The effect of construction contractor's multi-layer subcontracting strategy on project performance : a case study of construction firms in Hong Kong

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The effect of construction contractor's multi-layer subcontracting strategy on project performance : a case study of construction firms in Hong Kong

 

Author: Tam, Sing-sun
Title: The effect of construction contractor's multi-layer subcontracting strategy on project performance : a case study of construction firms in Hong Kong
Degree: D.B.A.
Year: 2001
Subject: Construction industry -- China -- Hong Kong -- Case studies
Construction contracts -- China -- Hong Kong -- Case studies
Hong Kong Polytechnic University -- Dissertations
Department: Dept. of Management
Pages: ix, 313 leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1604173
URI: http://theses.lib.polyu.edu.hk/handle/200/822
Abstract: The building and construction industry in Hong Kong has traditionally followed a system of multi-layer subcontracting, which is well accepted by the industry for reasons of competition, specialisation and economy of scale. This method of pyramid subcontracting, as it is usually termed, has been debated by observers of the construction industry as the sources of difficulties that prevent delivery of high performance construction projects. Public inquiries into the construction trade also speculated that if the multi-layer subcontracting in construction projects is not controlled and monitored properly, the procurement chain of subcontracting can be sources of problems in safety, quality and productivity. However, the effect of such extensive use of subcontractors on project performance has been an area of sparse previous researches. This research attempted to explore the factors that contributed to the decision making process of construction project managers, when they were making choices of the extent of subcontracting. The research also studied the influence of the subcontracting strategy on construction project performance. The theoretical framework of the research is built on the backbone of the economic theory of transaction cost, together with the attributes identified from both organisation and project management theories. This is an exploratory study, using the method of multiple case study research, to identify a set of independent constructs, which may influence the construction project manager to select the procurement strategy for successful project performance. By way of empirical analysis, a model linking the decision making factors to the choice of extent of subcontracting, which subsequently may affect the project performance, is proposed. The factors which affect the decision making process are: the effect of asset specificity, level of environmental uncertainty, efforts in preparing contract document, free access of information, trust between contractors, competition on prices, client's use of competitive tendering, use of total quality management, complexity of project and use of central purchasing functions. The findings of this research has established a theoretical statement which argues that if project managers of construction contractors have followed the decision process in the model, they will increase the extent of subcontracted works in the aim to improve the performance of their construction projects. The cross case analysis indicated with empirical evidences that project managers of construction projects have followed the decision making process in arriving at their best choice of procurement decisions. The decision making process is influenced by three mediating factors, which are respectively the confidence of the project managers' to act, the qualifying consensus of the construction firm, and the cognition of magnitude of risks. It is also argued that the project managers, whichever level of the procurement chain they are located at, may go through a similar decision making process. It is suggested that employment of subcontractors is necessary in construction projects, and provided the project managers, irrespective of their tier in the multi-layer subcontracting chain, have chosen their procurement strategies through a similar decision making process, then multi-layer subcontracting is not necessarily the root cause of construction project failures.

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