and width). the r2 is very low (0.0028). the following scatter gram shows the weakness of linear relation between cost deviation and project size. figure 14 cost deviation ($) vs. project size in road construction projects australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 70 in summary, the regression models that relate cost deviation in road construction projects and project size (i.e. road length and road width) reveal a weak linear relationship. this means that the cost deviation in road construction projects implemented in the west bank is not systematic rather it seems caused by many factors that vary from project to project and site to site, but in total the findings reveal that cost deviation is a critical problem in road construction project in the west bank. conclusion this study has investigated the statistical relationship between actual and estimated cost of road construction projects using data from palestinian road construction projects awarded over the years 2004 to 2008. the study was based on a sample of 169 road construction projects. based on this data several regression models were developed. the findings reveal that all projects suffer from cost deviation, it is found that 76% of projects have cost under-estimates and 24% have cost over-estimates. the deviation between estimated and actual cost has an average of 14.6%, ranging from -39.3% to 98%. these results agree with previous studies in that the cost deviation is predominant in road construction projects. the results show that cost under-estimates are more common than cost over-estimates in road construction projects implemented in the west bank regardless the project category. regression models that relate cost deviation in road construction projects and project size (i.e. road length and road width) reveal a very weak relationship. references al-khaldi, z. (1990) factors affecting the accuracy of construction costs estimating in saudi arabia. master thesis, king fahd university of petroleum and minerals, dhahran, saudi arabia al-momani, a. (1996) ‘construction cost prediction for public school buildings in jordan’, construction management and economics, 14, 311-317 al-zarooni, s. and abdou, a. (2000) ‘risk management in pre-design stage and its potential benefits for uae public projects’, proceedings of the 28th world congress on housing challenges for the 21st century, 15-19 april, abu dhabi, uae amehl, o., soyingbe, a. and odusami, k. (2010) ‘significant factors causing cost overruns in telecommunication projects in nigeria’, journal of construction in developing countries, 15 battaineh, h. (1999) information system of progress evaluation of public projects in jordan. master thesis, civil engineering dept., jordan univ. of science and technology, irbid, jordan flyvbjerg, b., holm, m., and buhl, s. (2003) ‘underestimating costs in public works projects, error or lie’, journal of the american planning association, 68 (3), 279-292 jahren, c. and ashe, a. (1990) ‘predictors of cost-overrun rates’, journal of construction engineering and management, 116 (3) mahamid, i. (2011) ‘analysis of cost deviations in road construction activities: a case study from palestine’, jordan journal of civil engineering, 5 (4). map (2002) survey of the construction services industry. unpublished mission report. the west bank and gaza nega, f. (2008) causes and effects of cost overrun on public building construction projects in ethiopia. master thesis, addis ababa university, addis ababa, ethiopia odeck, j. (2004) ‘cost overruns in road construction—what are their sizes and determinants?’, transport policy, 11, 43–53 australasian journal of construction economics and building mahamid, i and amund, b (2012) ‘cost deviation in road construction projects: the case of palestine’, australasian journal of construction economics and building, 12 (1) 58-71 71 omoregie, a and radford, d. (2006) ‘infrastructure delays and cost escalation: causes and effects in nigeria’, proceeding of sixth international postgraduate research conference, delft university of technology and tno, 3-7 april, the netherlands palestinian economic council for development and reconstruction (pecdar), personal communication, august, 2009. ramallah, the west bank, palestine pickrell, d. (1990) urban rail transit projects: forecasts versus actual ridership and cost. us department of transportation, washington dc randolph, d., rajandra, k., and campfield, j. (1987) ‘using risk management techniques to control construction contract costs’, journal of construction engineering and management, 3 (4), 314-324 rowland, h. (1981) the causes and effects of change orders on the construction process. master thesis presented to the georgia institute of technology, at atlanta, georgia, usa. skamris, m. and flyvbjerg, b. (1996) ‘accuracy of traffic forecasts and cost estimates on large transportation projects’, transportation research record, p. 1518 sodikov, jamshid (2005) ‘cost estimation of highway projects in developing country: artificial neural network approach’, journal of the eastern asia society for transportation studies, 6, 1036 – 1047 wilmot, c. and cheng, g. (2003) ‘estimating future highway construction costs’, journal construction engineering and management, 129 (3), 272-279 unrwa (2006) projects completion reports, unrwa, gaza issue2_2009.indb the australasian journal of construction economics and building [vol 9, no 2] i editorial welcome to the second edition of the australasian journal of construction economics and building (ajceb) for 2009. bond university, and in particular the mirvac school of sustainable development, is delighted to be the host of this journal this year. volume 9 issue 2 consists of six papers covering a range of topics applicable to both quantity surveying and building disciplines. we think they are of a high standard, and trust you enjoy reading them. we would like to particularly thank the numerous people who have kindly donated their time to review papers and to provide us with their advice and experience. without such goodwill no journal can survive. ajceb has a number of opportunities available to expand its infl uence and its reputation, and these matters are currently under consideration by the management committee. many of these opportunities are expected to be realised in 2010 and announcements about them will be communicated through the professional bodies that support the journal and other channels such as cnbr. during 2009 we received 39 new papers for consideration. twelve of these have been published and several are awaiting publication in the new year. they relate to an increasingly international spread of countries and research data. while fi ve papers are still under consideration, we have rejected 16 papers so far this year, equating to 47%. all papers are reviewed by at least three referees, and in some cases four where particular technical advice is sought. every paper published has required some revision, with several having undergone extensive