Subcontracting Analysis (Cont'd) What Factors Term Paper

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For example, in their study, "Nawkaw, Inc.: Changing the Color of Masonry," Amason and Ciavarella (2001) report that, "Commercial jobs usually were won through competitive bidding by general contractors, who then hired subcontractors. Sometimes general contractors did not seek bids, instead choosing subcontractors on the basis of their past performance" (p. 77).

Other factors involved that will likely influence which subcontractor will be selected relate to the organizational structure of the project. For example, as Frame (2003) points out, there is a basic approach to most large construction projects in use today. As shown in Figure 1 below, this is a commonly encountered organizational structure employed on construction projects which involves the owner retaining direct authority over both the contractor and architect-engineering firm; in this arrangement, the owner can issue directions, and the contractor and architect-engineering firm are obliged to comply and it is this degree of control over these two key players is what makes this structure appealing to owners (Frame, 2003).

Figure 1. Typical Configuration of Players in a Construction Project.

This approach also means that the contractor has an additional measure of control over subcontractors because although the architect-engineers retain authority over design issues, the contractor has authority over the physical building effort (Frame, 2003). Some valuable insights can be gained from a case study based on the experiences of the general contractor and primary architect-engineer firm used for the construction of the U.S. Penitentiary at Coleman, Florida, which was the first design/build project to be contracted by the U.S. Bureau of Prisons (Conley, 2000).

According to this author, "The project's success is the result of the team's ability to organize and work together, each viewing its individual roles and responsibilities from very different perspectives, while keeping the project focus in the forefront" (Conley, 2000, p. 118). In practice, the selection of the architect-engineer for this construction project was clearly based on the congruence between the respective organization's corporate culture and their mutual desire to complete the job in a timely and professional fashion. In this regard, Conley notes that, "Unwavering professionalism and open communication were necessary to produce viable construction schedules, system pricing, design and engineering, and construction means and methods in a concise group voice" (2000, p. 118).

Taken together, the foregoing considerations suggest that identifying the most appropriate subcontracting candidate for a given project can turn into a full-time job if the general contractor does not have relevant previous experience with similar projects because the subcontractor may not possess the precise mix of skills and resources needed and the general contractor might not recognize the deficiency. According to Applebaum (1999), "Specialty trade contractors usually work at only one trade, such as painting, carpentry, electrical work, or two or more closely related trades, such as plumbing, sprinkler work, and heating and air conditioning. Beyond fitting their work to that of other trades, specialty contractors do not have the responsibility for the building of the structure as a whole" (p. 6).

Likewise, specialty contractors may receive their contracts or purchase orders for their work from general contractors as well as engineers, construction managers, architects, or even the owners themselves; in addition, many specialty contractors perform repair work, which is typically contracted for by owners, occupants, architects, or rental agents (Applebaum, 1999). This means that the successful subcontractor for a given project will possess both the requisite resources as well as relevant experience with comparable projects in the past and be able to communicate this ability successfully to the general contractor (Amason & Ciavelia, 2001). This may be a subjective and informal analysis based on personal communications with friends and associates in the construction industry who have had personal experience with the subcontractor under consideration, or the selection process may require some more formal evaluation techniques.

Generally speaking, bids or proposals for subcontracting must be based on clear and complete specifications. According to the bidding procedures used by the City of Minneapolis (2004), "The contracts should be awarded to the lowest responsible bidder or the responder whose proposal is responsive to the solicitation and most advantageous in terms of price and any other factors identified in the solicitation" (Bidding procedures for the City of Minneapolis, 2004, p. 3).

Likewise, the bidding procedures for subcontractors established by the State of Utah (2005) provide that such contracts.".. shall be awarded promptly to the lowest responsible and responsive bidder who meets the requirements of the invitation for bids for a specific scope of work" (Procurement manual for construction managers and general contractors, 2005, p. 2). In this regard, Pressley (1997) provides some useful guidance on formalizing the selection process for subcontractors, particularly those with which the contractor has not had any previous experience, which is loosely interpreted for the purposes of this study as shown in Table 1 below.

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Table 1.

Important issues to consider in the subcontractor selection process.

Issue

Approach/Rationale

Specifications

The bid specification should clearly outline what a contractor needs and expects from a subcontractor. The specifications should include a list of equipment and supplies that will be made available, together with a statement of expectation on how such property will be used; a list of equipment and supplies the contractor expects the subcontractor to provide should also be listed.

Services precise description of the services needed by the general contractor should be provided to the prospective subcontractor.

Insurance

The bid specifications should ask for documents verifying the subcontractor's insurance coverage. At minimum, these documents should include workers' compensation and comprehensive general liability.

Subcontractor company information

The specification should request a brief history of the subcontractor, its corporate staff members' contact information, staff organizational charts, and short biographies of staff members stating their position, length of service, and accumulated experience. The specification should also ask for the bidding subcontractor's financial statement and a list of additional references.

Source: Pressley, 1997.

Some contractors will assign a greater degree of importance to the ability of the subcontractor to "walk the walk" and "talk the talk" of a given project, seeking to use those subcontractors that most closely align with the cultural aspects of the general contracting organization. In this regard, Applebaum (1999) reports that the social organization of the construction industry and its associated technology and traditions, leads to construction worker behavior that results in the following cultural patterns:

Autonomy and self-reliance of the craftsworker.

Large measure of control over the work process by the craftsworker.

Decentralized decision making on the construction site.

Nonbureaucratic organization of construction work.

Loose supervision of craftsworkers by construction management.

Integrated and interdependence of work groups.

Enjoyment of work satisfaction by construction workers (Applebaum, 1999, p. 185).

In many real-world settings, though, there may be some other factors that tend to affect the subcontractor selection process that are not necessarily written down anywhere, but nevertheless remain firmly in place. For example, as Brimmer emphasizes, Common threads, such as apprenticeship systems and trade unions, help connect the construction industry. Moreover, there is the old-boy network composed entirely of white males.... Frequently the officials letting public contracts belong to the old-body network. Once a contract has been awarded, the general contractor normally shares work with subcontractors" (p. 43). These lingering practices have created some institutionalized bias against blacks and women subcontractors in the construction industry:

Historic limitations, including small size and thin performance records, have restricted black firms from working primarily as subcontractors. Blacks often do not get notice of upcoming public contracts. Blacks are often contracted only by GCs to satisfy affirmative-action and set-aside requirements. In many cases, general contractors only include black subcontractors on public-sector projects where such participation is increasingly mandated; however, many minority-owned firms remain outside the selection process by general contractors for private-sector projects.

Minority-owned subcontractors may have problems securing bank loans.

In the construction industry, general contractors are able to increase total revenue above the winning bid price by negotiating change orders as the work progresses; however, many minority-owned subcontracting companies maintain that it is almost impossible for them to do this.

Having access to a secure supply for construction materials at competitive prices is vital; however, some minority-owned subcontractors have been excluded from developing such relationships (Brimmer, 1992).

While things may have changed for the better for minority-owned subcontractors in many regions of the country, it is reasonable to assume that many of these constraints remain firmly in place. Assuming, though, that the playing field is as level as it can be for everyone involved, the selection criteria used by a general contractor will tend to vary from project to project depending on its unique requirements and the personal preferences of the contracting organization. Therefore, it is important to develop some general process by which the subcontractor selection process can be managed over time.

For this purpose, Walla (1996) recommends that the general contractor assign a weight to each selection criterion and then….....

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