Rethinking the tendering frameworks of construction contractors in the context of a soft systems methodology approach

Abstract

Limited research has been conducted on the internal tendering procedures (ITP) of construction contractors because of the commercially sensitive and confidential nature of the subject matter. This limitation explains the reluctance of contractors to undergo interviews. Existing research (outside bid/no-bid and margin decision factor identification and subsequent decision modeling development) only begins to provide insights into key tendering stages, particularly around risk assessments and corporate review processes. Early research suggested one to three review stages. However, when considering the whole work procurement process from prospect identification to contract execution, five to seven series of reviews can be arguably applied by some contractors, wherein some reviews stepped through several layers of internal senior management. Tendering processes were presented as flowchart models that traditionally follow “hard” system (rectangular shapes and straight line arrows) steps, which suggest that a precise process also leads to precise results. However, given that contractors do not win every tender they submit, the process is less precise than that suggested in rigidly structured flowcharts. Twenty-five detailed semi-structured interviews were held with purposely selected high-profile publicly and privately owned construction companies in Australia with significantly varied turnovers. Analyses show that contractors are concerned about the negative effects of increasing corporate governance demands, with many stating that people involved are the most critical element to tendering success. A new way of presenting the ITP of contractors is assessed using a soft systems methodology (SSM) approach. SSM offers an alternative way of considering human interaction challenges within the ITP of contractors, which needs to be tested with the industry. The format graphics of SSM guidelines are presented as a way of offering contractors a different approach, which may assist individuals who are looking to re-structure their tendering activities in a more humanistic and less rigid procedural approach.

Keywords

contractor / corporate governance / humanistic / risk / soft systems methodology / tendering procedures

References

[1] Arowosafe O, Ceranic B, Dean A M (2015). A sustainable infrastructure delivery model: Value added strategy in the Nigerian construction industry. In: Proceedings of 31st Annual ARCOM Conference. Lincoln: 1229–1238

[2] Arslan G, Tuncan M, Birgonul M T, Dikmen I (2006). E-bidding proposal preparation system for construction projects. Building and Environment, 41(10): 1406–1413

[3] ASX (Australian Securities Exchange) Corporate Governance Council (2014). Corporate governance principles and recommendations (3rd Edition). http://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf, 2015–10–24

[4] BEIS (Dept for Business, Energy & Industrial Strategy) (2017). Corporate governance reform: The Government response to the green paper consultation. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/640631/corporate-governance-reform-government-response.pdf, 2018–3-1

[5] Betts M (1990). Methods and data used by large building contractors in preparing tenders. Construction Management and Economics, 8(4): 399–414

[6] Brook M (2011). Estimating and Tendering for Construction Work.London: Spon Press

[7] Cagno E, Caron F, Perego A (2001). Multi-criteria assessment of the probability of winning in the competitive bidding process. International Journal of Project Management, 19(6): 313–324

[8] Checkland P (1999). Systems Thinking, Systems Practice. Chichester: John Wiley & Sons

[9] Checkland P (2000). Soft systems methodology: A thirty year retrospective. Systems Research and Behavioral Science, 17(S1 SUPPL): S11–S58

[10] Checkland P (2010). Researching real-life: Reflections on 30 years of action research. Systems Research and Behavioral Science, 27(2): 129–132

[11] Checkland P, Forbes P, Martin S (1990). Techniques in soft systems practice part 3: monitoring and control in conceptual models and evaluation studies. Journal of Applied Systems Analysis, 17: 29–37

[12] Checkland P, Scholes J (1990). Soft Systems Methodology in Action.Chichester: John Wiley & Sons

[13] Checkland P, Tsouvalis C (1997). Reflecting on SSM: The link between root definitions and conceptual models. Systems Research and Behavioral Science, 14(3): 153–168

[14] Checkland P, Winter M (2006). Process and content: Two ways of using SSM. Journal of the Operational Research Society, 57(12): 1435–1441

[15] Cooper R G (2014). What’s next? After stage-gate. Research Technology Management, 57(1): 20–31

[16] Davis L, Miles M, Riley M, Pan W (2010). Developing lean supply in construction. In: Proceedings of 26th Annual ARCOM Conference. Leeds: 705–713

[17] de Neufville R, King D (1991). Risk and need-for-work premiums in contractor bidding. Journal of Construction Engineering and Management, 117(4): 659–673

[18] Erkoyuncu J A, Roy R, Shehab E, Kutsch E (2014). An innovative uncertainty management framework to support contracting for product-service availability. Journal of Service Management, 25(5): 603–638

[19] Farag F, McDermott P, Huelin C A (2016). The development of an activity zone conceptual framework to improve social value implementation in construction projects using human activity systems. In: Proceedings of the 32nd Annual ARCOM Conference. Manchester, 2: 975–984