rewriting, and the process being applied appears to be leading to stronger outcomes for the journal. this is expected to continue into the future. we would also like to advise that the authors for paper 3 (allocating risks in public-private partnerships using a transaction cost economics approach: a case study) in volume 9 issue 1 should have been xiaohua jin and kerry london (school of architecture and building, deakin university, australia). the editors wish you a merry christmas and we look forward to a propserous new year for all our readers. kind regards, professor craig langston, editor associate professor rick best, editor december 2009 professor craig langston mirvac school of sustainable development bond university gold coast, australia associate professor rick best mirvac school of sustainable development bond university gold coast, australia the australasian journal of construction economics and building [vol 9, no 2] ii wilkinson, s (2012) book review, australasian journal of construction economics and building, 12 (2) 101 101 book review writing a built environment dissertation: practical guidance and examples peter farrell, john wiley & sons, 2011, 256 pages, isbn 9781405198516, price aud 44.95, nzd 49.99, usd 37.95, gbp 22.95 eur 27.60, as ebook usd 30.95 aud 35.99 peter farrell has written a comprehensive and practical introductory guide for first time researchers in the built environment disciplines. as farrell notes, within the uk system and others, most undergraduates are required to undertake a dissertation and to write a short thesis. in my 20 years’ experience final year built environment students are often overwhelmed and intimidated with the seemingly onerous task of what they perceive as ‘writing a book’. their knowledge and understanding of the task that lies ahead and the research process is often limited and a book, such as this, starts by demystifying some of the new and unfamiliar terms associated with research. farrell’s own extensive experience as a lecturer of research methods and dissertation is evident in the well-defined structure of the text and the useful illustrative examples to demonstrate to readers what is required and involved at each stage. furthermore the text is well referenced throughout with the key texts which influence the built environment discipline. i particularly liked the sections which highlighted the ‘typical mistakes made by students’ and first time researchers and think that students will find this useful too. i found the writing style very readable and think that students will find they are able to understand the procedures involved in each stage of the research process without being bogged down in unf amiliar terminology and jargon. having said this, farrell does use correct terminology so that readers become familiar and should be able to express themselves accurately using the conventions of research and dissertation writing. the book concludes with a chapter on how to approach the writing of the final chapters and a useful insight into the examiners perspective and experience of reading a thesis. the appendices are very comprehensive and include checklists and exemplars. one appendix contains information about qualitative analysis and takes the reader through a worked example from the research objectives to the interview questions, transcripts, data analysis and interpretation finishing with a narrative of the data. there are also appendices covering quantitative analysis, where examples clearly illustrate and explain to students how to use and interpret the key statistical tests most frequently applied in this level of research. peter farrell has put a considerable amount of work and time into the text and his direct experience of many years of teaching this subject is apparent in the quality of the guidance and advice given to the readers. overall this is an informative book that i would adopt, thoroughly recommend and use for teaching dissertation units to students. dr sara wilkinson associate prof, university of technology, sydney ajceb[vol4,no1] ������� � �� ��,���� �����*��� 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������0���'�������� �5����������86��.. �r6:�i�r88 �/��8ccc7?? �g8ccch �4�j�� %''��7������� %''��7����? %''7����� � ���'��������� ��k�7�� � �� ��������� ��# � ������# ����� ��!���� �������� ��� �g8cc:h �1�������� ����������� ��� ����< *��. ���#� ##��# ���� �������� ��� ��������� ���� �� � ������� ����i�� ������ ..���� ���.� �� �.����� ����� 0���'�������� �5����������86��.. �r;6�i�r;? microsoft word br final edited book review best practice in construction disputes – avoidance, management and resolution paula berger and brennan ong, 2013, lexisnexis butterworths, australia isbn – 9780409333077, price – au$110.00 best practice in construction disputes – avoidance, management and resolution provides practical strategies and recommendations to transform construction conflicts which potentially escalate into destructive disputes into opportunities, through mechanisms such as dispute avoidance processes (daps), alternative dispute resolution (adr), adjudication, arbitration and litigation. at first glance, the book appears to have features of a handbook, a term which is no longer in popular use. however from chapters 1 to 3, the book’s author carefully ensures that readers appreciate the differences between a conflict and a dispute. this book delves into the difficulty of definitions of keywords, for example ‘conflicts’ and ‘disputes’, devoting a section of three paragraphs (1.8 to 1.10) to differentiating between the two. this section acknowledges that the two words have been used interchangeably in construction dispute resolution literature. however, a few pages further on, the meaning of disputes as interpreted by the australian and english courts is also provided. at 1.11, the book introduces the meaning of ‘claims’ and later at 1.16 argues that, “claims should be distinguished from disputes…” the section dedicated to “the escalation of conflicts into claims and disputes” has 6 paragraphs listed from 1.11 to 1.16. a quotable quote at paragraph 1.21 which reflects on the competency of the players in any project must certainly hold some truth, ie “disputes will inevitably arise only if parties do not have the skills to resolve conflicts and prevent their escalation into disputes.” this reviewer would dare add that another contributory factor would be the lack of skill or experience to identify potential conflicts. there is a corresponding differentiation between causes of conflict and causes of disputes. three of the more commonly cited causes of conflict are discussed in 8 paragraphs from 1.22 to 1.29. the three causes are latent conditions, variations/change in scope, and quality of the works. four factors are identified as playing a causal role in conflicts escalating into disputes, and these are provided in the 15 paragraphs from 1.31 to 1.45. these four factors are noted as: competitive tendering, lopsided risk allocation, bias of superintendent, and failure to comply with the contract. on the topic of competitive tendering, the book appears to this reviewer be slightly muddled in the following examples. first, at paragraph 1.32, the book attributes the industry practice of strongly discouraging communication during the bidding process thereby making it more difficult for a contractor to assess the time, costs and risks associated with undertaking the project to competitive tendering. this might have been better dealt with under lopsided risk allocation. second, the book mentions ‘claimanship’ as an apparent consequence of the shift away from quality design and build project towards complex and costly projects without explaining the link between this and competitive bidding shown at paragraph 1.33. the book takes a serious view of lopsided risk allocation. at paragraph 1.39 it states that, “the outcome of inequitable risk allocation is that a party either pays too much for a project or will not be able to recover any losses, which could mean insolvency and job losses.” australasian journal of construction economics and building chan, p. 2014, ‘a book review of “best practice in construction disputes – avoidance, management and resolution” ’, australasian journal of construction economics and building, 14 (3), 99-101. 100 under the topic of perceived bias of superintendent: a) on page 29, paragraph 1.41, the book’s author cites the comment of warren cj in the victorian supreme court case of kane constructions pty ltd v sopov [2005] vsc 237 at [623], “the superintendent may lose independence without actually intending to do so or even without knowledge they have done so”; b) on page 29, paragraph 1.42, the book’s author, relying on named empirical studies, noted that “the lack of procedural fairness” as the fundamental reason why claims rapidly escalate into disputes that require “resolution through the courts or arbitration”. the book’s author then captures the essence of the origin of the bias by reiterating on page 30, paragraph 1.43 “the perception of bias …emanates from the dual-role of the superintendent.” as far as the failure to comply with the construction contract is concerned, only one paragraph was devoted to this topic. it was noted by the author that, “notwithstanding the importance of the construction contract, it is far too common for parties to enter into a contract without full commitment and understanding of its terms…” the conclusion page 32, paragraph 1.46 sounded a very clear message as to why disputes will be around for a long time, with the position taken that, “the nature of traditional construction contracting, [is] where one party’s profit is made at the other’s expense.” after the first four chapters, the book begins to resemble a handbook, and contains much information on three mechanisms relating to disputes with an introduction chapter preceding each mechanism. first, it introduces what the author terms dispute avoidance processes (daps) (page 89, 4.2). from chapters 5 to 7 inclusive, the daps cover dispute resolution boards (drbs), dispute adjudication boards (dabs), and dispute resolution adviser (dra) respectively, and these chapters form part of part 1. each chapter is accompanied by a case study. following this, the book goes into more familiar territory in part 2, from chapters 9 to 14 inclusive, where five types of adr are covered including a chapter each on negotiation, mediation, senior executive appraisal/mini trials, expert determination and early neutral evaluation, and adr hybrids. in the third section the usual binding dispute resolution methods are discussed from chapters 15 to 18, including a chapter each on adjudication, arbitration, and litigation. had the book stopped at chapter18, it would have caused controversy regarding the title, but chapter 19 has been added and appropriately titled “chapter 19 best practice in the avoidance, management and resolution of construction disputes.” to avoid, this reviewer supposes, any disputes, the book’s author acknowledges (page 457, 19.3), that the term ‘best practice’ is itself a source of contention. this chapter seeks to explore what best practice means. the book’s author coined the phrase, ‘research validated best practice’ based on the following features: the first feature of best practice is one that addresses a common problem experienced by a broad array of organisations. the second feature is one that works effectively to address the problem, and has been proven to work in more than one instance. the third is one that has shown that it can be replicated; and the fourth is one that is supported by positive data from internal assessments and external evaluations. the final chapter ends on a hopeful note by introducing three reforms. first, there is a call for widespread and comprehensive education and training to overcome low levels of understanding of the many techniques available for the avoidance, management and australasian journal of construction economics and building chan, p. 2014, ‘a book review of “best practice in construction disputes – avoidance, management and resolution” ’, australasian journal of construction economics and building, 14 (3), 99-101. 101 resolution of construction disputes within both the construction industry and legal profession (page 471, 19.24). the second reform touches on the role of construction lawyers. instead of being reactive to the client’s disputes, the author contends that construction lawyer should be proactive, and assist parties to avoiding the escalation of everyday problems into disputes (page 473, 19.30). the third reform is to replace the old style of contracts with an entirely new suite of standard forms of construction contracts that are built on the foundations of relational contract theory, emphasizing the importance of working relationships, the motivation of communication between parties faced with problems and the encouragement of proactive identification and management of the sources of conflict throughout the course of the project (page 478, 19.39). in conclusion and in summary, the authors have sought to ensure that readers fully appreciate the differences between the words, ‘conflict’, ‘dispute’ and ‘claim’ as well as the causes of the first two, as the basis to launch their agenda of bringing about reform through their supply of plentiful data in support of what they sincerely believed is the best practice in construction industries globally, in regard to avoidance, management and resolution of construction disputes. on balance, this reviewer is comforted by the fact that there is hope for a better construction industry with fewer disputes if the authors’ recommendations for reform and their proposed best practices for the avoidance of dispute are accepted and implemented. nevertheless, here is a hope to see more work done by the authors on the single most troubling factor of whether a dispute will escalate or not specifically, the factor of personalities on site that could cause or avoid a