[20] Fellows R, Liu A (2008). Research Methods for Construction.Chichester: Wiley-Blackwell

[21] Greenhalgh B (2013). Introduction to Estimating for Construction.London: Routledge

[22] Krippendorff K (2013). Content Analysis: An Introduction to Its Methodology. Thousand Oaks: Sage

[23] Laryea S (2013). Nature of tender review meetings. Journal of Construction Engineering and Management, 139(8): 927–940

[24] Laryea S, Hughes W (2008). How contractors price risk in bids: Theory and practice. Construction Management and Economics, 26(9): 911–924

[25] Laryea S, Hughes W (2009). Commercial reviews in the tender process of contractors. Engineering, Construction, and Architectural Management, 16(6): 558–572

[26] Laryea S, Hughes W (2011). Risk and price in the bidding process of contractors. Journal of Construction Engineering and Management, 137(4): 248–258

[27] Leedy P D, Ormrod J E (2013). Practical Research Planning and Design.Upper Saddle River: Pearson Education

[28] Li H, Love P E D (1998). Developing a theory of construction problem solving. Construction Management and Economics, 16(6): 721–727

[29] Liu W B, Meng W, Mingers J, Tang N, Wang W (2012). Developing a performance management system using soft systems methodology: A Chinese case study. European Journal of Operational Research, 223(2): 529–540

[30] Love P E D, Edwards D J, Irani Z (2012). Moving beyond optimism bias and strategic misrepresentation: An explanation for social infrastructure project cost overruns. IEEE Transactions on Engineering Management, 59(4): 560–571

[31] Maqsood T, Finegan A, Walker D (2006). Applying project histories and project learning through knowledge management in an Australian construction company. Learning Organization, 13(1): 80–95

[32] Mochtar K, Arditi D (2001). Pricing strategy in the US construction industry. Construction Management and Economics, 19(4): 405–415

[33] SAI (Standards Australia International) (2003). AS8000:2003 Good Governance Principles. Sydney: SAI Global Limited

[34] SAL (Standards Australia Limited) (2008). AS/NZS ISO 9001:2008, Quality management systems — Requirements. Sydney: SAI Global Limited

[35] SAL (Standards Australia Limited) (2016) AS/NZS ISO 9001:2016 ISO 9001:2015, Quality management systems — Requirements.Sydney: SAI Global Limited

[36] Scheepbouwer E, Gransberg D D, del Puerto C L (2017). Construction engineering management culture shift: Is the lowest tender offer dead? Frontiers of Engineering Management, 4(1): 49–57

[37] Sherman D G, Cole A J, Boardman J T (1996). Assisting cultural reform in a projects-based company using systemigrams. International Journal of Project Management, 14(1): 23–30

[38] Shokri-Ghasabeh M, Chileshe N (2014). Knowledge management barriers to capturing lessons learned from Australian construction contractors perspective. Construction Innovation, 14(1): 108–134

[39] Skitmore M, Smyth H (2007). Pricing construction work: A marketing viewpoint. Construction Management and Economics, 25(6): 619–630

[40] Smith N J, Merna T, Jobling P (2006). Managing Risk in Construction Projects. Oxford: Blackwell Publishing

[41] Sutrisna M, Barrett P (2007). Applying rich picture diagrams to model case studies of construction projects. Engineering, Construction, and Architectural Management, 14(2): 164–179

[42] Urquhart S, Whyte A (2017). Contractor tendering research: Going beyond bid/no-bid and markup models. In: Proceedings of the Institution of Civil Engineers - Management, Procurement and Law. 170(6): 255–262

[43] Urquhart S, Whyte A, Lloyd N (2017). The development of a more efficient internal tender procedure oframework for Australian construction contractors In: Proceeding of the 33rd Annual ARCOM Conference. Cambridge, 693–702

[44] Watson R B (2012). Suggestions for new application areas for soft systems methodology in the Information Age. Systemic Practice and Action Research, 25(5): 441–456

[45] Whyte A (2015). Integrated Design and Cost Management for Civil Engineers. Clermont: CRC Press

[46] Yean Yng Ling F, Liu M (2005). Factors considered by successful and profitable contractors in mark-up size decision in Singapore. Building and Environment, 40(11): 1557–1565

[47] Yeo K T, Tiong R L K (2000). Positive management of differences for risk reduction in BOT projects. International Journal of Project Management, 18(4): 257–265

Acknowledgments

The authors acknowledge the contribution of an Australian Government Research Training Program Scholarship. They also acknowledge the participation of the 25 (anonymous) construction contractors interviewed for this study and the anonymous reviewers for their valuable comments that helped improve this manuscript.

RIGHTS & PERMISSIONS

2018 The Author(s) 2018. Published by Higher Education Press. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0)