dispute each time there is a conflict. it reminded this reviewer of a question posed at a conference attended in london in relation to the nec form; should we ask whether the form is a good form of contract or should we ask whether the administrator is a good person for the job and who is it that makes the project “trouble-free”. philip chan associate professor national university of singapore artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects ayedh alqahtani and andrew whyte, (curtin university, australia) abstract industrial application of life-cycle cost analysis (lcca) is somewhat limited, with techniques deemed overly theoretical, resulting in a reluctance to realise (and pass onto the client) the advantages to be gained from objective lcca comparison of (sub)component material specifications. to address the need for a user-friendly structured approach to facilitate complex processing, the work described here develops a new, accessible framework for lcca of construction projects; it acknowledges artificial neural networks (anns) to compute the wholecost(s) of construction and uses the concept of cost significant items (csi) to identify the main cost factors affecting the accuracy of estimation. ann is a powerful means to handle non-linear problems and subsequently map relationships between complex input/output data and address uncertainties. a case study documenting 20 building projects was used to test the framework and estimate total running costs accurately. two methods were used to develop a neural network model; firstly a back-propagation method using matlab software; and secondly, spread-sheet optimisation using microsoft excel solver. the best network used 19 hidden nodes, with the tangent sigmoid used as a transfer function for both methods. the results is that in both models, the accuracy of the developed nn model is 1% (via excel-solver) and 2% (via back-propagation) respectively. keywords: life cycle cost analysis (lcca), artificial neural networks (anns), cost significant items (csis), back-propagation, excel solver introduction stakeholders of built assets are increasingly required to extend estimation beyond the initial capital-cost. this includes all stages of an asset’s life-cycle, through incorporation of approaches such as benefit-to-cost ratio, internal rate of return and life cycle cost analysis (lcca) to evaluate the total life cost of construction (anurag shankar et al. 2010). lcca compares different design (sub)elements, specifications and materials on the basis of their whole-life installation, operation, maintenance and residual (decommissioning) costs. lcc analysis assesses all cost components, converting them into a cost at a specific point in time, namely the present (olubodun et al. 2010). client’s increasingly require such whole-costs for proposals. a key justification of lcca use is the ability to reduce operation costs even if that requires spending more during early (construction) stages; expensive updating/retrofitting of older buildings is a significant factor encouraging lcca uptake at the design development stage. however, sterner (2000) argues that lcc influence is diminished by it’s perceived ‘uncertainty’; misunderstanding of the somewhat complex process alongside an absence of standardisation. there is also a need to acknowledge that market-trends limit the implementation of lcc concepts in industry (olubodun et al. 2010, sterner 2000), where calculations must consider the time-value of money, as all future costs requiring discounting to present-values taking inflation into account (fabrycky and blanchard 1991, woodward 1997). estimates of inflation and a australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 52 ‘correct’ discount rate measuring the time-value-of-money so that design alternatives for a project, may be compared are deemed somewhat overly subjective, adding to uncertainty and risk and affecting lcc result accuracy. indeed traditional methods remain restrictive, as lcc prediction of the large number of variable factors affects the ‘value’ of the construction cost, compounded by complicated interaction between these factors (cheng et al. 2010), and coupled with the reluctance of busy practitioner’s to predict future discount-rate multipliers, continues to restrict lcca usage by the construction industry. many researchers recommend sensitivity and probability analyses, and statistical tools to address the problem of uncertainty (singh 1990). regression modelling is another method towards identification of construction cost impact factors, where regression equations estimate construction cost depending upon on cost-factor interrelationships. these methods become complex when numerous cost elements are considered as the dependent variables (sonmez 2011). sensitivity analysis is a method to indicate how the value of lcc is affected by changing the interest and inflation rate parameters. it is often the case where small variations in a parameter lead to a significant change in lcc result. in these cases a further analysis can be done utilizing probability analysis (kirk 1995), incorporating monte carlo simulation of variables, presented as a probability distribution of all total costs of all alternative options. resultant findings illustrate the most likely cost of all alternative options and the range within which it can be expected to lie (flanagan and norman 1993). however, these adaptations have disadvantages including: i. probability subjectively evaluated today may differ in the future (whyte and scott 2010). ii. nominal account is taken of non-cost factors that affect lcc estimation. iii. complex processes cannot fit input and output variables easily. iv. sensitivity analysis does not quantify risk but rather identifies factors that are risk sensitive where only one parameter is varied at a time (flanagan and norman 1993). towards addressing these uncertainties, the work presented here develops and tests a new model of estimating costs for each stage of a project, using artificial neural networks (ann) to estimate costs occurring at each stage of the life-cycle of construction. the model estimates the total capital, operation and maintenance costs, alongside an assessment of accuracy that compares total operation/maintenance costs of actual building projects. applications of anns in construction using simulation and modelling tools at all stages of an asset’s life cycle provides a way to anticipate the behaviour of an asset before it is built (mackenzie and briggs 2006). artificial intelligence methods such as expert systems, neural networks (nns), fuzzy logic (fl), and genetic algorithms (gas) are argued to help solve prediction problems (cheng et al. 2010). artificial neural networks (anns) are data modelling methods that attempt to solve complicated issues by formulating data relationships; albeit that there is no simplistic equation that can map relationships between data variables. anns (in methods deemed to be similar to the performance of human brain) are beneficial where conditions are difficult to identify, and have been commonly employed in construction applications like estimating productivity; predicting corporate bankruptcy and measuring project financial performance. indeed, a number of previous studies have sought to use neural networks to address construction estimation with varying degrees of success (wilmot and mei 2005); (ehab et al. 2009);(chang sian et al. 2010);(ali et al. 2011); (ismaail et al. 2011);(sodikov 2005);(hashem al-tabtabai 1999);(kim et al. 2004);(arafa and alqedra 2011);(kim et al. 2005);(murat günaydın and zeynep doğan 2004)). australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 53 previous study indicates that artificial neural networks are being considered for construction project estimation. artificial neural networks (anns) with their ability to gain meaning from complicated data can be used to estimate costs that are too complicated to be solved by other techniques, with advantages of anns deemed to include that: 1. anns are capable of automatically learning how to perform work (by example) based on the information gathered for training; thus it is relatively easier to generate prediction models over other traditional nonlinear statistical methods; 2. anns whilst unable to explain explicitly the relationships between input and output variables, a main objective for creating a decision model is to be able to estimate and more accurately explain relations between variables; 3. anns are able to create the estimation model based on data forms of ordinal data or mixed forms of nominal and ordinal data; and in addition, 4. ann generalisations are beneficial, as they utilise data that the model has collected during training stages to synthesize input-output mapping with new data. currently, building sector clients seek predictions that are flexible and easy to use. as mentioned before, anns have several advantages over traditional methods but there are currently no clear steps that can be followed to simplify the estimation cost process in anns applications. there is still a need to develop a framework of anns to (excite clients, and) predict whole construction costs. to make sense of the huge number of variable factors that affect the value of the construction cost; there is a need to provide better interaction between these factors in a less complicated process. it is important to standardise the estimation process and integrate some methods with anns, to identify the key factors to be considered as input factors of anns model. this research will develop a new framework for estimation cost using artificial neural networks integration techniques. new framework towards a cost estimation model the process developed here for a new model of cost estimation follows a number of systemic procedures. there are eight basics steps proposed here: (1) identify the purpose of estimation; (2) identify cost factors affecting cost estimation; (3) identify non-cost factors affecting cost estimation; (4) create database for cost and non-cost factors; (5)design nns; (6) train nns; (7) validation the model; and (8) run the application. see figure 1 and the text below: identification of the purpose of estimation the purpose of estimation may range from an estimate of construction cost only, to estimating the total life-cycle costs of new projects which include construction, operation and maintenance. implementation of csis: construction projects have numerous variable factors impacting upon the value of lcc. interaction between factors is somewhat complex with current lcc models suffering arguably from an absence of both standardisation and a simple methodology to collect and interpolate data (olubodun et al. 2010). the concept of cost-significant-items (csis) shall help future analysts to simplify estimation methodologies by determining the key items contributing most to construction project lcc. csi ideology owes much to pareto’s classic 80:20 rule. in the construction sector, various building-sector scholars have applied csis to construction cost estimate research, finding that csis theory is able to determine the small number of items which represent a constant percentage of the total cost of construction projects (al-hajj and horner 1998, asif 1988, elcin and hakan 2005, horner and zakieh 1996). if the csis could be simply australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 54 recognized, it would motivate estimators to direct attention to such specific items, and would reduce the time taken for estimation. in this way, cost information required to estimate total cost could be collected, analysed and recorded in a manner which will provide a more significant and realistic method of prediction. create database design nns csis training and testing nns final model of nns non-cost factors purpose of estimation figure 1 framework of nns model identification of non-cost factors affecting the accuracy of estimation: a main restriction of most of the current models of cost estimation is that they only consider significant factors that can be readily quantified. however, non-cost factors should be considered because they seem to play a vital and important role to the accuracy of cost estimation(elhag et al. 2005). non-cost factors affecting the accuracy of estimating come from a large range of categories. these factors are qualitative such as type of project (residential, commercial, industrial), type of structure (concrete, steel, masonry), and project size. these factors can be identified from an analysis of literature, historical data and practitioner experience. database creation database creation consists of taking the most significant cost/non-cost factors, already identified in earlier steps and actual values of unit-rate costs for past projects. this data is used to exemplify input and output information in the proposed model during the training/testing stages. design of neural networks the initial steps in the design of neural network modelling are selecting, collecting and preparing suitable data. in estimation cost modelling, there are two types of data needed to create a neural network model: input data consisting of data identified as key to the result of the cost estimation model (collected from the database) representing csis and the important non-cost factors; and output data consisting of the data collected from the database representing the actual value of total costs of previous projects. such data needs to be normalized before australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 55 presented to the network, because mixing variables with big magnitudes and small magnitudes will confuse the learning algorithm (tymvios et al. 2008). the input and output data can be scaled to a range (-1 to 1) to suit neural networks processes. normalization of the data uses the following formula (arafa and alqedra 2011): = ⌈ ( ) ⌉……… (1) where : normal value, : original data set, : the minimum value of data, : the maximum value of data. after collecting the data, the designer specifies the number of hidden layers; neurons in each layer and transfer functions. in general, traditional parametric ‘trial & error’ is performed to select the number of hidden layers and hidden nodes. during the training process, the number of hidden layers and hidden nodes will be adjusted until identification of the best model which gives the lowest values for the root mean square error (rms) and absolute difference percentage for output parameters. transfer functions then describe how the neuron's activation value occurs as a result of applying a transfer function to the sum of the weighted inputs. key transfer functions are the sigmoid, threshold and linear functions (duch and jankowski 1999). training and testing nns training the neural network refers to a procedure that utilises numerous learning methods to adjust weights and to learn patterns in the data-set, including iteratively gathering data with samples of known right answers. before starting the process of training, learning rates should be selected. in fact, several anns programs, such as matlab, automatically set the learning rate in terms of maximised performance of the model, to gain the best result. regarding training the model, training methods mostly fall into one of two categories: a supervised training method in which the trainer tells the model if its result were correct; and an unsupervised training method in which there is neither teacher nor trainer during training to tell the network whether its output was correct. the network’s weights are continuously modified until the difference between the model’s outputs and the actual output converges to an acceptable level. the training process is stopped when a minimum root mean square error in equation 2 is reached. √∑ ( ) 2 ……………… (2) where: rms: root mean square error, n: number of sample using in the training stage, oi: the actual output. pi: the model output. testing the model process is fundamentally the same as the training process, but the model will use sample (data) never seen before, and no corrections are made. if the results of a testing process are acceptable the model is suitable to use. if the result is inappropriate, a re-design of the model is required. the acceptable level of the result of the model will be evaluated based on the value of rms (equation2) and absolute difference (in equation 3). ………. (3) where: oi: the actual output. pi: the model output. australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 56 final model of anns: once the model is built, it can be utilised to predict the cost of new construction projects. it should be noted that a building practitioner is then able to use the final model to estimate new project costs without performing changes to the design structure of the anns model such as the transfer function, the number of inputs (important cost and non-cost factors) and hidden nodes, which had been selected at an initial stage. case study the purpose of estimation the aim of the following case study is to review/validate the newly developed framework for an estimation cost model for building projects. this case study aims to estimate the running costs (operation and maintenance costs) for three types of building projects (teaching, residential and laboratory facilities). the new work presented by this current study uses a comprehensive catalogue of 20 building projects compiled previously by al-hajj (1991). al-hajj’s cost information is documented as stemming from three sources, namely: york university; an independent facilities management company; and the uk’s building maintenance cost information service (bmcis-uk); the relevance of the case-study prepares the ground for future-work, described below. implementation of csis: the key cost factors affecting the accuracy of running-cost estimation for the twenty (teaching, residential and laboratory facility) building projects catalogued by al-hajj(1991), employing an analysis of cost significant items (csis) (across an existing data-set of 20 projects towards verification of the concept of pareto), finds 11 items as most influential across all building projects over the catalogue’s analysis period of 18 years. these key items represent about 16% of all total items. table (1) below lists the resultant cost significant items for the data-set: csis (affecting the accuracy of running cost estimation) 1. internal decoration 2. roof repair 3. internal cleaning 4. laundry 5. gas expenditure 6. electricity expenditure 7. fuel oil expenditure 8. management fees 9. porterage 10. rates 11. insurance table 1 cost significant items identification of design factors influencing estimation accuracy seven major design factors from al hajj’s (1991) catalogue of 20 building projects, described as the most important design factors affecting building’s estimation cost, are listed in table 2 below. australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 57 design factors 1. type of building 2. gross floor area (m2) 3. area of pitched roof (m2) 4. area of flat roof (m2) 5. area of external glazing (m2) 6. number of stories above ground floor 7. number of stories under ground floor table 2 non-cost significant factors design neural networks a) selection nns software/simulation and data collection this paper compares two methods to create and design neural networks: 1back-propagation method using matlab software (2012b) 2spread sheet optimization using microsoft excel solver. both methods use three-layer nn, because it is argued here that they provide simple transparent methods towards nn modelling. the neural network model developed in this paper consists of three layers (as figure 2 below): 1input layer of 8 nodes: type of building, gross floor area, area of pitched roof, area of flat roof, area of external glazing, number of stories above ground floor, number of stories under ground floor and csis. 2hidden layer (trial and error in a training stage used to determine number of nodes) 3output layer contained one node (the total running cost). figure 2 neural network structure with three layers the data for the 20 projects were entered into excel. the input and output data is normalized and scaled to a range (-1 to 1) using equation 1 to suit neural networks processes. b) determining the best network architecture traditional parametric (trial and error) has been performed to select the number of hidden layers and the number of hidden nodes. during the training process, the number of hidden layers and hidden nodes are adjusted to find the best artificial neural network model to give the lowest value for the root mean square (rms) and absolute difference percentage for output parameters. tangent sigmoid is used as a transfer function of nns model for both methods. in australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 58 order to train/test the model and find a best number of nodes in hidden layers, matlab is utilised for its ease of use and speed of training. the best architecture resulting from matlab is compiled to spread sheet to compare the results of both methods. c) training and testing the network in this case study, the 20 projects are divided to three sets. one set consist of 14 projects (70%) used for training the model and 3 projects (15%) are used towards model validation and the remaining 3 projects (15%) used to test the procedure. as mentioned before, one of the objectives of training the model is to identify the best structure of neural network model. the acceptable level of the result of the model is evaluated based on the value of rms (equation2) and absolute difference (in equation 3). results a) back-propagation the back-propagation method, the ‘weights’ which aim to connect nodes and biases are changed utilising a number of inputs and the desired output value. the difference between the network output and actual output, become network error sets, after which the network error is back propagated from the output layer to adjust the weights and biases. this step is repeatedly performed until the minimum level of network error is reached. the 20 model trails and error were applied to identify the number of hidden nodes on hidden layers. it was clear that increasing the number of hidden nodes in hidden layers leads to changing the value of rms and absolute difference error. 19 hidden nodes provided the lowest rms value of 0.033 and an absolute difference error value of 0.96%. however, neural network models with one hidden node provided the highest rms value of 0.388 with an absolute difference error value of 3.89%. the value of rms & absolute difference error changed consecutively within the above mentioned range for the remaining 18 model trails. table 3 below illustrates rms and an absolute difference error for all 20 model trails. table 3 20 model trails for determining the best model figure 3 below present the properties of the best neural network model gained through the trial and error method at a training stage. no. of hidden nodes rms % absolute different error no. of hidden nodes rms % absolute different error no. of hidden nodes rms % absolute different error 1 0.388 3.89 8 0.062 1.08 15 0.089 1.61 2 0.096 3.10 9 0.094 2.21 16 0.106 1.51 3 0.174 5.25 10 0.063 1.42 17 0.206 4.82 4 0.093 1.74 11 0.057 0.79 18 0.069 1.04 5 0.129 1.80 12 0.324 8.59 19 0.033 0.96 6 0.054 1.02 13 0.045 1.03 20 0.324 6.94 7 0.116 2.57 14 0.047 1.18 australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 59 figure 3 structure of the best model as mentioned, three projects are used to test the performance of the best model identified at a training stage. the results indicate that the running cost model developed by back-propagation neural network model performs well; no important difference could is recognised between the estimated and actual running costs. results are described in table 4 below. projects actual running cost nn back-propagation nn solver prediction different error % prediction different error % 1 training set 63552.42 63592.04 -0.0623 63868.6 0.5 2 72598.21 71915.26 0.949659 58174.11 0.289 3 53824.35 53793.54 0.057273 72226.34 -0.5 4 77704.34 77738.46 -0.04389 53835.87 0.002 5 67316 66934.95 0.569282 78061.6 0.449 6 62099.82 63575.97 -2.32187 66984.26 -0.5 7 61901.73 62401.78 -0.80134 61888.75 -0.332 8 72136.01 71188.08 1.331591 62214.63 0.5 9 56267.38 56713.5 -0.78662 72490.83 0.494 10 50831.1 50533.1 0.589718 56538.82 0.5 11 58842.45 59650.85 -1.35522 50833.63 0.003 12 47221.59 47685.55 -0.97295 88929.12 -0.492 13 45350.81 46858.88 -3.21832 77302.77 0.5 14 53758.33 53638.6 0.223223 69978.92 -0.5 15 58006.1 54837 5.779132 53799.11 0.071 16 76912.01 78488.09 -2.00805 47456.54 0.5 17 89369.22 87712.59 1.888706 45577.56 0.5 18 test set 61285.47 60178.19 1.84 61149.6 0.521 19 70331.26 69090.58 1.795734 61172.63 -0.201 20 60823.28 59506.25 2.213263 58834.79 0 avrg. different error % (testing) 1.91 0.107 table 4 result of both neural network model for all 20 projects from table 4, the average difference between the actual value of running costs and the result from back-propagation neural network modelling for the testing projects was about 1.91%. australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 60 b) spread sheet using excel solver ‘solver’ finds the best set of values for some variables by maximizing or minimizing a desired output cell connected by formulas to the variables, under a set of user-specified constraints. in this case, the optimization goal is to reduce the nn weighted error to 0. in order to reach this goal, the adjustable variable has been identified as the weights from inputs to hidden nodes and from hidden nodes to outputs. optimization constraints were set to limit the percentage error on both training and test project to 3% and 1% or lower to avoid erroneous network result on individual training projects. this paper applied 7 steps as suggested by hegazy and ayed (1998) to build anns model in spread sheet. the best architecture resulting from matlab was used on the spread sheet (8 nodes on input layer-19 nodes in hidden layers-1 node on output layers). 17 projects were used to train the model and 3 projects were used to test the model (the same 3 projects that were used to test back-propagation modelling). the results show that the running cost model developed by spread sheet neural network modelling performs well. no important differences are recognised between the estimated and actual running costs (table 4). from table 4 the average difference between the actual value of running costs and the result from spread sheet neural network modelling for the testing projects was 0.107%. the expected accuracy of the both models at training and testing stage is introduced in table 5 below. the spread-sheet neural network model and backpropagation are able to estimate the total running cost with an average accuracy of 99% and 98%. the neural network model results from both the training and testing stages and the actual value of running costs for both models were analysed through regression analysis in order to investigate the model response in more detail. the result of linearly regression is presented graphically in figure 4 below. liner regression analysis consists of two parameters (as equation 4). y (actual value) = m*x (estimated value) + b…………………………….(4) where m & b represent the slope and the y-intercept of the best regression relating the actual value of running costs to the neural network model. for both models, in both training and testing stages, the slope is close to1 and the y-intercept is close to 0, indicating a good fit. in addition, regression analysis is able to provide the value of the correlation coefficient (r 2 ) between the actual value of running cost and the model output. for both models, in training and testing tests, r 2 is close to 1, indicating a good fit and linear correlation between the actual running cost and the neural network result at training and testing stage. maximum positive error % maximum negative error % average difference error % standard deviation accuracy range nn backpropagation training stage 0.95 -3.21 -0.417 ±1.264 (-1.681 to 0.847) testing stage 2.21 0 1.95 ±0.229 (-1.721 to +2.179) nn solver training stage 0.5 -0.5 0.117 ±0.426 (-.309 to +0.543) testing stage 0.521 -0.201 0.107 ±0.373 (-0.266 to +0.48) table 5 the expected accuracy of both models australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 61 discussion it is argued that the framework developed in this research can be used to estimate the total cost of construction projects at different phases of a project’s life cycle. it doesn’t revolutionize the estimation cost method, but rather, improves upon the traditional approach of construction estimating and improves a client’s knowledge of whole-costs. the framework seeks to consider the most important cost and non-cost factors to estimate the total cost of projects with clear steps to collect the relevant variables. this is perhaps a step beyond current methods which lack a standardised method to collect such variables. a) back-propagation model at training stage b) back-propagation model at testing c) spread sheet model at training stage d) spread sheet model at testing figure 4 regression analyis of both models at training and testing stage y = 1.0067x 0.0486 r² = 0.9995 0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 e st im a te d r u n n in g c o st $ (1 0 0 0 ) actual running costs$(10000) actual running costs vs estimation running costs y = 0.9598x + 0.2361 r² = 0.9716 5.5 5.7 5.9 6.1 6.3 6.5 5.5 5.7 5.9 6.1 6.3 6.5 e st im a te d r u n n in g c o st $ (1 0 0 0 ) actual running costs$(10000) actual running costs vs estimation running costs y = 0.9737x + 0.1624 r² = 0.9903 0 2 4 6 8 10 0 1 2 3 4 5 6 7 8 9 10 e st im a te d r u n n in g c o st $ (1 0 0 0 actual running costs$(10000) actual running costs vs estimation running costs y = 0.9978x 0.1079 r² = 0.9996 0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 e st im a te d r u n n in g c o st $ (1 0 0 0 actual running costs$(10000) actual running costs vs estimation running costs australasian journal of construction economics and building alqahtani, a and whyte, a (2013) ‘artificial neural networks incorporating cost significant items towards enhancing estimation for (life-cycle) costing of construction projects’, australasian journal of construction economics and building, 13 (3) 51-64 62 using the concept of csis at each phase of construction projects has proved to be a valuable method towards the improvement of estimation cost practices. the most significant aspects of this framework is taking advantage of csis and integrate it with anns to improve the accuracy of estimation, saving time and cost in the process. regarding the accuracy of estimation, an average variation of 1% was noted between the prediction costs and actual costs in the case study. compared to other studies, the variation obtained here is less than obtained from previous work. this study is part of an ongoing study which aims to simplify and improve the accuracy of estimating costs in order to accelerate the understanding and implementation of lcc in the construction sector. a key aim of this paper was to create a new direction for future work. the next section illustrates the essential further development of framework and model. future work the following bullet points represent a way forward:  going beyond the current very extensive data-set cited by al-hajj (as part of his phd datageneration purposes) further research is necessary to apply the csis at all stages of proposed/recent local construction projects to now identify the most important cost factor affecting estimation of cost at each stage of construction;  further research is necessary to identify key non-cost factors affecting the estimation cost; analysis of the literature and historical data will help determine these factors;  ann models may be developed based on the framework suggested here to estimate the cost at each stage of construction projects.  the sample of data used to train and test the ann models will be extended in order to validate the ann model. these recommended research directions would provide a better understanding of the framework. conclusion this paper introduced a new framework for estimating lcc cost at each stage of construction projects. the framework developed here uses artificial neural networks in order to simplify and improve estimation processes. identification of the main cost and non-cost/design factors affecting the accuracy of estimation cost at each stage of lcc is noted as an important step of such a framework. the concept of cost significant items (csi) alongside analyses of available literature as well as an analysis of an historical data-set was used in an application of the developed framework. case-study analysis utilised 20 previously catalogued building projects to test the developed framework and sought to estimate the total running cost of this data-set. two methods were used to develop nn modelling; back-propagation and spread-sheeting using excel solver. both nns modelling techniques were able to provide reliable results. it is suggested that these encouraging findings indicating improvements in a more reliable estimation process be further compared by multiple-regression modelling. references al-hajj, a. 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(1997) 'life cycle costing—theory, information acquisition and application', international journal of project management, 15 (6), 335-344. ninth draft of dissertation the relevance of the iso26000 social responsibility issues to the hong kong construction industry lisa robyn barnes and norman croker, (university of newcastle, australia) abstract corporate social responsibility (“csr”), the responsibility of a corporation for the impacts of its decisions on society and the environment, originated as a term in the 1950’s (carroll 1999). however, iso 26000 “guidance on social responsibility” published in november 2010, redefines “social responsibility” (“sr”) broadly, by reference to sr principles, core subjects and issues. the hong kong construction industry (“hkci”) sector is critical to hong kong’s economy, accounting for 5.6% of the gdp and 9.2% of employment in 1999 (tang 2001). in 2011, the gross value of construction work amounted to hk$215.0 billion and contributed hk$65.4 billion (hksarcsd 2013a) to the total gdp of hk$1,823.2 billion (hktdc 2013; hkgov 2013). provisional quarterly data for 2012 indicates an increase in the gross value of construction works for 2012 of 25% to be now in excess of hk$250 billion (hksarcsd 2013b). the aim of this research is to investigate which iso 26000 sr principles, core subjects and issues are relevant to hkci firms. the principle findings are that: the reported level of hkci csr activity relative to the seven core subject of iso 26000 is a function of company size; many sme’s consider that many of the iso 26000 sr issues are irrelevant to them; b